Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Aug. 31, 2021 | Nov. 29, 2021 | Feb. 26, 2021 | |
Document And Entity Information | |||
Document Type | 10-K | ||
Document Period End Date | Aug. 31, 2021 | ||
Entity Registrant Name | ShiftPixy, Inc. | ||
Entity Central Index Key | 0001675634 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2021 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --08-31 | ||
Entity Current Reporting Status | Yes | ||
Entity Interactive Data Current | Yes | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Small Business | true | ||
Entity Emerging Growth Company | true | ||
Entity Ex Transition Period | false | ||
Entity Shell Company | false | ||
Entity Common Stock Shares Outstanding | 28,713,099 | ||
Entity Public Float | $ 39,152,000 | ||
Entity File Number | 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 | 33131 | ||
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, 2021 | Aug. 31, 2020 |
Current assets | ||
Cash | $ 1,199,000 | $ 4,303,000 |
Accounts receivable, net | 498,000 | 308,000 |
Unbilled accounts receivable | 2,741,000 | 2,303,000 |
Deposit - workers' compensation | 155,000 | 293,000 |
Prepaid expenses | 605,000 | 723,000 |
Other current assets | 126,000 | 73,000 |
Current assets of discontinued operations | 356,000 | 1,030,000 |
Total current assets | 5,680,000 | 9,033,000 |
Fixed assets, net | 2,784,000 | 575,000 |
Note receivable, net | 4,004,000 | 4,045,000 |
Deposits - workers' compensation | 386,000 | 736,000 |
Deposits and other assets | 944,000 | 449,000 |
Deferred offering costs - SPACs (See Note 6) | 48,261,000 | |
Non-current assets of discontinued operations | 883,000 | 2,582,000 |
Total assets | 62,942,000 | 17,420,000 |
Current liabilities | ||
Accounts payable and other accrued liabilities | 6,553,000 | 3,831,000 |
Payroll related liabilities | 7,876,000 | 5,752,000 |
Accrued workers' compensation costs | 663,000 | 497,000 |
Current liabilities of discontinued operations | 1,516,000 | 1,746,000 |
Total current liabilities | 16,608,000 | 11,826,000 |
Non-current liabilities | ||
Accrued workers' compensation costs | 1,646,000 | 1,247,000 |
Non-current liabilities of discontinued operations | 3,765,000 | 4,377,000 |
Total liabilities | 22,019,000 | 17,450,000 |
Commitments and contingencies | ||
ShiftPixy, Inc. Stockhoders' 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; 25,863,099 and 16,902,146 shares issued as of August 31, 2021 and August 31, 2020 | 3,000 | 1,000 |
Additional paid-in capital | 142,786,000 | 119,431,000 |
Accumulated deficit | (149,338,000) | (119,462,000) |
Total ShiftPixy, Inc. Stockholders' Deficit | (6,549,000) | (30,000) |
Non controlling interest in consolidated subsidiaries (See Note 6) | 47,472,000 | 0 |
Total Equity (Deficit) | 40,923,000 | (30,000) |
Total liabilities and Equity (Deficit) | $ 62,942,000 | $ 17,420,000 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Aug. 31, 2021 | Aug. 31, 2020 |
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 | 25,863,099 | 16,902,146 |
Treasury stock, shares | 0 | 0 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) | 12 Months Ended | |
Aug. 31, 2021 | Aug. 31, 2020 | |
Consolidated Statements of Operations | ||
Revenues (gross billings of $79.0 million and $65.5 million less worksite employee payroll cost of $55.6 million and $56.9 million, respectively) | $ 23,420,000 | $ 8,642,000 |
Cost of revenue | 23,098,000 | 7,685,000 |
Gross profit | 322,000 | 957,000 |
Operating expenses: | ||
Salaries, wages, and payroll taxes | 11,100,000 | 7,227,000 |
Stock-based compensation - general and administrative | 1,594,000 | 1,526,000 |
Commissions | 176,000 | 181,000 |
Professional fees | 4,089,000 | 3,366,000 |
Software development - external | 3,755,000 | 2,240,000 |
Depreciation and amortization | 357,000 | 272,000 |
Impaired asset expense | 0 | 3,543,000 |
General and administrative | 6,596,000 | 4,180,000 |
Total operating expenses | 27,667,000 | 22,535,000 |
Operating Loss | (27,345,000) | (21,578,000) |
Other (expense) income: | ||
Interest expense | (5,000) | (2,525,000) |
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 | 1,777,000 | |
Other income | 25,000 | |
Gain on convertible note penalties accrual | 760,000 | |
Total other (expense) income | 20,000 | (68,890,000) |
Loss from continuing operations before income taxes | (27,325,000) | (90,468,000) |
Income tax expense | 42,000 | |
Loss from continuing operations | (27,367,000) | (90,468,000) |
(Loss) Income from discontinued operations | ||
(Loss) Income from discontinued operations | (2,509,000) | (561,000) |
Gain from asset sale | 15,682,000 | |
Total Income (Loss) from discontinued operations, net of tax | (2,509,000) | 15,121,000 |
Net loss | $ (29,876,000) | $ (75,347,000) |
Net Loss per share, Basic and diluted | ||
Continuing operations | $ (0.81) | $ (4.96) |
Discontinued operations | ||
Operating (loss) income | (0.07) | (0.03) |
Gain on sale of assets | 0.86 | |
Total discontinued operations | (0.07) | 0.83 |
Net Loss per share of common stock - Basic | (0.88) | (4.13) |
Net Loss per share of common stock - Diluted | $ (0.90) | $ (4.13) |
Weighted average common stock outstanding - Basic | 33,722,534 | 18,222,661 |
Weighted average common stock outstanding - Diluted | 33,722,534 | 18,222,661 |
Consolidated Statements of Op_2
Consolidated Statements of Operations (Parenthetical) - USD ($) $ in Millions | 12 Months Ended | |
Aug. 31, 2021 | Aug. 31, 2020 | |
Consolidated Statements of Operations | ||
Gross billings | $ 79 | $ 65.5 |
Worksite employee payroll cost | $ 55.6 | $ 56.9 |
Consolidated Statements of Equi
Consolidated Statements of Equity (Deficit) - USD ($) | Common Stock | Preferred Stock | Additional Paid-in Capital | Accumulated Deficit | Total Stockholders' Deficit ShiftPixy Inc stock - holders | Non controlling interest | Treasury Stock | Total |
Balance, shares at Aug. 31, 2019 | 909,222 | |||||||
Balance, amount at Aug. 31, 2019 | $ 32,505,000 | $ (44,115,000) | $ (11,935,000) | $ (325,000) | $ (11,935,000) | |||
Stock-based compensation expense | 1,300,000 | 1,300,000 | 1,300,000 | |||||
Common stock issued upon conversion of convertible notes and interest, shares | 589,695 | |||||||
Common stock issued for underwritten offering, net of offering costs | 11,478,000 | 11,478,000 | 11,478,000 | |||||
Common stock issued for underwritten offering, net of offering costs, shares | 2,472,500 | |||||||
Preferred stock issued for preferred option exercise | $ 1,000 | 1,000 | 1,000 | |||||
Common stock issued for preferred stock exchange | $ 1,000 | $ (1,000) | ||||||
Treasury stock retired | 325,000 | |||||||
Treasury stock retired | (325,000) | |||||||
Treasury stock retired, shares | (13,953) | |||||||
Common stock issued for note exchange | 200,000 | 200,000 | 200,000 | |||||
Common stock issued for note exchange, shares | 21,750 | |||||||
Common stock issued for services rendered, amount | 75,000 | 75,000 | 75,000 | |||||
Common stock issued for services rendered, shares | 856 | |||||||
Common stock issued for warrant exercise | 33,000 | 33,000 | 33,000 | |||||
Common stock issued for warrant exercise, shares | 6,275 | |||||||
Common shares issued upon conversion of convertible notes and interest, amount | 6,238,000 | 6,238,000 | 6,238,000 | |||||
Reclassification of derivative liabilities to paid in capital | 1,979,000 | 1,979,000 | 1,979,000 | |||||
Inducement loss on note conversions, amount | 624,000 | 624,000 | 624,000 | |||||
Inducement loss on note conversions, shares | 38,658 | |||||||
Common stock issued for warrant exchange | 552,000 | 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 | 653,000 | |||||
Allocated fair value of warrants issued - exchanged notes payable | 2,006,000 | 2,006,000 | 2,006,000 | |||||
Modification of warrants | 22,000 | 22,000 | 22,000 | |||||
Expense related to preferred options | 62,091,000 | 62,091,000 | 62,091,000 | |||||
Preferred stock issued for Preferred Option exercise (in shares) | 12,794,490 | |||||||
Common stock issued for preferred stock exchange (in shares) | 12,794,490 | (12,794,490) | ||||||
Net Loss | (75,347,000) | (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) | (30,000) | |||
Balance, shares at Aug. 31, 2019 | 909,222 | |||||||
Balance, amount at Aug. 31, 2019 | 32,505,000 | (44,115,000) | (11,935,000) | $ (325,000) | $ (11,935,000) | |||
Common stock issued for preferred stock exchange (in shares) | 24,634,560 | |||||||
Balance, shares at Aug. 31, 2021 | 25,863,099 | |||||||
Balance, amount at Aug. 31, 2021 | $ 3,000 | 142,786,000 | (149,338,000) | (6,549,000) | $ 47,472,000 | $ (6,549,000) | ||
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) | (30,000) | |||
Stock-based compensation expense | 1,594,000 | 1,594,000 | 1,594,000 | |||||
Common stock issued for underwritten offering, net of offering costs | 10,701,000 | 10,701,000 | 10,701,000 | |||||
Common stock issued for underwritten offering, net of offering costs, shares | 4,000,000 | |||||||
Preferred stock issued for Preferred Option exercise (in shares) | 12,500 | |||||||
Common stock issued for preferred stock exchange (in shares) | 12,500 | (12,500) | ||||||
Excess fair value of SPACs Founder shares transferred to underwriter | 47,472,000 | 47,472,000 | ||||||
Common stock issued for private placement, including exercise of prefunded warrants net of offering costs (in shares) | 4,948,453 | |||||||
Common stock issued for private placement, including exercise of prefunded warrants net of offering costs | $ 2,000 | 11,060,000 | 11,062,000 | 11,062,000 | ||||
Net Loss | (29,876,000) | (29,876,000) | (29,876,000) | |||||
Balance, shares at Aug. 31, 2021 | 25,863,099 | |||||||
Balance, amount at Aug. 31, 2021 | $ 3,000 | $ 142,786,000 | $ (149,338,000) | $ (6,549,000) | $ 47,472,000 | $ (6,549,000) |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | |
Aug. 31, 2021 | Aug. 31, 2020 | |
OPERATING ACTIVITIES | ||
Net Loss | $ (29,876,000) | $ (75,347,000) |
Income (loss) from discontinued operations | (2,509,000) | 15,121,000 |
Net loss from continuing operations | (27,367,000) | (90,468,000) |
Adjustments to reconcile net loss from continuing operations to net cash used in continuing operating activities: | ||
Bad debt expense | 45,000 | 0 |
Expense related to Preferred Options | 62,091,000 | |
Depreciation and amortization | 357,000 | 272,000 |
Impaired asset expense | 0 | 3,543,000 |
Gain on convertible note penalties accrual | (760,000) | |
Amortization of debt discount and debt issuance cost | 6,749,000 | |
Stock issued for services | 75,000 | |
Stock-based compensation- general and administrative | 1,594,000 | 1,300,000 |
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 | 41,000 | 1,074,000 |
Change in fair value of derivative and warrant liability | (1,777,000) | |
Changes in operating assets and liabilities | ||
Accounts receivable | (235,000) | (223,000) |
Unbilled accounts receivable | (438,000) | (885,000) |
Prepaid expenses | 65,000 | (374,000) |
Other current assets | 171,000 | |
Deposits - workers' compensation | 488,000 | (40,000) |
Deposits and other assets | (495,000) | (325,000) |
Accounts payable | 2,723,000 | (623,000) |
Payroll related liabilities | 2,124,000 | 3,193,000 |
Accrued workers' compensation | (1,081,000) | 984,000 |
Other current liabilities | (803,000) | |
Deferred offering costs | (634,000) | |
Total Adjustments | 6,833,000 | 74,840,000 |
Net cash used in continuing operating activities | (20,534,000) | (15,628,000) |
Net cash provided by discontinued operating activities | 668,000 | (1,255,000) |
Net cash used in operating activities | (21,512,000) | (16,883,000) |
INVESTING ACTIVITIES | ||
Purchase of fixed assets | (2,566,000) | (235,000) |
Proceeds from working capital adjustment - sale of assets | 88,000 | |
Proceeds from sale of assets | 9,500,000 | |
Net cash provided by (used in) investing activities | (2,566,000) | 9,353,000 |
FINANCING ACTIVITIES | ||
Deferred offering costs | (789,000) | |
Proceeds from Public offering, net of offering costs | 10,701,000 | 11,479,000 |
Proceeds from PIPE offering, net of offering costs | 11,062,000 | |
Repayment of convertible notes | (1,240,000) | |
Proceeds from exercise of warrants | 33,000 | |
Net cash provided by financing activities | 20,974,000 | 10,272,000 |
Net increase (decrease) in cash | (3,104,000) | 2,742,000 |
Cash - Beginning of Year | 4,303,000 | 1,561,000 |
Cash -End of Year | 1,199,000 | 4,303,000 |
Supplemental Disclosure of Cash Flows Information: | ||
Cash paid for interest | 14,000 | 315,000 |
Income taxes | 4,000 | |
Non-cash Investing and Financing Activities: | ||
Excess fair value of SPACs Founder shares transferred to underwriter | $ 47,472,000 | |
Conversion of debt and accrued interest into common stock | 6,238,000 | |
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 |
Nature of Operations
Nature of Operations | 12 Months Ended |
Aug. 31, 2021 | |
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 Human Capital service provider that provides solutions for large contingent part-time workforce demands, primarily in the restaurant and hospitality service trades. The Company’s historic focus has been on the quick service restaurant industry in Southern California, but has begun to expand into other geographic areas and industries employing temporary or part-time labor sources. The Company functions as an employment administrative services (“EAS”) provider primarily through its wholly-owned subsidiary, ReThink Human Capital Management, Inc. (“HCM”), as well as a staffing provider through another of its wholly-owned subsidiaries, ShiftPixy Staffing, Inc (“Staffing”). These subsidiaries provide a variety of services to our clients, (as a co-employer through HCM and a direct employer through Staffing), including the following: administrative services, payroll processing, human resources consulting, and workers’ compensation administration and coverage (as permitted and/or required by state law). The Company has built a human resources information systems (“HRIS”) platform to assist in customer acquisition that simplifies the onboarding of new clients into the Company’s closed proprietary operating and processing information system (the “ShiftPixy Ecosystem”). This HRIS platform is expected to facilitate additional value-added services in future reporting periods. In January 2020, the Company sold the assets of Shift Human Capital Management Inc. (“SHCM”), a wholly-owned subsidiary of the Company, pursuant to which it assigned the majority of the Company’s billable clients at the time of the sale to a third party for cash. The continuing impact of this transaction on the Company’s financial statements is described below in Note 3, Discontinued Operations . On March 31, 2021, shareholders representing a majority of the Company’s outstanding shares of capital stock approved an amendment to the Company’s Amended and Restated Articles of Incorporation (the “Amendment”) making the federal district courts of the United States the exclusive forum for the resolution of any complaint asserting a cause of action against the Company arising under the Securities Act of 1933, as amended. On May 13, 2021, the Company filed the Amendment with the Wyoming Secretary of State. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Aug. 31, 2021 | |
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 and majority owned subsidiaries have been consolidated in the accompanying financial statements. All intercompany balances have been eliminated in consolidation. The amount of net loss attributable to minority interests of majority owned subsidiaries was de minimus for Fiscal 2021. 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 (as defined below); · 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 illiquid noncontrolling interest in SPAC shares transferred; · Valuation of long-lived assets including long term notes receivable prior to January 1, 2021; and · Projected development of workers’ compensation claims. Revenue and Direct Cost Recognition For the year ended August 31, 2021, we adopted Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606), using the modified retrospective approach. Under this method, the guidance is applied only to the most current period presented in the financial statements. ASU No. 2014-09 outlines a single comprehensive revenue recognition model for revenue arising from contracts with customers and superseded most of the previous revenue recognition guidance, including industry-specific guidance. Under ASU No. 2014- 09, an entity recognizes revenue for the transfer of promised goods or services to customers in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services. Our revenue recognition policies remained substantially unchanged as a result of the adoption of ASU No. 2014-09 and we did not have any significant changes in our business processes or systems. The Company’s revenues are primarily disaggregated in fees for providing staffing solutions and EAS/human capital management services. The Company enters into contracts with its clients for staffing or EAS based on a stated rate and price in the contract. Contracts generally have a term of 12 months but are cancellable at any time by either party with 30 days’ written notice. The performance obligations in the agreements are generally combined into one performance obligation, as they are considered a series of distinct services, and are satisfied over time because the client simultaneously receives and consumes the benefits provided as the Company performs the services. Payments for the Company’s services are typically made in advance of, or at the time that the services are provided. The Company does not have significant financing components or significant payment terms for its customers and consequently has no material credit losses. The Company uses the output method based on a stated rate and price over the payroll processed to recognize revenue, as the value to the client of the goods or services transferred to date appropriately depicts our performance towards complete satisfaction of the performance obligation. Staffing Solutions The Company records gross billings as revenues for its staffing solutions clients. The Company is primarily responsible for fulfilling the staffing solutions services and has discretion in establishing price. The Company includes the payroll costs in revenues with a corresponding increase to cost of revenues for payroll costs associated with these services. As a result, we are the principal in this arrangement for revenue recognition purposes. For Fiscal 2020, the Company recognized no revenues that should have been evaluated under a staffing solutions model. EAS Solutions EAS solutions revenue is primarily derived from the Company’s gross billings, which are based on (i) the payroll cost of the Company’s worksite employees (“WSEs”) and (ii) a mark-up computed as a percentage of payroll costs for payroll taxes and workers’ compensation premiums. Gross billings are invoiced to each EAS client concurrently with each periodic payroll of the Company’s WSEs which coincides with the services provided and which is typically a fixed percentage of the payroll processed. Revenues, which exclude the payroll cost component of gross billings and therefore consist solely of markup, are recognized ratably over the payroll period as WSEs perform their services at the client worksite. Although the Company assumes responsibility for processing and remitting payroll and payroll related obligations, it does not assume employment-related responsibilities such as determining the amount of the payroll and related payroll obligations. As a result, the Company records revenue on a “net” basis in this arrangement for revenue recognition purposes. Revenues that have been recognized but not invoiced for EAS clients are included in unbilled accounts receivable on the Company’s consolidated balance sheets, and were $2,741,000 and $2,303,000, as of August 31, 2021 and August 31, 2020, respectively. Consistent with the Company’s revenue recognition policy for EAS clients, direct costs do not include the payroll cost of its WSEs. The cost of revenue associated with the Company’s revenue generating activities is primarily comprised of all other costs related to its WSEs, such as the employer portion of payroll-related taxes, employee benefit plan premiums and workers’ compensation insurance costs. The fees collected from the worksite employers for benefits (i.e. zero-margin benefits pass-through), workers’ compensation and state unemployment taxes are presented in revenues and the associated costs of benefits, workers’ compensation and state unemployment taxes are included in operating expenses for EAS clients, as the Company does retain risk and acts as a principal with respect to this aspect of the arrangement. With respect to these fees, the Company is primarily responsible for fulfilling the service and has discretion in establishing price. Disaggregation of Revenue The Company’s primary revenue streams include HCM and staffing services. The disaggregated Company revenue for Fiscal 2021 and Fiscal 2020 was as follows: Revenue (in millions): 2021 2020 HCM 1 $ 8.2 $ 8.6 Staffing 15.2 — $ 23.4 $ 8.6 1 HCM revenue is presented net, $63.8 million gross less worksite employees payroll cost of 55.6 million for Fiscal 2021 and $65.5 million gross less worksite employees payroll cost of $56.9 million in Fiscal 2020. During Fiscal 2021 the Company announced the launch of ShiftPixy Labs and expects to generate revenue from this initiative in Fiscal 2022. For Fiscal 2021 and Fiscal 2020, the following geographical regions represented more than 10% of total revenues: Region: 2021 2020 California 70.3 % 78.2 % Washington 10.8 % 11.6 % Incremental Cost of Obtaining a Contract Pursuant to the “practical expedients” provided under ASU No 2014-09, the Company expenses sales commissions when incurred because the terms of its contracts are cancellable by either party upon 30 days’ notice. These costs are recorded in commissions in the Company’s Consolidated Statements of Operations. Segment Reporting Prior to Fiscal 2021, the Company operated as one reportable segment under ASC 280, Segment Reporting . The chief operating decision maker regularly reviews the financial information of the Company at a consolidated level in deciding how to allocate resources and in assessing performance. During Fiscal 2021, the Company entered into new business lines and geographic areas that, to date, are not material. However, with the migration to Staffing during the fiscal quarter ending May 31, 2021, the Company expects to manage the business on a segmented basis in the future and will therefore report such information once systems and processes are updated accordingly. Reporting and monitoring activities on a segment basis will allow the chief operating decision maker to evaluate operating performance more effectively. See also Disaggregation of Revenue , above. Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less when purchased as cash equivalents. The Company had no such investments as of August 31, 2021 or August 31, 2020. 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. As of August 31, 2021, there was $891,000 of cash on deposit in excess of the amounts insured by the FDIC. The Company had two and zero individual clients that represented more than 10% of its annual revenues in Fiscal 2021 and Fiscal 2020, respectively. Four clients represented 94% of total accounts receivable at August 31, 2021, compared to three clients representing approximately 92% of its total accounts receivable at August 31, 2020. 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 remaining 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 Leasehold improvements - shorter of the useful life or the remaining lease term, typically 5 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 Fiscal 2021 or Fiscal 2020. 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 three to five years from when the asset is placed in service. The Company also expenses internal costs related to minor upgrades and enhancements, as it is impractical to separate these costs from normal maintenance activities. 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 $0 and $3,543,000 for Fiscal 2021 and Fiscal 2020, respectively. Workers’ Compensation Everest Program Until July 2018, a portion of the Company’s workers’ compensation risk was covered by a retrospective rated policy through Everest National Insurance Company, which calculates the final policy premium based on the Company’s loss experience during the term of the policy and the stipulated formula set forth in the policy. The Company funds the policy premium based on standard premium rates on a monthly basis and based on the gross payroll applicable to workers covered by the policy. During the policy term and thereafter, periodic adjustments may involve either a return of previously paid premiums or a payment of additional premiums by the Company or a combination of both. If the Company’s losses under that policy exceed the expected losses under that policy, then the Company could receive a demand for additional premium payments. The Company is currently engaged in litigation regarding such a demand for additional premium payments as discussed at Note 16, Contingencies, Everest Litigation , below. Sunz Program From July 2018 through February 28, 2021, the Company’s workers’ compensation program for its WSEs was 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 $500,000 of claims per occurrence. The Company provides and maintains a loss fund that is earmarked to pay claims and claims related expenses. The workers’ compensation insurance carrier establishes monthly funding requirements comprised of premium costs and funds to be set aside for payment of future claims (“claim loss funds”). The level of claim loss funds is primarily based upon anticipated WSE payroll levels and expected workers’ compensation loss rates, as determined by the insurance carrier. Monies funded into the program for incurred claims expected to be paid within one year are recorded as Deposit - workers’ compensation, a short-term asset, while the remainder of claim funds are included in Deposit- workers’ compensation, a long-term asset in its consolidated balance sheets. The Company is currently engaged in litigation regarding demands by Sunz for additional claims loss funds, as discussed at Note 16, Contingencies, Sunz Litigation , below. Balance Sheet Items Related To Workers’ Compensation Under both the Everest and Sunz Programs, the Company utilized a third-party to estimate its loss development rate, which is based primarily upon the nature of WSE 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, 2021, the Company had $155,000 in Deposit – workers’ compensation classified as a short-term asset and $386,000 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, 2021, the Company had short term accrued workers’ compensation costs of $663,000 and long term accrued workers’ compensation costs of $1,646,000 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, Discontinued Operations, below. As of August 31, 2021, the retained workers’ compensation assets and liabilities are presented as a discontinued operation net asset or liability. As of August 31, 2021, the Company had $356,000 in short term assets and $1,516,000 of short term liabilities, and had $883,000 of long term assets and $3,765,000 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. Current Program Effective March 1, 2021, the Company migrated its clients to a guaranteed cost program. Under this program, the Company’s financial responsibility is limited to the cost of the workers’ compensation premium. The Company funds the workers’ compensation premium based on standard premium rates on a monthly basis and based on the gross payroll applicable to workers covered by the policy. Any final adjustments to the premiums are based on the final audited exposure multiplied by the applicable rates, classifications, experience modifications and any other associated rating criteria. 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 warrant 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 820, Fair Value Measurement , requires entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized on the balance sheet, for which it is practical to estimate fair value. ASC 820 defines fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. At August 31, 2021 and August 31, 2020, 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: o Quoted prices for similar assets or liabilities in active markets; o Quoted prices for identical or similar assets or liabilities in inactive markets; o Inputs other than quoted prices that are observable for the asset or liability; o Inputs that are derived principally from or corroborated by observable market data by correlation or other means; and o If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability. · Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement. The Company did not have any Level 1 or Level 2 assets or liabilities at August 31, 2021 or August 31, 2020. The Company recorded expense related to Preferred Options (as defined below) in the year ended August 31, 2020 using Level 2 fair value measurements. See Note 11, Stockholders' Equity , below, for assumptions used for this valuation. We recorded the fair value of the SPAC founder shares that the Company transferred to the underwriters using non-recurring Level 3 assumptions, including quoted asset prices for SPAC shares and warrants and estimates of the likelihood of the IPOs and IBCs of our sponsored SPACs being consummated. See also Note 6, Deferred Offering Costs — SPACS , below. 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 convertible notes (see Note 10, Senior Convertible Notes Payable ) consisting of conversion feature derivatives and warrants, is a Level 3 fair value measurement as of August 31, 2020 and through December 31, 2020 (end of the earnout period as defined under the terms of the Note Receivable). The Note Receivable, as described in Note 3, Discontinued Operations , below, was estimated using a discounted cash flow technique based on expected contingent payments identified in the Vensure Asset Sale contract and with significant inputs that are not observable in the market and thus represents a Level 3 fair value measurement as defined in ASC 820. The Company valued the Note Receivable on the January 1, 2020 transaction date using a 10% discount rate, and on August 31, 2020 and through December 31, 2020 using a 15% discount rate, which contemplates the risk and probability assessments of the expected future cash flows. The significant inputs in the Level 3 measurement not supported by market activity include the probability assessments of expected future cash flows related to the Vensure Asset Sale, appropriately discounted considering the uncertainties associated with the obligation, and as calculated in accordance with the terms of the Vensure Asset Sale agreement. For Fiscal 2020, the expected cash payments from the Note Receivable were based on estimated gross wages billed for the clients transferred to Vensure pursuant to the Vensure Asset Sale as of the measurement date. The Company used the following assumptions to value the Note Receivable as of August 31, 2020: · Discount rate of 15% · Actual monthly wages billed to the extent available to the Company For interim reporting periods after December 31, 2020 and as of August 31, 2021, the Company valued the Note Receivable as discussed in Note 3, Discontinued Operations , below. The development and determination of the unobservable inputs for Level 3 fair value measurements and the fair value calculations are the responsibility of the Company’s chief financial officer and are approved by the chief executive officer. There were no transfers out of Level 3 in Fiscal 2021. 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 2020 March 2020 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, 2021 or August 31, 2020, since all of the Company's convertible notes outstanding 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, 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 2020 March 2020 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, 2021 and August 31, 2020, there were no transfers of financial assets or financial liabilities between the hierarchy levels. Internal-Use Software During Fiscal 2021 and Fiscal 2020, the Company incurred both internal and external research and development costs for its software development of approximately $6,802,000 and $4,165,000, respectively, of which $2,649,000 and $1,674,000, 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, no software costs were capitalized for Fiscal 2021 and Fiscal 2020, respectively. Advertising Costs The Company expenses all advertising as incurred. The Company recorded expenses totaling $2,597,000 and $646,000 for Fiscal 2021 and Fiscal 2020, 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. Income Taxes The Company accounts for income taxes pursuant to ASC 740, Income Taxes . Under ASC 740, |
Discontinued Operations
Discontinued Operations | 12 Months Ended |
Aug. 31, 2021 | |
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 transferring $1.5 million of working capital assets, including cash balances and certain operating assets associated with the assigned client contracts included in the agreement, to a wholly owned subsidiary of Vensure (the “Vensure Asset Sale”). Gross proceeds from the Vensure Asset Sale were $19.2 million, of which $9.7 million was received at closing and $9.5 million was scheduled to be paid out in equal monthly payments over the four years following the closing of the transaction (the “Note Receivable”), subject to adjustments for working capital and customer retention, (as measured by a gross wage guarantee included in the governing agreement), over the twelve month period following the Vensure Asset Sale. For Fiscal 2020, the Company estimated the value of the Note Receivable at fair value as discussed in Note 2, Summary of Significant Acounting Policies , above. For Fiscal 2021, the Company recorded the Note Receivable based on the estimate of expected collections based on additional information obtained through discussions with Vensure and evaluation of our records. On March 12, 2021, the Company received correspondence from Vensure proposing approximately $10.7 million of working capital adjustments under the terms of the Vensure Asset Sale agreement which, if accepted, would have had the impact of eliminating any sums owed to the Company under the Note Receivable. As indicated in the reconciliation table below, the Company has recorded $2.6 million of working capital adjustments, subject to final review and acceptance, and has provided for an additional reserve of $2.9 million for potential claims. By letter dated April 6, 2021, the Company disputed Vensure’s proposed adjustments. The disputes between the Company and Vensure regarding working capital adjustments under the Vensure Asset Sale agreement are currently the subject of litigation pending in the Delaware Chancery Court, as discussed at Note 16, Contingencies, Vensure Litigation , below. The following is a reconciliation of the gross proceeds to the net Note Receivable from the Vensure Asset Sale as presented on the Company’s consolidated balance sheet for Fiscal 2021. Gross proceeds $ 19,166,000 Cash received at closing – asset sale (9,500,000) Cash received at closing – working capital (166,000) Gross note receivable $ 9,500,000 Less: Transaction reconciliation – estimated working capital adjustment (2,604,000) Adjusted note receivable 6,896,000 Less: Reserve for estimated potential claims (2,892,000) Long-term note receivable $ 4,004,000 The entire Note Receivable is recorded as a long term note receivable as of August 31, 2021. Any adjustments to the Note Receivable are applied against payments in the order they are due to be paid. As such, the estimates of the working capital and reserves for estimated potential claims would not result in any cash payments due to the Company until Fiscal 2022. The Vensure Asset Sale generated a gain of $15.6 million for Fiscal 2020. The Company expected a minimal tax impact from the Vensure Asset Sale as it utilized its net operating losses accumulated since inception to offset the gain resulting from discontinued operations tax provision with a corresponding offset to the valuation allowance. The Vensure Asset Sale met the criteria of discontinued operations set forth in ASC 205 and as such the Company has reclassified its discontinued operations for all periods presented and has excluded the results of its discontinued operations from continuing operations for all periods presented. The terms of the Vensure Asset Sale call for adjustments to the Note Receivable either for: (i) working capital adjustments or (ii) in the event that the gross wages of the business transferred is less than the required amount. (i) Working capital adjustments : Through August 31, 2021, the Company has identified $2.6 million of likely working capital adjustments, including $88,000 related to lower net assets transferred at closing, and $2.5 million of cash remitted to the Company’s bank accounts, net of cash remitted to Vensure’s bank accounts. Under the terms of the Vensure Asset Sale, a reconciliation of the working capital was to have been completed by April 15, 2020. Due to operational difficulties and quarantined staff caused by the outbreak of COVID-19 , Vensure requested a postponement of the working capital reconciliation that was due in Fiscal 2020. Although Vensure provided the Company with its working capital reconciliation on March 12, 2021, it failed to provide adequate documentation to support its calculations. Accordingly, the working capital adjustment recorded as of August 31, 2021, represents the Company’s estimate of the reconciliation adjustment by using Vensure's claims and the limited supporting information Vensure provided as a starting point, and then making adjustments for amounts in dispute based upon our internal records and best estimates. There is no assurance that the working capital change identified as of August 31, 2021 represents the final working capital adjustment. (ii) Gross billings adjustment : Under the terms of the Vensure Asset Sale, the proceeds of the transaction are reduced if the actual gross wages of customers transferred for Calendar 2020 are less than 90% of those customers' Calendar 2019 gross wages. The Company has prepared an estimate of the Calendar 2020 gross wages based on a combination of factors including reports of actual transferred client billings in early Calendar 2020, actual gross wages of continuing customers of the Company, publicly available unemployment reports for the Southern California markets and the relevant COVID-19 impacts on employment levels, and other information. Based on the information available, the Company estimated that it would receive additional consideration below the required threshold and reduced the contingent consideration by $1.4 million. Vensure has not identified any such adjustments to date. Based on the information available, the Company reclassified the previously recorded gross wages claim to a general potential claims reserve during Fiscal 2021. No additional adjustment was made during Fiscal 2021. The carrying amounts of the classes of assets and liabilities from the Vensure Asset Sale included in discontinued operations are as follows: August 31, August 31, 2021 2020 Cash $ — $ — Accounts receivable and unbilled account receivable — — Prepaid expenses and other current assets — — Deposits – workers’ compensation 356,000 1,030,000 Total current assets 356,000 1,030,000 Fixed assets, net — — Deposits – workers’ compensation 883,000 2,582,000 Total assets $ 1,239,000 $ 3,612,000 Accounts payable and other current liabilities $ — $ — Payroll related liabilities — — Accrued workers’ compensation cost 1,516,000 1,746,000 Total current liabilities 1,516,000 1,746,000 Accrued workers’ compensation cost 5,411,000 4,377,000 Total liabilities 6,927,000 6,123,000 Net liability $ (5,688,000) $ (2,511,000) Reported results for the discontinued operations by period were as follows: For the Year Ended August 31, August 31, 2021 2020 Revenues (gross billings of $120.7 million less WSE payroll cost of $103.0 million, respectively for the year ended August 31, 2020) $ — $ 17,632,000 Cost of revenue 2,509,000 16,899,000 Gross profit (2,509,000) 733,000 Operating expenses: Salaries, wages and payroll taxes — 553,000 Commissions — 741,000 Total operating expenses — 1,294,000 (Loss) income from discontinued operations $ (2,509,000) $ (561,000) During Fiscal 2021, the Company recorded net operating loss from discontinued operations totaling $8,632,000 that were fully reserved. During Fiscal 2020, the Company utilized fully reserved net operating loss carryforwards of approximately $15,669,000 to offset income from discontinued operations. The components of income tax expense for discontinued operations are as follows: For the Year Ended August 31, 2021 2020 Provision for income tax expense Federal tax expense $ (500,000) $ 3,436,000 State tax expense (129,000) 1,565,000 Total tax expense (629,000) 5,001,000 Tax benefit for utilization of tax loss carryforwards 629,000 (5,001,000) Provision for income tax expense from discontinued operations $ — $ — |
Going Concern
Going Concern | 12 Months Ended |
Aug. 31, 2021 | |
Going Concern | |
Going Concern | Note 4: Going Concern The accompanying financial statements have been prepared in conformity with GAAP, which contemplate continuation of the Company as a going concern. Historically, the Company has funded itself either through cash flow from operations or the raising of capital through equity sales. If the Company is unable to obtain additional capital, it may not be able to make payments in a timely manner or otherwise fund its operations. The COVID-19 pandemic continued to negatively impact worldwide economic activity through most of Fiscal 2021, including within the United States where our operations are based. While these negative impacts began to ameliorate during the latter portion of Fiscal 2021, prolonged workforce disruptions still negatively impacted sales for the majority of the fiscal year, as well as the Company’s overall liquidity. As of the end of Fiscal 2021, the Company had cash of $1.5 million and a working capital deficit of $10.9 million. During Fiscal 2021, the Company used approximately $21.5 million of cash from its continuing operations and incurred recurring losses, resulting in an accumulated deficit of $149.3 million as of August 31, 2021. The following table sets forth a summary of changes in cash flows for Fiscal 2021 and Fiscal 2020: For the year ended August 31, 2021 2020 Net cash used in operating activities $ (21,512,000) $ (16,883,000.00) Net cash provided by (used in) investing activities (2,566,000) 9,353,000 Net cash provided by financing activities 20,974,000 10,272,000 Change in cash $ (3,104,000) $ 2,742,000 The recurring losses, negative working capital and cash used in the Company’s operations are indicators of substantial doubt as to the Company’s ability to continue as going concern for at least one year from issuance of these financial statements. The Company’s plans to alleviate this substantial doubt include raising additional capital to fund expansion of its operations, including the continued development and support of its HRIS platform, its SPAC sponsorship activities, and its ShiftPixy Labs growth initiatives . The Company closed a private placement transaction with a large institutional investor on September 3, 2021, (immediately following the close of Fiscal 2021), which yielded proceeds to the Company of approximately $11.9 million net of fees and expenses. The Company expects to engage in additional sales of its securities during Fiscal 2022, either through registered public offerings or private placements, the proceeds of which the Company intends to use to fund its operations and growth initiatives. If these sources do not provide the capital necessary to fund the Company’s operations during the next twelve months, it may need to curtail certain aspects of its operations or expansion activities, consider the sale of additional assets, or consider other means of financing. The Company can give no assurance that it will be successful in implementing its business plan and obtaining financing on advantageous terms, or that any such additional financing will be available. These consolidated financial statements do not include any adjustments for this uncertainty. |
Accounts Receivable
Accounts Receivable | 12 Months Ended |
Aug. 31, 2021 | |
Accounts Receivable | |
Accounts Receivable | Note 5: Accounts Receivable Accounts receivable represent outstanding gross billings to clients, and 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 Fiscal 2021 and Fiscal 2020 was not material. Write-offs for Fiscal 2021 and Fiscal 2020 were $45,000 and $0, respectively. 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. |
Deferred Offering Costs SPACs
Deferred Offering Costs SPACs | 12 Months Ended |
Aug. 31, 2021 | |
Deferred Offering Costs SPACs | |
Deferred Offering Costs SPACs | Note 6: Deferred Offering Costs – SPACs During Fiscal 2021, the Company incurred professional fees related to the filing of registration statements for the IPOs of four SPACs. The Company also transferred certain Founder Shares of those SPACs to a third party which created a non-controlling interest in those entities. These Founder Shares of common stock were transferred to the SPACs’ underwriter representative (the “Representative”) at below fair market value, resulting in compensation and therefore deferred offering costs for the SPACs, and the creation of a minority interest. The non-controlling interest is recorded as a minority interest on the Company’s Balance Sheet and Statement of Equity for Fiscal 2021. There were no similar transactions for Fiscal 2020. As of August 31, 2021, Deferred offering costs - SPACs totaled $48,261,000, consisting of $789,000 in legal and accounting fees related to the SPACs’ IPOs and $47,472,000 related to the non-controlling interest in consolidated subsidiaries. The non-controlling interest – deferred offering costs represents the estimated value of a portion of our Founder Shares in each of the following SPACs that we received as a result of our sponsorship as follows: (i) 2,000,000 shares of IHC common stock; (ii) 2,000,000 shares of TechStackery common stock; (iii) 2,000,000 shares of Vital common stock; and (iv) 4,000,000 shares of Firemark common stock. These shares were sold or transferred to the Representative on April 22, 2021 at a price below the fair market value of the shares and which is considered deferred compensation period. We estimate the total value of the 10,000,000 shares transferred, which represents deferred compensation to the Representative, to be $47,472,000, or $4.7472 per share. We arrived at this valuation by reference to similar SPAC IPO transactions, as set forth below: 1. 2. 3. |
Fixed Assets
Fixed Assets | 12 Months Ended |
Aug. 31, 2021 | |
Fixed Assets. | |
Fixed Assets | Note 7: Fixed Assets Fixed assets consisted of the following at August 31, 2021 and August 31, 2020: August 31, August 31, 2021 2020 Equipment $ 2,386,000 $ 576,000 Furniture & fixtures 599,000 348,000 Leasehold improvements 545,000 41,000 3,530,000 965,000 Accumulated depreciation & amortization (746,000) (390,000) Fixed assets, net $ 2,784,000 $ 575,000 Depreciation and amortization expense for Fiscal 2021 and Fiscal 2020 was $357,000 and $272,000, respectively. Included in the equipment balance at August 31, 2021 is $961,000 of equipment purchased but not placed in service. Software consists primarily of customized software purchased from third party providers, which is incorporated into the Company’s HRIS platform and related mobile application. No software cost was capitalized during Fiscal 2021. For Fiscal 2020, the Company recorded $3,737,000 of capitalized software cost, which was impaired during the year. 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 Fiscal 2021 and Fiscal 2020, no internally developed software was capitalized. A substantial portion of the capitalized software is attributable to a third party with whom the Company is engaged in litigation described below in Note 16, Contingencies, Kadima Litigation . During Fiscal 2021, the Company evaluated its capitalized software costs in the context of the procedural status and progress of this 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 to be impaired. |
Workers Compensation
Workers Compensation | 12 Months Ended |
Aug. 31, 2021 | |
Workers Compensation | |
Workers Compensation | Note 8: Workers’ Compensation The Company had three workers’ compensation programs in effect at various points during Fiscal 2021 and Fiscal 2020. The Everest program covered corporate employees and WSEs from July 1, 2017 through June 30, 2018 and the SUNZ program covered corporate employees and WSEs from July 1, 2018 through February 28, 2021. Effective March 1, 2021, the Company migrated its clients to a guaranteed cost program, pursuant to which the Company’s financial responsibility is limited to the cost of the workers’ compensation premium. The Company funds the workers’ compensation premium based on standard premium rates on a monthly basis and based on the gross payroll applicable to workers covered by the policy. Any final adjustments to the premiums are based on the final audited exposure multiplied by the applicable rates, classifications, experience modifications and any other associated rating criteria. The following table summarizes the workers’ compensation deposit from continuing operations for Fiscal 2021 and Fiscal 2020: Everest SUNZ Program Program Total Workers’ Comp Deposit at August 31, 2019 $ — 1,827,000 $ 1,827,000 Premiums paid — — — Paid in deposits — 601,000 601,000 Claim losses — (1,399,000) (1,399,000) Deposit refund — — — Workers’ Comp Deposit at August 31, 2020 $ — 1,029,000 $ 1,029,000 Paid in deposits — 446,000 446,000 Claim losses — (934,000) (934,000) Workers’ Comp Deposit at August 31, 2021 — 541,000 541,000 Less Current Amount — (155,000) (155,000) Long Term Balance at August 31, 2021 $ — 386,000 $ 386,000 The following table summarizes the workers’ compensation deposit from discontinued operations for Fiscal 2021 and Fiscal 2020: Everest SUNZ Program Program Total Workers’ Comp Deposit at August 31, 2019 $ — 6,411,000 $ 6,411,000 Premiums paid — — — Paid in deposits — 2,107,000 2,107,000 Claim losses — (4,907,000) (4,907,000) Deposit refund — — — Workers’ Comp Deposit at August 31, 2020 $ — 3,611,000 $ 3,611,000 Paid in deposits — 1,062,000 1,062,000 Claim losses — (3,434,000) (3,434,000) Workers’ Comp Deposit at August 31, 2021 — 1,239,000 1,239,000 Less Current Amount — (356,000) (356,000) Long Term Balance at August 31, 2021 $ — 883,000 $ 883,000 The following table summarizes the accrued workers’ compensation liability from continuing operations for Fiscal 2021 and Fiscal 2020: Everest SUNZ Program Program Total 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 Claim loss development 50,000 1,273,000 1,323,000 Paid in losses — (760,000) (760,000) Workers' Comp Liability at August 31, 2021 254,000 2,054,000 2,308,000 Less Current Amount (133,000) (530,000) (663,000) Long Term Balance at August 31, 2021 $ 121,000 1,524,000 $ 1,645,000 The following table summarizes the accrued workers’ compensation liability from discontinued operations for Fiscal 2021 and Fiscal 2020: Everest SUNZ Program Program Total 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 Claim loss development 103,000 2,639,000 2,742,000 Paid in losses — (3,583,000) (3,583,000) Workers’ Comp Liability at August 31, 2021 820,000 4,461,000 5,281,000 Less Current Amount (275,000) (1,240,000) (1,515,000) Long Term Balance at August 31, 2021 $ 545,000 3,221,000 $ 3,766,000 |
Accrued Payroll and Related Lia
Accrued Payroll and Related Liabilities | 12 Months Ended |
Aug. 31, 2021 | |
Accrued Payroll and Related Liabilities | |
Accrued Payroll and Related Liabilities | Note 9: Accrued Payroll and Related Liabilities Accrued payroll liabilities consisted of the following at August 31, 2021 and August 31, 2020: August 31, August 31, 2021 2020 Accrued Payroll $ 2,438,000 $ 1,970,000 Accrued Payroll Taxes 4,758,000 3,325,000 Corporate employee accrued paid time off 680,000 457,000 Accrued Payroll and related liabilities $ 7,876,000 $ 5,752,000 Accrued payroll and accrued payroll taxes represent payroll liabilities associated with the Company’s WSEs as well as its corporate employees. |
Senior Convertible Notes Payabl
Senior Convertible Notes Payable | 12 Months Ended |
Aug. 31, 2021 | |
Senior Convertible Notes Payable | |
Senior Convertible Notes Payable | Note 10: 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. During Fiscal 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 that had been declared in default in 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 16, Contingencies, below, for additional information on the litigation related to the Senior Convertible Notes. During Fiscal 2020, the Company resolved all litigation with three of its five institutional investors repaying in cash or converting into common stock its outstanding notes and all of the Senior Convertible Notes. 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 judgment 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. As a result of the settlements and resolution of litigation, the Company recorded a gain of $760,000 for Fiscal 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 — % — % 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 Fiscal 2020, representing the difference in fair value between the closing share price and the conversion price on the date of issuance. During Fiscal 2020, the Company amortized $2,210,000, 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, 2021 | |
Stockholders' Equity. | |
Stockholders' Equity | Note 11: Stockholders’ Equity Preferred Stock As previously disclosed, in September 2016, the founding shareholders of the Company were granted options to acquire preferred stock of the Company (the “Preferred Options”). The number of Preferred Options granted was based upon the number of shares held at the time of the grant. These Preferred Options are nontransferable and forfeited upon the sale of the related founding shares of common stock held by the option holder. Upon the occurrence of certain specified events, such founding shareholders can exercise each Preferred Option to purchase one share of preferred stock of the Company at an exercise price of $0.0001 per share. The preferred stock underlying the Preferred Options does not include any rights to dividends or preference upon liquidation of the Company and is convertible into shares of the Company’s common stock on a one-for-one basis. The Preferred Options became exercisable upon the consummation of the Vensure Asset Sale in January 2020, as discussed above. During Fiscal 2020, the Company recorded an expense of $62.1 million, related to the triggering of the Preferred Options as other expense, which was calculated pursuant to the Black-Scholes-Merton methodology applicable to valuing the 24,634,560 Preferred Options that became 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 date of valuation -- March 25, 2020 -- and concluded that this represented an illiquid market price and therefore was not a reliable valuation metric. The Company then evaluated the Preferred Options on the same date using Level 2 inputs based on the offering price of the Company’s common stock and warrants issued in connection with its May 2020 Public Offering, as adjusted for the fair value of the warrants issued in conjunction with said public offering. The resulting allocated common share price was then discounted for a lack of marketability of shares subject to “lock-up” agreements entered into in connection with the May 2020 Public Offering, which yielded a fair value of $2.52 per Preferred Option. The Company used the following assumptions to value the expense related to the Preferred Options: (i) option life of 3.77 years; (ii) risk free rate of 0.47%; (iii) volatility of 134%; (iv) exercise price of $0.0001 per share; and (v) a fair value of $3.62 per share of the Company’s common stock. On June 4, 2020, Scott W. Absher, the Company’s Chief Executive Officer, exercised 12,500,000 Preferred Options to purchase 12,500,000 shares of our preferred stock for an aggregate purchase price of $1,250. Immediately following the exercise of the Preferred Options described above, Mr. Absher elected to convert the 12,500,000 shares of preferred stock into 12,500,000 shares of common stock, which are subject to a 24-month lock-up period during which such shares may not be traded. Between July 20, 2020 and November 30, 2020, an additional 294,490 Preferred Options were exercised and converted into 294,490 shares of common stock, which were subject to a six-month lock up period at the time they were issued, during which such shares could not be traded on the open market. As of the date of this Form 10-K, the restrictions on 294,490 of these shares have been lifted, rendering them freely tradeable, while 11,827,570 Preferred Options issued pursuant to the September 2016 grant and triggered by the Vensure Asset Sale remain unexercised. On October 22, 2021, the Company’s board of directors canceled 11,790,000 of these Preferred Options previously issued to its co-founder, J. Stephen Holmes, pursuant to the September 2016 grant. Accordingly, these Preferred Options are no longer exercisable. The amount of Preferred Options, and the number of shares of preferred stock issuable upon exercise of such options, is based upon the number of shares of common stock held by the option holders at the time the Preferred Options were issued in September 2016. Accordingly, in order to confirm the original intent of the granting of up to 25,000,000 Preferred Options to Mr. Absher, it has always been the Company’s intent to adopt a second grant of Preferred Options granting an additional 12,500,000 Preferred Options to Mr. Absher, whereby each option permits the holder to acquire one share of the Company’s preferred stock for $0.0001 per share. On August 13, 2021, consistent with this intent, the Company granted 12,500,000 Preferred Options to Mr. Absher to purchase shares of Preferred Stock, par value $0.0001 per share, for consideration of $0.0001 per share. Each Preferred Option is exercisable for a period of twenty-four months upon (i) the acquisition of a Controlling Interest (as defined below) in the Company by any single shareholder or group of shareholders acting in concert, (other than Mr. Absher), or (ii) the announcement of (x) any proposed merger, consolidation, or business combination in which the Company’s Common Stock is changed or exchanged, or (y) any sale or distribution of at least 50% of the Company’s assets or earning power, other than through a reincorporation. Each share of Preferred Stock is convertible into Common Stock on a one-for-one basis. “Controlling Interest” means the ownership or control of outstanding voting shares of the Company sufficient to enable the acquiring person, directly or indirectly and individually or in concert with others, to exercise one-fifth or more of all the voting power of the Company in the election of directors or any other business matter on which shareholders have the right to vote under the Wyoming Business Corporation Act. 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 (“AGP”), 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 AGP’s over-allotment option to purchase 166,500 additional May 2020 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 recapitalization. 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 or prior to the closing date of May 26, 2020. Pursuant to the May Underwriting Agreement, the Company, upon closing of the May 2020 Offering, issued to AGP warrants to purchase up to 111,108 shares of common stock (the “May Underwriter Warrants”), representing 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 AGP’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 AGP’s over-allotment option to purchase 83,840 shares of common stock at $5.40 per share. October 2020 Public Offering On October 8, 2020, the Company entered into an underwriting agreement (the “October Underwriting Agreement”) with AGP in connection with a public offering (the “October 2020 Offering”) of an aggregate of (i) 4,000,000 shares of our 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 AGP’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, 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 $1.3 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 AGP warrants to purchase up to 200,000 shares of common stock (the “October Underwriter Warrants”), which is equivalent to 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 six months after the closing date and ending 5 years from the closing date, at a price per share equal to $3.30, which is equivalent to 110% of the public offering price per share. May 2021 Private Placement On May 17, 2021, the Company closed a private placement with a large institutional investor pursuant to which it sold to the investor an aggregate of (i) 2,320,000 shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), together with warrants (the “May 2021 Common Warrants”) to purchase up to 2,320,000 shares of Common Stock, with each May 2021 Common Warrant exercisable for one share of Common Stock at a price per share of $2.425, and (ii) 2,628,453 prefunded warrants (the “May 2021 Prefunded Warrants”), together with the May 2021 Common Warrants to purchase up to 2,628,453 shares of Common Stock, with each May 2021 Prefunded Warrant exercisable for one share of Common Stock at a price per share of $0.0001. Each share of Common Stock and accompanying May 2021 Common Warrant were sold together at a combined offering price of $2.425 and each May 2021 Prefunded Warrant and accompanying May 2021 Common Warrant were sold together at a combined offering price of $2.4249. The May 2021 Prefunded Warrants are immediately exercisable, at a nominal exercise price of $0.0001, and may be exercised at any time until all of the May 2021 Prefunded Warrants are exercised in full. The May 2021 Common Warrants have an exercise price of $2.425 per share, are immediately exercisable, and will expire five years from June 15, 2021, which is the date that the registration statement covering the resale of the shares underlying the Common Warrants was declared effective. The private placement generated gross proceeds of approximately $12.0 million, prior to deducting $0.94 million of costs consisting of Placement Agent commissions and offering expenses payable by the Company. In addition to the seven percent (7.0)% of the aggregate gross proceeds cash fee, the Company issued to the Placement Agent warrants to purchase an aggregate of up to five percent (5)% of the aggregate number of shares of Common Stock issuable upon exercise of the May 2021 Prefunded Warrants sold in the private placement (the “May Placement Agent Warrants”). The May Placement Agent Warrants are exercisable commencing on November 17, 2021 (six months after issuance), expire June 15, 2025, and have an initial exercise price of $2.6675 per share. Common Stock and Warrants During Fiscal 2021, the Company issued the following securities pursuant to the transactions described above: · 4,000,000 shares of common stock pursuant to the October 2020 Public Offering at $3.00 per share and warrants to purchase 2,300,000 shares of common stock. · 2,320,000 shares of common stock, 2,628,453 May 2021 Prefunded Warrants and May 2021 Common Warrants to purchase up to 4,948,453 shares of common stock pursuant to the May 2021 Private Placement. Each share of Common Stock and accompanying May 2021 Common Warrant were sold together at a combined offering price of $2.425, and each May 2021 Prefunded Warrant and accompanying May 2021 Common Warrant were sold together at a combined offering price of $2.4249. During Fiscal 2020, the Company issued the following securities pursuant to the transactions described above: · 12,794,220 shares of common stock pursuant to the exercise of Preferred Options. · 2,472,500 shares of common stock pursuant to the May 2020 Public Offering at $5.40 per share, pre-funded warrants to purchase 323,310 shares of common stock and warrants to purchase 1,277,580 shares of common stock. · 628,353 shares of common stock in connection with the settlement of the Company's senior convertible notes as described in Note 10, Senior Convertible Notes Payable, above, and further described in the Company's Form 10-K for Fiscal 2020. · 856 shares of common stock to two directors for services rendered valued at $75,000. The following table summarizes the changes in the Company’s issued and outstanding common stock and prefunded warrants from August 31, 2020 to August 31, 2021: Weighted average Weighted Number remaining average of life exercise shares (years) price Warrants outstanding, August 31, 2020 1,896,209 4.7 $ 7.91 Issued 10,324,329 4.6 2.03 (Cancelled) — — — (Exercised) (2,628,453) 4.8 — Warrants outstanding, August 31, 2021 9,592,085 5.7 $ 3.02 Warrants exercisable, August 31, 2021 9,344,662 4.4 $ 3.84 The following tables summarize the Company’s issued and outstanding warrants outstanding as of August 31, 2021: Weighted average Life of Outstanding Warrants Warrants Exercise Outstanding in years price May 2021 Common Warrants 4,948,453 4.8 $ 2.43 May 2021Underwriter Warrants (1) 247,423 4.2 2.67 October 2020 Common Warrants 2,300,000 4.1 3.30 October 2020 Underwriter Warrants 200,000 4.1 3.30 May 2020 Common Warrants 1,277,580 3.8 5.40 May 2020 Underwriter Warrants 111,108 3.8 5.40 March 2020 Exchange Warrants 423,669 4.1 10.17 Amended March 2019 Warrants 66,288 2.5 40.00 March 2019 Services Warrants 3,366 2.5 70.00 June 2018 Warrants 6,276 2.3 40.00 June 2018 Services Warrants 5,422 2.3 99.60 2017 PIPE Warrants 2,500 1.0 276.00 9,592,085 4.4 $ 3.84 (1) The May 2021 Underwriter Warrants are not exercisable until November 17, 2021. |
Stock Based Compensation
Stock Based Compensation | 12 Months Ended |
Aug. 31, 2021 | |
Stock Based Compensation | |
Stock Based Compensation | Note 12: Stock Based Compensation Employee Stock Option Plan Increase In March 2017, the Company adopted its 2017 Stock Option/Stock Issuance Plan (the “Plan”). The Plan provides incentives to eligible employees, officers, directors and consultants in the form of incentive stock options (“ISOs”), non-qualified stock options (“NQs”), (each of which is exercisable into shares of common stock) (collectively, “Options”) or shares of common stock (“Share Grants”). On July 1, 2020, the Company's board of directors unanimously approved an increase in the number of shares of common stock issuable under the Plan from 250,000 to 3,000,000, and granted options that were contingent upon shareholder approval. 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 ISOs, and 280,159 are designated as NQs 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 Fiscal 2021, an additional 270,937 ISOs were granted at exercise prices between $3.44 and $5.40 per share (the closing price of the Company’s common stock as reported by Nasdaq on the date of the grant), and 148,959 of the ISOs granted between July 1, 2020 and August 31, 2021 were cancelled. The remaining 1,357,137 ISOs are reported as non-exercisable in the table below. On March 31, 2021, the Company’s shareholders approved the increase in the number of shares of common stock issuable under the Plan as well as the various contingent grant awards under the Plan since July 1, 2020. As such, all previously unexercisable option grant awards became exercisable and the option awards granted since July 1, 2020 were no longer subject to any contingency not set forth in the Plan. On June 4, 2021, the Company registered an aggregate of 3,000,000 shares, par value $0.0001 per share, reserved for issuance under the Plan. For all options granted prior to July 1, 2020, each option is immediately exercisable and has a term of service vesting provision over a period of time as follows: 25% vest after a 12-month service period following the award, with the balance vesting in equal monthly installments over the succeeding 36 months. The options granted on or after July 1, 2020, typically vest over four years, with 25% of the grant vesting one year from the grant date, and the remainder in equal quarterly installments over the succeeding 12 quarters. All options granted to date have a stated ten-year term. Stock grants are issued at fair value, considered to be the market price on the grant date. The fair value of option awards is estimated on the grant date using the Black-Scholes stock option pricing model. Following its adoption of ASU 2016-9, the Company elected to account for forfeitures under the Plan as they occur. Any compensation cost previously recognized for an unvested award that is forfeited because of a failure to satisfy a service condition is reversed in the period of the forfeiture. The Company recognized approximately $1,594,000 and $1,300,000 of compensation expense for Fiscal 2021 and Fiscal 2020, respectively. During Fiscal 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.” The Company compensates its board members through grants of common stock for services performed. These services have been accrued within the accounts payable and other accrued liabilities on the consolidated balance sheet. The Company has incurred $169,000 and $150,000 for the Fiscal 2021 and Fiscal 2020, respectively. At August 31, 2021, the total unrecognized deferred share-based compensation expected to be recognized over the remaining weighted average vesting periods of three years for outstanding grants was $4,191,000. The following table summarizes the Company’s option grant, exercise and forfeiture activity from August 31, 2019, through August 31, 2021: Options Outstanding and Exercisable Weighted Average Weighted Number Remaining Average of Contractual Exercise Options Life Price (In years) 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, August 31, 2020 1,398,740 9.5 8.18 Granted 840,000 8.5 2.61 Exercised — — — Forfeited (461,720) 5.9 2.72 Balance at August 31, 2021 1,776,115 8.9 $ 6.53 Options outstanding as of August 31, 2021 and August 31, 2020 had aggregate intrinsic value of $0 and $22,000, respectively. At August 31, 2021, 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 $6,000,000. Option vesting activity from August 31, 2019, through August 31, 2021 was as follows: Weighted Weighted Number Remaining Average of Contractual Exercise Options Vested Options Life Price (In years) Balance, August 31, 2019 10,291 8.0 $ 152.80 Vested 19,414 8.1 $ 89.06 Exercised — 0 $ 0.00 Forfeited (1,295) 6.4 $ 140.09 Balance, August 31, 2020 28,410 7.2 $ 115.10 Vested 281,622 8.8 $ 7.15 Exercised — 0 $ — Forfeited (775) 6.1 $ 67.17 Balance at August 31, 2021 309,257 8.6 $ 16.91 The following table summarizes information about stock options outstanding and vested at August 31, 2021: Options Outstanding Options Vested Weighted Number Average Weighted Weighted Weighted of Options Number Remaining Average Number Remaining Average not of Options Contractual Exercise of Contractual Exercise Exercise Prices Exercisable Exercisable Life Price Options Life Price (In years) (In years) $3.44-10.00 — 1,735,418 9.3 $ 4.72 275,104 8.9 $ 5.30 $10.01-$40.00 — 3,500 7.8 21.69 2,086 7.8 21.68 $40.01-$80.00 — 13,396 7.6 51.21 10,072 7.6 51.22 $80.01-$120.00 — 10,302 6.7 102.90 8,987 6.7 102.84 $120.01-$160.00 12,375 6.0 155.20 11,883 6.0 155.48 $160.01-$391.60 — 1,125 5.9 391.60 1,125 5.9 391.60 — 1,776,115 8.9 $ 6.53 309,257 8.6 $ 16.91 The number of options and exercise prices have been presented retroactively for the 1 for 40 reverse stock split, which was effective December 17, 2019. |
Related Parties
Related Parties | 12 Months Ended |
Aug. 31, 2021 | |
Related Parties. | |
Related Parties | Note 13: Related Parties J. Stephen Holmes formerly served as a non-employee sales manager advisor to and significant shareholder of the Company. The Company incurred $750,000 in professional fees for services provided by Mr. Holmes during each of Fiscal 2021 and 2020, respectively. On or about October 22, 2021, the Company severed all ties with Mr. Holmes, effective immediately, and cancelled Preferred Options that had previously been issued to him but had not been exercised. As a result of these actions, the Company no longer has any financial obligation to Mr. Holmes, and believes that he is no longer a significant shareholder of the Company. During Fiscal 2021, we made one-time payments to certain of our employees totaling approximately $650,000 in connection with their agreement to relocate from California to our new principal executive offices in Miami, Florida. Included among these were payments to the following related parties, in the amounts indicated: (i) Scott W. Absher, our board of directors Chair and Chief Executive Officer, $160,000; (ii) Amanda Murphy, our Director of Operations and a member of our Board, $80,000; (iii) David May, a member of our business development team, and the son-in-law of Mr. Absher, $80,000; (iv) Phil Eastvold, the Executive Producer of our wholly owned subsidiary, ShiftPixy Productions, Inc., and the son-in-law of Mr. Absher, $88,000; (v) Hannah Absher, an employee of the Company and the daughter of Mr. Absher, $18,000; and (vi) Jared Holmes, an employee of the Company and son of J. Stephen Holmes, $18,000. David May, a member of our business development team, is the son-in-law of Mr. Absher. In addition to the relocation bonus noted above, Mr. May received compensation, including sales commissions, of approximately $149,000 and $132,000 for Fiscal 2021 and Fiscal 2020, respectively. Phil Eastvold, the Executive Producer of ShiftPixy Productions, Inc., is the son-in-law of Mr. Absher. In addition to the relocation bonus noted above, Mr. Eastvold received compensation of approximately $224,000 for Fiscal 2021.Mr. Eastvold was not an employee of the Company prior to Fiscal 2021, and therefore received no compensation during Fiscal 2020. Connie Absher, (the spouse of Scott Absher), Elizabeth Eastvold, (the daughter of Scott and Connie Absher and spouse of Mr. Eastvold), and Hannah Absher, (the daughter of Scott and Connie Absher), are also employed by the Company. These individuals, as a group, received aggregate compensation of $240,000 and $220,000 for Fiscal 2021 and Fiscal 2020, respectively. In addition, as noted above, Hannah Absher received a relocation bonus of approximately $18,000 during Fiscal 2021, in connection with her relocation. Neither Connie Absher nor Elizabeth Eastvold received any such relocation bonus. Amanda Murphy is a member of the Company’s board of directors and its Director of Operations, and has been named as the Company’s Chief Operating Officer effective January 1, 2022. In addition to the relocation bonus noted above, Ms. Murphy received compensation of approximately $264,000 and $240,000 for Fiscal 2021 and Fiscal 2020, respectively. On December 23, 2019, pursuant to the terms of his director agreement, the Company issued to Whitney White, one of its independent directors, 428 shares of our common stock, valued at $37,500, or $87.62 per share. On June 2, 2021, the Company's board of directors approved a one-time discretionary cash bonus award to Mr. Absher in the amount of $240,000, in recognition of his recent contributions to the Company. |
Income Taxes
Income Taxes | 12 Months Ended |
Aug. 31, 2021 | |
Income Taxes | |
Income taxes | Note 14: 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, 2021 2020 Deferred tax liabilities: Depreciation $ (597,000) $ (111,000) Software development costs — (265,000) Note receivable (1,088,000) (1,132,000) Total deferred tax liabilities (1,685,000) (1,508,000) Deferred tax assets: Net operating loss carryforward 18,198,000 9,362,000 Business interest 2,998,000 3,087,000 Other accruals 458,000 — Workers’ compensation accruals 2,061,000 2,202,000 Stock-based compensation 207,000 759,000 Deferred rent 168,000 14,000 Other 6,000 — Total deferred tax assets 24,096,000 15,424,000 Valuation allowance (22,411,000) (13,916,000) Total net deferred tax assets $ 1,685,000 $ 1,508,000 Net deferred tax assets $ — $ — Income tax expense consists of the following: For the Year Ended August 31, 2021 2020 Current Federal $ — $ — State 42,000 — Total current 42,000 — Deferred Federal (5,059,000) (4,669,000) State (2,807,000) (1,915,000) Total deferred (7,866,000) (6,584,000) Change in valuation allowance $ 7,866,000 $ 6,584,000 Total Income Tax Expense (Benefit) $ 42,000 $ — The reconciliation of the statutory federal rate to the Company’s effective income tax rate is as follows: August 31, August 31, 2021 2020 Federal statutory rate (21%) $ (5,738,000) $ (19,000,000) Non-deductible penalties and other permanent differences 333,000 49,000 State and local income taxes, net of federal benefit (1,607,000) (1,688,000) Redetermination of prior year taxes (812,000) 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 7,866,000 6,584,000 Net income tax provision $ 42,000 $ — 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, 2021, and 2020, the Company had no accrued interest and penalties related to uncertain tax positions. 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 2021 and 2020 was approximately $7,866,000 and $6,584,000, respectively. As of August 31, 2021, and 2020, the Company had cumulative federal net operating loss (“NOL”) carryforwards of approximately $64,652,000 and $34,115,000 respectively, which begin to expire in 2035 and state net operating loss carryforwards of approximately $68,034,000 and $42,185,000, respectively. The Company’s net operating losses 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. As of August 31, 2021 and 2020, the company had NOLs of $37,809,000 and $8,067,000, respectively; which have an indefinite life but are limited to 80% of taxable income when used. 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 the NOL carryback provision has not resulted 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, 2021. |
Commitments
Commitments | 12 Months Ended |
Aug. 31, 2021 | |
Commitments | |
Commitments | Note 15: 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 lease for 13,246 square feet of office space located in Miami, Florida to house its principal executive offices commencing October 2020, and continuing through September 2027. The lease contains escalation clauses relating to increases in real property taxes as well as certain maintenance costs. Effective October 1, 2020, the Company entered into a non-cancelable 64-month lease for 23,500 square feet of primarily industrial space located in Miami, Florida, to house ghost kitchens, production facilities, and certain marketing and technical functions, including those associated with ShiftPixy Labs. The lease contains escalation clauses relating to increases in real property taxes as well as certain maintenance costs. Effective June 7, 2021, the Company entered into a non-cancelable sublease agreement with Verifone, Inc. to sublease premises consisting of approximately 8,000 square feet of office space located in Miami, Florida, that the Company anticipates using for its sales and operations workforce. The lease has a term of three years expiring on May 31, 2024. The base rent is paid monthly and escalates annually pursuant to a schedule set forth in the sublease. Effective June 21, 2021, the Company entered into a non-cancelable 77 month lease, with an anticipated possession date of March 1, 2022, for premises consisting of approximately 13,418 square feet of office space located in Sunrise, Florida, that the Company anticipates using primarily to house its operations personnel and other elements of its workforce. The base rent is paid monthly and escalates annually pursuant to a schedule set forth in the lease. Future minimum lease payments under non-cancelable operating leases at August 31, 2021, are as follows: Years ended August 31, 2022 $ 1,198,000 2023 1,014,000 2024 1,075,000 2025 1,108,000 2026 814,000 Thereafter 838,000 Total minimum payments $ 6,047,000 ShiftPixy Labs Ghost Kitchens On March 17, 2021, the Company entered into a master service agreement for the construction of six container units housing ten ghost kitchens, to be installed at its ShiftPixy Labs industrial facility in Miami, Florida, for a cost of approximately $962,000. As of August 31, 2021, the Company has made payments totaling $865,000 pursuant to this agreement, which it has capitalized as construction in progress and included under fixed assets on the consolidated balance sheet. The Company expects to incur additional costs totaling $97,000 under this agreement, which it expects to pay early in Fiscal 2022. Non-contributory 401(k) Plan The Company has a non-contributory 401(k) Plan (the “401(k) Plan”). The 401(k) Plan covers all non-union employees who are at least 21 years of age and have completed 3 months of service. There were no employer contributions to the 401(k) Plan during Fiscal 2021 and Fiscal 2020. SPAC Sponsorship On April 29, 2021, the Company announced its sponsorship, through a wholly-owned subsidiary, of four SPAC IPOs. The Company purchased founder shares in each SPAC, through its wholly-owned subsidiary, for an aggregate purchase price of $25,000 per SPAC. The number of Founder Shares issued was determined based on the expectation that such Founder Shares would represent 20% of the outstanding shares of each SPAC after its IPO (excluding the private placement warrants described below and their underlying securities). The registration statement and prospectus covering the IPO of one of these SPACs, IHC, was declared effective by the SEC on October 19, 2021, and IHC units (the “IHC Units”), consisting of one share of common stock and an accompanying warrant to purchase one share of IHC common stock, began trading on the NYSE on October 20, 2021. The IHC IPO closed on October 22, 2021, raising gross proceeds for IHC of $115 million. In connection with the IHC IPO, the Company purchased, through its wholly-owned subsidiary, 4,639,102 placement warrants at a price of $1.00 per warrant, for an aggregate purchase price of $4,639,102. The Company also anticipates purchasing private placement warrants in each of the three other SPACs it is sponsoring, at a price of $1.00 per warrant, for an aggregate of $17,531,408 (or up to $18,656,408 if the over-allotment option of each SPAC is exercised in full), which includes the Company’s investment in Founder Shares and assumes that all four SPAC IPOs are consummated and the pricing terms of each other SPAC IPO is identical to the pricing of the IHC IPO. Each private placement warrant is exercisable to purchase one whole share of common stock in each SPAC at $11.50 per share. The private placement warrants of each SPAC will be worthless to the extent that they do not complete an initial business combination. The investment amounts set forth above do not include loans that the Company may extend to each SPAC in an amount not to exceed $500,000 individually (or $2 million in the aggregate), in its role as sponsor. As of October 31, 2021, the Company had advanced, through its wholly owned subsidiary, an aggregate of approximately $820,000 to the SPACs for payment of various expenses in connection with the SPAC IPOs, principally consisting of SEC registration, legal and auditing fees. The Company anticipates that each of the SPACs will repay these advanced expenses from the proceeds of their respective SPAC IPOs, as permitted. |
Contingencies
Contingencies | 12 Months Ended |
Aug. 31, 2021 | |
Contingencies | |
Contingencies | Note 16: 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. 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 Form 10-K, 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 April 2019, Kadima filed a complaint against the Company in the Superior Court of the State of Arizona, Maricopa County, alleging claims for breach of contract, promissory estoppel and unjust enrichment, and seeking damages in excess of $11.0 million. The Company vigorously disputes and denies each of Kadima’s claims, including that it owes any sums to Kadima, and further believes that it is entitled, at a minimum, to a refund of a substantial portion of the sums that it has already paid, along with the release of the software modules currently being withheld. In June 2020, the Company engaged in a mediation with Kadima in an attempt to resolve the matter, which was unsuccessful. On July 14, 2020 the Company filed an answer to Kadima’s complaint, which denied Kadima’s claims and asserted counter-claims for breach of contract and fraud. Discovery is substantially complete, and a trial date has not been set. Splond Litigation On April 8, 2019, claimant, Corey Splond, filed a class action lawsuit on behalf of himself and other similarly situated individuals in the Eighth Judicial District Court for the State of Nevada, Clark County, naming the Company and its client as defendants, and alleging violations of certain wage and hour laws. This lawsuit is in the initial stages, and the Company denies any liability. Even if the plaintiff ultimately prevails, the potential damages recoverable will depend substantially upon whether the Court determines in the future that this lawsuit may appropriately be maintained as a class action. Further, in the event that the Court ultimately enters a judgment in favor of plaintiff, the Company believes that it would be contractually entitled to be indemnified by its client against at least a portion of any damage award. Radaro Litigation On July 9, 2020, the Company was served with a complaint filed by one of its former software vendors, Radaro Inc., in the United States District Court for the Central District of California, alleging damages arising from claims sounding in breach of contract and fraud. By Order filed October 21, 2020, the Court dismissed plaintiff’s claims for fraud and for punitive damages, with leave to replead. The Company denies plaintiff’s claims and is defending the lawsuit vigorously. Discovery is underway, and the Court has set a trial date of September 6, 2022. Everest Litigation On December 18, 2020, the Company was served with a Complaint filed in the United States District Court for the Central District of California by its former workers’ compensation insurance carrier, Everest National Insurance Company. The Complaint asserts claims for breach of contract, alleging that the Company owes certain premium payments to plaintiff under a retrospective rated policy, and seeks damages of approximately $600,000. On February 5, 2021, the Company filed an Answer to Plaintiff’s Complaint denying its claims for relief, and also filed a cross-claim against the third party claims administrator, Gallagher Bassett Services, Inc., for claims sounding in breach of contract and negligence based upon its administration of claims arising under the policy. By order dated April 7, 2021, the Court dismissed the Company’s complaint against Gallagher Bassett without prejudice to re-filing in another forum. On May 17, 2021, the Company refiled its complaint against Gallagher Basset in the Circuit Court of Cook County, Illinois. Discovery is underway in both cases, and the California Court has set a trial date in the Everest case of February 22, 2022, while no trial date has been set in the Illinois case. Sunz Litigation On March 19, 2021, the Company was served with a Complaint filed in the Circuit Court for the 11th Judicial Circuit, Manatee County, Florida, by its former workers’ compensation insurance carrier, Sunz Insurance Solutions, LLC. The Complaint asserts claims for breach of contract, alleging that the Company owes payments for loss reserve funds totaling approximately $10 million. The Company denies plaintiff’s allegations and is defending the lawsuit vigorously. On May 12, 2021, the Company filed a motion to dismiss the complaint, and Sunz filed an amended complaint in response. Discovery is proceeding in the matter and no trial date has been set. Internal Revenue Service (“IRS”) Notice On May 13, 2021, the Company received a Notice of Federal Tax Lien Filing and Right to a Hearing Under IRC 6320 (the “Notice”) from the IRS, claiming underpayment of Federal income taxes for the 2020 tax year totaling $1,983,051, consisting of the following: (i) Federal income tax withholding; (ii) employee OASDI or Medicare withholding; (iii) employer OASDI or Medicare taxes; and (iv) FUTA taxes. By letter dated June 9, 2021, the Company requested a Due Process Hearing before the IRS, and further stated that it denies any underpayment on the grounds that the taxes in question are subject to various deferrals and credits arising under the CARES Act, including the following: (i) Section 2302, which permits eligible employers to defer payment of OASDI employer taxes; and (ii) Section 2301, which allows eligible employers to apply the Employee Retention Tax Credit, or “ERTC”, to taxes owed for the 2020 tax year. Further, subsequent to receiving the Notice, the Company made tax payments totaling $880,109, which it believes should be credited against any alleged underpayment in the event that the claims underlying the Notice are ultimately determined to be valid. As of the date of the filing of this report, the Company has received no response from the IRS, and no date for a Due Process Hearing has been set. |
Subsequent Events
Subsequent Events | 12 Months Ended |
Aug. 31, 2021 | |
Subsequent Events | |
Subsequent Events | Note 17: Subsequent Events Management has evaluated events that have occurred subsequent to the date of these consolidated financial statements and has determined that, other than those listed below, no such reportable subsequent events exist through the date the financial statements were issued. Vensure Litigation On September 7, 2021, Shiftable HR Acquisition, LLC, a wholly-owned subsidiary of Vensure, filed a complaint against the Company in the Court of Chancery of the State of Delaware asserting claims arising from the Asset Purchase Agreement (the “APA”) governing the Vensure Asset Sale described above. The APA provided for Vensure to purchase, through its wholly-owned subsidiary, certain of the Company’s assets for total consideration of $19 million in cash, with $9.5 million to be paid at closing, and the remainder to be paid in 48 equal monthly installments (the “Installment Sum”). The Installment Sum was subject to certain adjustments to account for various post-closing payments made by the parties, and the APA provided for the following procedure to determine the final amount of the Installment Sum: (i) Within 90 days of the effective date, Vensure was required to provide the Company with a “Proposed Closing Statement”, which must detail any adjustments; (ii) Within 30 days of its receipt of Vensure’s Proposed Closing Statement, the Company had the right to challenge any of the proposed adjustments contained therein; and (iii) If the Company disputed Vensure’s Proposed Closing Statement, a 30-day period ensued for the parties to attempt to resolve the dispute, with the Company entitled to examine “such Books and Records of [Vensure] as relate to the specific items of dispute.” Vensure resisted the Company’s repeated efforts to obtain the Proposed Closing Statement for over one year after the closing of the transaction. Finally, on March 12, 2021, under threat of legal action by the Company, Vensure provided its Proposed Closing Statement, in which it contended for the first time that it owes nothing to the Company, and that the Company actually owes Vensure the sum of $1,519,991. By letter dated April 6, 2021, the Company provided Vensure with its objections to the Proposed Closing Statement, which included Vensure’s gross overstatement of payments it purportedly made on the Company’s behalf, as well as its bad faith actions in obstructing the Company’s efforts to make these payments. From April 2021 through August 2021, Vensure and the Company engaged in the “30-day negotiation period” referred to above, which was extended multiple times at Vensure’s request to provide Vensure an opportunity to provide evidence supporting its assertions. Over the course of these negotiations, Vensure withdrew its claim for approximately $1.5 million from the Company, and acknowledged that Vensure owed ShiftPixy some portion of the Installment Fund. Nevertheless, in early September 2021, without warning and contrary to the dispute resolution provisions of the APA, Vensure filed suit against the Company in Delaware Chancery Court for breach of contract and declaratory judgment, seeking unspecified damages. The Company vigorously disputes and denies each of Vensure’s claims. Accordingly, on November 4, 2021, the Company filed its Answer and Counterclaim to Vensure’s Complaint, in which it not only denied Vensure’s claims, but also asserted counterclaims for breach of contract and tortious interference with contract. The counterclaim seeks damages from Vensure totaling approximately $9.5 million — the full amount due under the APA — plus an award of attorneys’ fees and expenses. Discovery is expected to commence shortly. September 2021 Private Placement On September 3, 2021, the Company closed a $12 million private placement transaction, inclusive of $0.9 million of placement agent fees and costs, with a large institutional investor pursuant to which the Company sold to the investor an aggregate of (i) 2,850,000 shares of Common Stock, together with warrants (the “September 2021 Common Warrants”) to purchase up to 2,850,000 shares of Common Stock, with each September 2021 Common Warrant exercisable for one share of Common Stock at a price per share of $1.595, and (ii) 4,673,511 prefunded warrants (the “September 2021 Prefunded Warrants”), together with the September 2021 Common Warrants to purchase up to 4,673,511 shares of Common Stock, with each September 2021 Prefunded Warrant exercisable for one share of Common Stock at a price per share of $0.0001. Each share of Common Stock and accompanying September 2021 Common Warrant were sold together at a combined offering price of $1.595 and each September 2021 Prefunded Warrant and accompanying September 2021 Common Warrant were sold together at a combined offering price of $1.5949. The September 2021 Prefunded Warrants are immediately exercisable at a nominal exercise price of $0.0001, and may be exercised at any time until all of the September 2021 Prefunded Warrants are exercised in full. The September 2021 Common Warrants have an exercise price of $1.595 per share, are immediately exercisable, and will expire five years from the date that the registration statement covering the resale of the shares underlying the September 2021 Common Warrants is declared effective (which has not yet occurred). The private placement generated gross proceeds of approximately $12.0 million, prior to deducting $0.89 million of costs consisting of Placement Agent commissions and offering expenses payable by the Company. In addition to the seven percent ( 7%) of the aggregate gross proceeds cash fee, the Company issued to the Placement Agent warrants to purchase an aggregate of up to five percent (5%) of the aggregate number of shares of Common Stock issuable upon exercise of the September 2021 Prefunded Warrants sold in the offering (the “September Placement Agent Warrants”). The September Placement Agent Warrants are exercisable for a period commencing on March 3, 2022 (six months after issuance) and expire four years from the effective date (which has not yet occurred) of a registration statement for the resale of the underlying shares, and have an initial exercise price of $1.7545 per share. Compensatory Arrangements of Certain Officers On October 22, 2021, the Company’s board of directors approved annual salary increases for the following named executive officers and related parties, all of which are effective January 1, 2022 unless otherwise indicated: (i) Scott W. Absher, the Company’s board of directors Chair and Chief Executive Officer, to $1,000,000 from $764,673; (ii) Domonic J. Carney, the Company’s Chief Financial Officer, to $750,000 from $474,152; Robert S. Gans, the Company’s General Counsel, to $750,000 from $474,152; and (iii) Amanda Murphy, the Company’s current Director of Operations and a member of its board, to $500,000 from $264,152 (to coincide with her promotion to the position of Chief Operating Officer of the Company). In addition, the board of directors approved the following discretionary bonuses to the following named executive officers, all of which are payable January 1, 2022 unless otherwise indicated: (i) $500,000 to Mr. Absher, (of which 50% was payable upon board of directors approval with the remainder payable January 1); (ii) $150,000 to Mr. Carney; and (iii) $150,000 to Mr. Gans. No portion of the discretionary bonuses has been paid as of the date of this Form 10-K. Cancellation of Preferred Options On October 22, 2021, the Company cancelled 11,790,000 Preferred Options previously issued to J. Stephen Holmes but never exercised, and severed all business ties with Mr. Homes effective immediately. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Aug. 31, 2021 | |
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 and majority owned subsidiaries have been consolidated in the accompanying financial statements. All intercompany balances have been eliminated in consolidation. The amount of net loss attributable to minority interests of majority owned subsidiaries was de minimus for Fiscal 2021. |
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 (as defined below); · 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 illiquid noncontrolling interest in SPAC shares transferred; · Valuation of long-lived assets including long term notes receivable prior to January 1, 2021; and · Projected development of workers’ compensation claims. |
Revenue and Direct Cost Recognition | Revenue and Direct Cost Recognition For the year ended August 31, 2021, we adopted Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606), using the modified retrospective approach. Under this method, the guidance is applied only to the most current period presented in the financial statements. ASU No. 2014-09 outlines a single comprehensive revenue recognition model for revenue arising from contracts with customers and superseded most of the previous revenue recognition guidance, including industry-specific guidance. Under ASU No. 2014- 09, an entity recognizes revenue for the transfer of promised goods or services to customers in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services. Our revenue recognition policies remained substantially unchanged as a result of the adoption of ASU No. 2014-09 and we did not have any significant changes in our business processes or systems. The Company’s revenues are primarily disaggregated in fees for providing staffing solutions and EAS/human capital management services. The Company enters into contracts with its clients for staffing or EAS based on a stated rate and price in the contract. Contracts generally have a term of 12 months but are cancellable at any time by either party with 30 days’ written notice. The performance obligations in the agreements are generally combined into one performance obligation, as they are considered a series of distinct services, and are satisfied over time because the client simultaneously receives and consumes the benefits provided as the Company performs the services. Payments for the Company’s services are typically made in advance of, or at the time that the services are provided. The Company does not have significant financing components or significant payment terms for its customers and consequently has no material credit losses. The Company uses the output method based on a stated rate and price over the payroll processed to recognize revenue, as the value to the client of the goods or services transferred to date appropriately depicts our performance towards complete satisfaction of the performance obligation. Staffing Solutions The Company records gross billings as revenues for its staffing solutions clients. The Company is primarily responsible for fulfilling the staffing solutions services and has discretion in establishing price. The Company includes the payroll costs in revenues with a corresponding increase to cost of revenues for payroll costs associated with these services. As a result, we are the principal in this arrangement for revenue recognition purposes. For Fiscal 2020, the Company recognized no revenues that should have been evaluated under a staffing solutions model. EAS Solutions EAS solutions revenue is primarily derived from the Company’s gross billings, which are based on (i) the payroll cost of the Company’s worksite employees (“WSEs”) and (ii) a mark-up computed as a percentage of payroll costs for payroll taxes and workers’ compensation premiums. Gross billings are invoiced to each EAS client concurrently with each periodic payroll of the Company’s WSEs which coincides with the services provided and which is typically a fixed percentage of the payroll processed. Revenues, which exclude the payroll cost component of gross billings and therefore consist solely of markup, are recognized ratably over the payroll period as WSEs perform their services at the client worksite. Although the Company assumes responsibility for processing and remitting payroll and payroll related obligations, it does not assume employment-related responsibilities such as determining the amount of the payroll and related payroll obligations. As a result, the Company records revenue on a “net” basis in this arrangement for revenue recognition purposes. Revenues that have been recognized but not invoiced for EAS clients are included in unbilled accounts receivable on the Company’s consolidated balance sheets, and were $2,741,000 and $2,303,000, as of August 31, 2021 and August 31, 2020, respectively. Consistent with the Company’s revenue recognition policy for EAS clients, direct costs do not include the payroll cost of its WSEs. The cost of revenue associated with the Company’s revenue generating activities is primarily comprised of all other costs related to its WSEs, such as the employer portion of payroll-related taxes, employee benefit plan premiums and workers’ compensation insurance costs. The fees collected from the worksite employers for benefits (i.e. zero-margin benefits pass-through), workers’ compensation and state unemployment taxes are presented in revenues and the associated costs of benefits, workers’ compensation and state unemployment taxes are included in operating expenses for EAS clients, as the Company does retain risk and acts as a principal with respect to this aspect of the arrangement. With respect to these fees, the Company is primarily responsible for fulfilling the service and has discretion in establishing price. Disaggregation of Revenue The Company’s primary revenue streams include HCM and staffing services. The disaggregated Company revenue for Fiscal 2021 and Fiscal 2020 was as follows: Revenue (in millions): 2021 2020 HCM 1 $ 8.2 $ 8.6 Staffing 15.2 — $ 23.4 $ 8.6 1 HCM revenue is presented net, $63.8 million gross less worksite employees payroll cost of 55.6 million for Fiscal 2021 and $65.5 million gross less worksite employees payroll cost of $56.9 million in Fiscal 2020. During Fiscal 2021 the Company announced the launch of ShiftPixy Labs and expects to generate revenue from this initiative in Fiscal 2022. For Fiscal 2021 and Fiscal 2020, the following geographical regions represented more than 10% of total revenues: Region: 2021 2020 California 70.3 % 78.2 % Washington 10.8 % 11.6 % Incremental Cost of Obtaining a Contract Pursuant to the “practical expedients” provided under ASU No 2014-09, the Company expenses sales commissions when incurred because the terms of its contracts are cancellable by either party upon 30 days’ notice. These costs are recorded in commissions in the Company’s Consolidated Statements of Operations. |
Segment Reporting | Segment Reporting Prior to Fiscal 2021, the Company operated as one reportable segment under ASC 280, Segment Reporting . The chief operating decision maker regularly reviews the financial information of the Company at a consolidated level in deciding how to allocate resources and in assessing performance. During Fiscal 2021, the Company entered into new business lines and geographic areas that, to date, are not material. However, with the migration to Staffing during the fiscal quarter ending May 31, 2021, the Company expects to manage the business on a segmented basis in the future and will therefore report such information once systems and processes are updated accordingly. Reporting and monitoring activities on a segment basis will allow the chief operating decision maker to evaluate operating performance more effectively. See also Disaggregation of Revenue , above. |
Cash and Cash Equivalents | 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, 2021 or August 31, 2020. |
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. As of August 31, 2021, there was $891,000 of cash on deposit in excess of the amounts insured by the FDIC. The Company had two and zero individual clients that represented more than 10% of its annual revenues in Fiscal 2021 and Fiscal 2020, respectively. Four clients represented 94% of total accounts receivable at August 31, 2021, compared to three clients representing approximately 92% of its total accounts receivable at August 31, 2020. |
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 remaining 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 Leasehold improvements - shorter of the useful life or the remaining lease term, typically 5 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 Fiscal 2021 or Fiscal 2020. 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 three to five years from when the asset is placed in service. The Company also expenses internal costs related to minor upgrades and enhancements, as it is impractical to separate these costs from normal maintenance activities. |
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 $0 and $3,543,000 for Fiscal 2021 and Fiscal 2020, 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 through Everest National Insurance Company, which calculates the final policy premium based on the Company’s loss experience during the term of the policy and the stipulated formula set forth in the policy. The Company funds the policy premium based on standard premium rates on a monthly basis and based on the gross payroll applicable to workers covered by the policy. During the policy term and thereafter, periodic adjustments may involve either a return of previously paid premiums or a payment of additional premiums by the Company or a combination of both. If the Company’s losses under that policy exceed the expected losses under that policy, then the Company could receive a demand for additional premium payments. The Company is currently engaged in litigation regarding such a demand for additional premium payments as discussed at Note 16, Contingencies, Everest Litigation , below. Sunz Program From July 2018 through February 28, 2021, the Company’s workers’ compensation program for its WSEs was 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 $500,000 of claims per occurrence. The Company provides and maintains a loss fund that is earmarked to pay claims and claims related expenses. The workers’ compensation insurance carrier establishes monthly funding requirements comprised of premium costs and funds to be set aside for payment of future claims (“claim loss funds”). The level of claim loss funds is primarily based upon anticipated WSE payroll levels and expected workers’ compensation loss rates, as determined by the insurance carrier. Monies funded into the program for incurred claims expected to be paid within one year are recorded as Deposit - workers’ compensation, a short-term asset, while the remainder of claim funds are included in Deposit- workers’ compensation, a long-term asset in its consolidated balance sheets. The Company is currently engaged in litigation regarding demands by Sunz for additional claims loss funds, as discussed at Note 16, Contingencies, Sunz Litigation , below. Balance Sheet Items Related To Workers’ Compensation Under both the Everest and Sunz Programs, the Company utilized a third-party to estimate its loss development rate, which is based primarily upon the nature of WSE 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, 2021, the Company had $155,000 in Deposit – workers’ compensation classified as a short-term asset and $386,000 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, 2021, the Company had short term accrued workers’ compensation costs of $663,000 and long term accrued workers’ compensation costs of $1,646,000 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, Discontinued Operations, below. As of August 31, 2021, the retained workers’ compensation assets and liabilities are presented as a discontinued operation net asset or liability. As of August 31, 2021, the Company had $356,000 in short term assets and $1,516,000 of short term liabilities, and had $883,000 of long term assets and $3,765,000 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. Current Program Effective March 1, 2021, the Company migrated its clients to a guaranteed cost program. Under this program, the Company’s financial responsibility is limited to the cost of the workers’ compensation premium. The Company funds the workers’ compensation premium based on standard premium rates on a monthly basis and based on the gross payroll applicable to workers covered by the policy. Any final adjustments to the premiums are based on the final audited exposure multiplied by the applicable rates, classifications, experience modifications and any other associated rating criteria. |
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 warrant 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 820, Fair Value Measurement , requires entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized on the balance sheet, for which it is practical to estimate fair value. ASC 820 defines fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. At August 31, 2021 and August 31, 2020, 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: o Quoted prices for similar assets or liabilities in active markets; o Quoted prices for identical or similar assets or liabilities in inactive markets; o Inputs other than quoted prices that are observable for the asset or liability; o Inputs that are derived principally from or corroborated by observable market data by correlation or other means; and o If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability. · Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement. The Company did not have any Level 1 or Level 2 assets or liabilities at August 31, 2021 or August 31, 2020. The Company recorded expense related to Preferred Options (as defined below) in the year ended August 31, 2020 using Level 2 fair value measurements. See Note 11, Stockholders' Equity , below, for assumptions used for this valuation. We recorded the fair value of the SPAC founder shares that the Company transferred to the underwriters using non-recurring Level 3 assumptions, including quoted asset prices for SPAC shares and warrants and estimates of the likelihood of the IPOs and IBCs of our sponsored SPACs being consummated. See also Note 6, Deferred Offering Costs — SPACS , below. 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 convertible notes (see Note 10, Senior Convertible Notes Payable ) consisting of conversion feature derivatives and warrants, is a Level 3 fair value measurement as of August 31, 2020 and through December 31, 2020 (end of the earnout period as defined under the terms of the Note Receivable). The Note Receivable, as described in Note 3, Discontinued Operations , below, was estimated using a discounted cash flow technique based on expected contingent payments identified in the Vensure Asset Sale contract and with significant inputs that are not observable in the market and thus represents a Level 3 fair value measurement as defined in ASC 820. The Company valued the Note Receivable on the January 1, 2020 transaction date using a 10% discount rate, and on August 31, 2020 and through December 31, 2020 using a 15% discount rate, which contemplates the risk and probability assessments of the expected future cash flows. The significant inputs in the Level 3 measurement not supported by market activity include the probability assessments of expected future cash flows related to the Vensure Asset Sale, appropriately discounted considering the uncertainties associated with the obligation, and as calculated in accordance with the terms of the Vensure Asset Sale agreement. For Fiscal 2020, the expected cash payments from the Note Receivable were based on estimated gross wages billed for the clients transferred to Vensure pursuant to the Vensure Asset Sale as of the measurement date. The Company used the following assumptions to value the Note Receivable as of August 31, 2020: · Discount rate of 15% · Actual monthly wages billed to the extent available to the Company For interim reporting periods after December 31, 2020 and as of August 31, 2021, the Company valued the Note Receivable as discussed in Note 3, Discontinued Operations , below. The development and determination of the unobservable inputs for Level 3 fair value measurements and the fair value calculations are the responsibility of the Company’s chief financial officer and are approved by the chief executive officer. There were no transfers out of Level 3 in Fiscal 2021. 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 2020 March 2020 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, 2021 or August 31, 2020, since all of the Company's convertible notes outstanding 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, 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 2020 March 2020 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, 2021 and August 31, 2020, there were no transfers of financial assets or financial liabilities between the hierarchy levels. |
Internal-Use Software | Internal-Use Software During Fiscal 2021 and Fiscal 2020, the Company incurred both internal and external research and development costs for its software development of approximately $6,802,000 and $4,165,000, respectively, of which $2,649,000 and $1,674,000, 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, no software costs were capitalized for Fiscal 2021 and Fiscal 2020, respectively. |
Advertising Costs | Advertising Costs The Company expenses all advertising as incurred. The Company recorded expenses totaling $2,597,000 and $646,000 for Fiscal 2021 and Fiscal 2020, 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. |
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. |
Stock-Based Compensation | Stock-Based Compensation As of August 31, 2021 and August 31, 2020, 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 stock-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”) 2016‑9, 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 Fiscal 2021 and Fiscal 2020 was increased by 11,827,570 and 24,634,560, respectively. 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 (as defined below) was deemed to be exercisable into preferred shares on January 1, 2020, the effective date of the Vensure Asset Sale as described in Note 3, Discontinued Operations , below. 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 11, Stockholders’ Equity , below. Between March 25, 2020 and August 31, 2020, and between August 31, 2020 and August 31, 2021, 12,794,790 and 12,500 of the 24,634,560 Preferred Options issued were exercised into a like number of shares of preferred stock and immediately exchanged for a like number of shares of common stock. In October 2021, as described in Note 17, Subsequent Events , below, the Company cancelled 11,790,000 of the remaining outstanding Preferred Options prior to their exercise. If the underlying share count associated with the cancelled Preferred Options were removed from the share count used in the Company's earnings (loss) per share calculation, the weighted average number of shares of common stock outstanding for Fiscal 2021 and Fiscal 2020 would have been adjusted to 21,932,537 and 10,394,875, respectively. Securities used in, or that are excluded from the calculation of weighted average dilutive common stock, because their inclusion would have been antidilutive, consist of the following: For the For the Year Year Ended Ended August 31, August 31, 2021 2020 Options 1,776,115 1,398,740 Warrants 9,592,086 1,896,209 Total potentially dilutive shares 11,368,201 3,294,949 Preferred Options are excluded from the potentially dilutive shares in the table above since they 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 13, Related Parties , below. Shares of common stock provided are recorded at cost as treasury stock. No treasury stock was outstanding as of August 31, 2021 or August 31, 2020, as the Company retired all of its treasury stock outstanding during 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. |
Recent Accounting Standards | Recent Accounting Standards In February 2016, the FASB issued ASU 2016-2, Leases . The new standard requires that a lessee recognize assets and liabilities on the balance sheet for leases with terms longer than 12 months. The recognition, measurement and presentation of lease expenses and cash flows by a lessee will depend on its classification of the lease as a finance or operating lease. The guidance also includes new disclosure requirements providing information on the amounts recorded in the financial statements. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases . For entities that early adopted Topic 842, the amendments are effective upon issuance of ASU 2018-10, and the transition requirements are the same as those in Topic 842. For entities that have not adopted Topic 842, the effective date and transition requirements will be the same as the effective date and transition requirements in Topic 842. The updated effective date will be for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. The Company is evaluating the effect of adopting this new accounting guidance and is currently finalizing its analysis of the financial impact of the adoption. The Company expects to adopt the guidance using the modified retrospective method. In June 2016, the FASB issued ASU 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). This standard requires an impairment model (known as the current expected credit loss (“CECL”) model) that is based on expected losses rather than incurred losses. Under the new guidance, each reporting entity should estimate an allowance for expected credit losses, which is intended to result in more timely recognition of losses. This model replaces multiple existing impairment models in current U.S. GAAP, which generally requires a loss to be incurred before it is recognized. The new standard applies to trade receivables arising from revenue transactions such as contract assets and accounts receivable. Under ASC 606, revenue is recognized when, among other criteria, it is probable that an entity will collect the consideration it is entitled to when goods or services are transferred to a customer. When trade receivables are recorded, they become subject to the CECL model and estimates of expected credit losses on trade receivables over their contractual life will be required to be recorded at inception based on historical information, current conditions, and reasonable and supportable forecasts. This guidance is effective for smaller reporting companies for annual periods beginning after December 15, 2022, including the interim periods in the year. Early adoption is permitted. The Company will adopt the guidance when it becomes effective. On December 31, 2019, the FASB issued ASC 2019-12 “Income Taxes: Simplifying the Accounting for Income Taxes” (“Topic 740”). The amendments in this update simplify the accounting for income taxes by removing certain exceptions. For public business entities, the amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption of the amendments is permitted, including adoption in any interim period for (1) public business entities for periods for which financial statements have not yet been issued and (2) all other entities for periods for which financial statements have not yet been made available for issuance. An entity that elects to early adopt the amendments in an interim period should reflect any adjustments as of the beginning of the annual period that includes that interim period. Additionally, an entity that elects early adoption must adopt all the amendments in the same period. The Company will adopt the guidance when it becomes effective. In August 2020, the FASB issued ASU 2020-06, which simplifies the guidance on the issuer’s accounting for convertible debt instruments by removing the separation models for (1) convertible debt with a cash conversion feature and (2) convertible instruments with a beneficial conversion feature. As a result, entities will not separately present in equity an embedded conversion feature in such debt and will account for a convertible debt instrument wholly as debt, unless certain other conditions are met. The elimination of these models will reduce reported interest expense and increase reported net income for entities that have issued a convertible instrument that is within the scope of ASU 2020-06. Also, ASU 2020-06 requires the application of the if-converted method for calculating diluted earnings per share and the treasury stock method will be no longer available. ASU 2020-06 is applicable for fiscal years beginning after December 15, 2021, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. 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 In May 2021, the FASB issued ASU 2021-4 Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (a consensus of the FASB Emerging Issues Task Force) . The amendments in this update are effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. The Company is evaluating the effect of adopting this new accounting guidance and is currently finalizing its analysis of the financial impact of the adoption. In August 2020, the FASB issued ASU 2020-6, 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 2020-6 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, 2021 | |
Summary of Significant Accounting Policies. | |
Schedule of Disaggregation of Revenue | Revenue (in millions): 2021 2020 HCM 1 $ 8.2 $ 8.6 Staffing 15.2 — $ 23.4 $ 8.6 1 HCM revenue is presented net, $63.8 million gross less worksite employees payroll cost of 55.6 million for Fiscal 2021 and $65.5 million gross less worksite employees payroll cost of $56.9 million in Fiscal 2020. |
Schedule of geographical regions represented total revenue | Region: 2021 2020 California 70.3 % 78.2 % Washington 10.8 % 11.6 % |
Schedule of estimated useful lives of property and equipment | Equipment: 5 years Furnitures & Fixtures: 5 - 7 years Leasehold improvements - shorter of the useful life or the remaining lease term, typically 5 years |
Schedule of fair value of the Company's derivative liabilities | March 2020 March 2020 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 2020 March 2020 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 % |
Schedule of weighted average dilutive common shares | For the For the Year Year Ended Ended August 31, August 31, 2021 2020 Options 1,776,115 1,398,740 Warrants 9,592,086 1,896,209 Total potentially dilutive shares 11,368,201 3,294,949 |
Discontinued Operations (Tables
Discontinued Operations (Tables) | 12 Months Ended |
Aug. 31, 2021 | |
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) Gross note receivable $ 9,500,000 Less: Transaction reconciliation – estimated working capital adjustment (2,604,000) Adjusted note receivable 6,896,000 Less: Reserve for estimated potential claims (2,892,000) Long-term note receivable $ 4,004,000 |
Schedule of carrying amounts of the classes of assets and liabilities from the Asset Sale included in discontinued operations | August 31, August 31, 2021 2020 Cash $ — $ — Accounts receivable and unbilled account receivable — — Prepaid expenses and other current assets — — Deposits – workers’ compensation 356,000 1,030,000 Total current assets 356,000 1,030,000 Fixed assets, net — — Deposits – workers’ compensation 883,000 2,582,000 Total assets $ 1,239,000 $ 3,612,000 Accounts payable and other current liabilities $ — $ — Payroll related liabilities — — Accrued workers’ compensation cost 1,516,000 1,746,000 Total current liabilities 1,516,000 1,746,000 Accrued workers’ compensation cost 5,411,000 4,377,000 Total liabilities 6,927,000 6,123,000 Net liability $ (5,688,000) $ (2,511,000) |
Schedule of reported results for the discontinued operations by period | For the Year Ended August 31, August 31, 2021 2020 Revenues (gross billings of $120.7 million less WSE payroll cost of $103.0 million, respectively for the year ended August 31, 2020) $ — $ 17,632,000 Cost of revenue 2,509,000 16,899,000 Gross profit (2,509,000) 733,000 Operating expenses: Salaries, wages and payroll taxes — 553,000 Commissions — 741,000 Total operating expenses — 1,294,000 (Loss) income from discontinued operations $ (2,509,000) $ (561,000) |
Summary of provision for income tax expense from discontinued operations | For the Year Ended August 31, 2021 2020 Provision for income tax expense Federal tax expense $ (500,000) $ 3,436,000 State tax expense (129,000) 1,565,000 Total tax expense (629,000) 5,001,000 Tax benefit for utilization of tax loss carryforwards 629,000 (5,001,000) Provision for income tax expense from discontinued operations $ — $ — |
Going Concern (Tables)
Going Concern (Tables) | 12 Months Ended |
Aug. 31, 2021 | |
Going Concern | |
Summary of changes in cash flows | For the year ended August 31, 2021 2020 Net cash used in operating activities $ (21,512,000) $ (16,883,000.00) Net cash provided by (used in) investing activities (2,566,000) 9,353,000 Net cash provided by financing activities 20,974,000 10,272,000 Change in cash $ (3,104,000) $ 2,742,000 |
Fixed Assets (Tables)
Fixed Assets (Tables) | 12 Months Ended |
Aug. 31, 2021 | |
Fixed Assets | |
Schedule of Fixed Assets | August 31, August 31, 2021 2020 Equipment $ 2,386,000 $ 576,000 Furniture & fixtures 599,000 348,000 Leasehold improvements 545,000 41,000 3,530,000 965,000 Accumulated depreciation & amortization (746,000) (390,000) Fixed assets, net $ 2,784,000 $ 575,000 |
Workers Compensation (Tables)
Workers Compensation (Tables) | 12 Months Ended |
Aug. 31, 2021 | |
Continuing operations | |
Summarizes of workers' compensation deposit | Everest SUNZ Program Program Total Workers’ Comp Deposit at August 31, 2019 $ — 1,827,000 $ 1,827,000 Premiums paid — — — Paid in deposits — 601,000 601,000 Claim losses — (1,399,000) (1,399,000) Deposit refund — — — Workers’ Comp Deposit at August 31, 2020 $ — 1,029,000 $ 1,029,000 Paid in deposits — 446,000 446,000 Claim losses — (934,000) (934,000) Workers’ Comp Deposit at August 31, 2021 — 541,000 541,000 Less Current Amount — (155,000) (155,000) Long Term Balance at August 31, 2021 $ — 386,000 $ 386,000 |
Summarizes the accrued workers' compensation liability | Everest SUNZ Program Program Total 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 Claim loss development 50,000 1,273,000 1,323,000 Paid in losses — (760,000) (760,000) Workers' Comp Liability at August 31, 2021 254,000 2,054,000 2,308,000 Less Current Amount (133,000) (530,000) (663,000) Long Term Balance at August 31, 2021 $ 121,000 1,524,000 $ 1,645,000 |
Discontinued operations. | |
Summarizes of workers' compensation deposit | Everest SUNZ Program Program Total Workers’ Comp Deposit at August 31, 2019 $ — 6,411,000 $ 6,411,000 Premiums paid — — — Paid in deposits — 2,107,000 2,107,000 Claim losses — (4,907,000) (4,907,000) Deposit refund — — — Workers’ Comp Deposit at August 31, 2020 $ — 3,611,000 $ 3,611,000 Paid in deposits — 1,062,000 1,062,000 Claim losses — (3,434,000) (3,434,000) Workers’ Comp Deposit at August 31, 2021 — 1,239,000 1,239,000 Less Current Amount — (356,000) (356,000) Long Term Balance at August 31, 2021 $ — 883,000 $ 883,000 |
Summarizes the accrued workers' compensation liability | Everest SUNZ Program Program Total 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 Claim loss development 103,000 2,639,000 2,742,000 Paid in losses — (3,583,000) (3,583,000) Workers’ Comp Liability at August 31, 2021 820,000 4,461,000 5,281,000 Less Current Amount (275,000) (1,240,000) (1,515,000) Long Term Balance at August 31, 2021 $ 545,000 3,221,000 $ 3,766,000 |
Accrued Payroll and Related L_2
Accrued Payroll and Related Liabilities (Tables) | 12 Months Ended |
Aug. 31, 2021 | |
Accrued Payroll and Related Liabilities | |
Schedule of Accrued payroll liabilities | August 31, August 31, 2021 2020 Accrued Payroll $ 2,438,000 $ 1,970,000 Accrued Payroll Taxes 4,758,000 3,325,000 Corporate employee accrued paid time off 680,000 457,000 Accrued Payroll and related liabilities $ 7,876,000 $ 5,752,000 |
Senior Convertible Notes Paya_2
Senior Convertible Notes Payable (Tables) | 12 Months Ended |
Aug. 31, 2021 | |
Senior 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 — % — % |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 12 Months Ended |
Aug. 31, 2021 | |
Stockholders' Equity. | |
Summary of warrants outstanding | Weighted average Weighted Number remaining average of life exercise shares (years) price Warrants outstanding, August 31, 2020 1,896,209 4.7 $ 7.91 Issued 10,324,329 4.6 2.03 (Cancelled) — — — (Exercised) (2,628,453) 4.8 — Warrants outstanding, August 31, 2021 9,592,085 5.7 $ 3.02 Warrants exercisable, August 31, 2021 9,344,662 4.4 $ 3.84 |
Summary of information about warrants outstanding | Weighted average Life of Outstanding Warrants Warrants Exercise Outstanding in years price May 2021 Common Warrants 4,948,453 4.8 $ 2.43 May 2021Underwriter Warrants (1) 247,423 4.2 2.67 October 2020 Common Warrants 2,300,000 4.1 3.30 October 2020 Underwriter Warrants 200,000 4.1 3.30 May 2020 Common Warrants 1,277,580 3.8 5.40 May 2020 Underwriter Warrants 111,108 3.8 5.40 March 2020 Exchange Warrants 423,669 4.1 10.17 Amended March 2019 Warrants 66,288 2.5 40.00 March 2019 Services Warrants 3,366 2.5 70.00 June 2018 Warrants 6,276 2.3 40.00 June 2018 Services Warrants 5,422 2.3 99.60 2017 PIPE Warrants 2,500 1.0 276.00 9,592,085 4.4 $ 3.84 The May 2021 Underwriter Warrants are not exercisable until November 17, 2021. |
Stock Based Compensation (Table
Stock Based Compensation (Tables) | 12 Months Ended |
Aug. 31, 2021 | |
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, 2019 50,749 9.0 $ 95.20 Granted 1,506,096 10.0 5.30 Exercised — — — Forfeited (158,105) 9.6 56.08 Balance, August 31, 2020 1,398,740 9.5 8.18 Granted 840,000 8.5 2.61 Exercised — — — Forfeited (461,720) 5.9 2.72 Balance at August 31, 2021 1,776,115 8.9 $ 6.53 |
Schedule of Option vesting activity | Weighted Weighted Number Remaining Average of Contractual Exercise Options Vested Options Life Price (In years) Balance, August 31, 2019 10,291 8.0 $ 152.80 Vested 19,414 8.1 $ 89.06 Exercised — 0 $ 0.00 Forfeited (1,295) 6.4 $ 140.09 Balance, August 31, 2020 28,410 7.2 $ 115.10 Vested 281,622 8.8 $ 7.15 Exercised — 0 $ — Forfeited (775) 6.1 $ 67.17 Balance at August 31, 2021 309,257 8.6 $ 16.91 |
Summarizes of stock options outstanding | Options Outstanding Options Vested Weighted Number Average Weighted Weighted Weighted of Options Number Remaining Average Number Remaining Average not of Options Contractual Exercise of Contractual Exercise Exercise Prices Exercisable Exercisable Life Price Options Life Price (In years) (In years) $3.44-10.00 — 1,735,418 9.3 $ 4.72 275,104 8.9 $ 5.30 $10.01-$40.00 — 3,500 7.8 21.69 2,086 7.8 21.68 $40.01-$80.00 — 13,396 7.6 51.21 10,072 7.6 51.22 $80.01-$120.00 — 10,302 6.7 102.90 8,987 6.7 102.84 $120.01-$160.00 12,375 6.0 155.20 11,883 6.0 155.48 $160.01-$391.60 — 1,125 5.9 391.60 1,125 5.9 391.60 — 1,776,115 8.9 $ 6.53 309,257 8.6 $ 16.91 |
Income taxes (Tables)
Income taxes (Tables) | 12 Months Ended |
Aug. 31, 2021 | |
Income Taxes | |
Schedule of net deferred tax assets | August 31, 2021 2020 Deferred tax liabilities: Depreciation $ (597,000) $ (111,000) Software development costs — (265,000) Note receivable (1,088,000) (1,132,000) Total deferred tax liabilities (1,685,000) (1,508,000) Deferred tax assets: Net operating loss carryforward 18,198,000 9,362,000 Business interest 2,998,000 3,087,000 Other accruals 458,000 — Workers’ compensation accruals 2,061,000 2,202,000 Stock-based compensation 207,000 759,000 Deferred rent 168,000 14,000 Other 6,000 — Total deferred tax assets 24,096,000 15,424,000 Valuation allowance (22,411,000) (13,916,000) Total net deferred tax assets $ 1,685,000 $ 1,508,000 Net deferred tax assets $ — $ — |
Schedule of Income tax expense | For the Year Ended August 31, 2021 2020 Current Federal $ — $ — State 42,000 — Total current 42,000 — Deferred Federal (5,059,000) (4,669,000) State (2,807,000) (1,915,000) Total deferred (7,866,000) (6,584,000) Change in valuation allowance $ 7,866,000 $ 6,584,000 Total Income Tax Expense (Benefit) $ 42,000 $ — |
Reconciliation of the statutory federal rate | August 31, August 31, 2021 2020 Federal statutory rate (21%) $ (5,738,000) $ (19,000,000) Non-deductible penalties and other permanent differences 333,000 49,000 State and local income taxes, net of federal benefit (1,607,000) (1,688,000) Redetermination of prior year taxes (812,000) 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 7,866,000 6,584,000 Net income tax provision $ 42,000 $ — |
Commitments (Tables)
Commitments (Tables) | 12 Months Ended |
Aug. 31, 2021 | |
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, 2021, are as follows: Years ended August 31, 2022 $ 1,198,000 2023 1,014,000 2024 1,075,000 2025 1,108,000 2026 814,000 Thereafter 838,000 Total minimum payments $ 6,047,000 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies - Disaggregation of Revenue (Details) - USD ($) | 12 Months Ended | |
Aug. 31, 2021 | Aug. 31, 2020 | |
Revenues | $ 23,420,000 | $ 8,642,000 |
Gross billings | 79,000,000 | 65,500,000 |
Worksite employee payroll cost | $ 55,600,000 | $ 56,900,000 |
California | ||
Region: | ||
Revenue, Remaining Performance Obligation, Percentage | 70.30% | 78.20% |
Washington | ||
Region: | ||
Revenue, Remaining Performance Obligation, Percentage | 10.80% | 11.60% |
HCM | ||
Revenues | $ 8,200,000 | $ 8,600,000 |
Gross billings | 63,800,000 | 65,500,000 |
Worksite employee payroll cost | 55,600,000 | $ 56,900,000 |
Staffing | ||
Revenues | $ 15,200,000 |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Estimated Useful Lives of Property and Equipment (Details) | 12 Months Ended |
Aug. 31, 2021 | |
Equipment | 5 years |
Leasehold improvements - shorter of the useful life or the remaining lease term | 5 years |
Minimum [Member] | |
Furnitures & Fixtures | 5 years |
Capitalized software development | 3 years |
Maximum | |
Furnitures & Fixtures | 7 years |
Capitalized software development | 5 years |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies - Derivative liabilities (Details) - USD ($) | 12 Months Ended | ||
Aug. 31, 2020 | Aug. 31, 2021 | Aug. 31, 2019 | |
Reclassification to APIC due to note settlements, exchanges or conversions | $ (1,979,000) | ||
Unbilled Contracts Receivable | 2,303,000 | $ 2,741,000 | |
Beginning balance | 3,756,000 | ||
Change in fair value | (1,777,000) | ||
March 2020 Conversion Feature | |||
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 2020 Warrant Liability | |||
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_7
Summary of Significant Accounting Policies - Estimate fair value (Details) | 12 Months Ended |
Aug. 31, 2021$ / shares | |
Volatility | 134.00% |
March 2020 Conversion Feature | |
Market price per share | $ 6.68 |
Dividend yield | 0.00% |
March 2020 Conversion Feature | Minimum [Member] | |
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 | |
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 Warrant Liability | |
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_8
Summary of Significant Accounting Policies - Weighted average dilutive common shares (Details) - shares | 12 Months Ended | |
Aug. 31, 2021 | Aug. 31, 2020 | |
Total potentially dilutive shares | 11,368,201 | 3,294,949 |
Options [Member] | ||
Total potentially dilutive shares | 1,776,115 | 1,398,740 |
Warrants [Member] | ||
Total potentially dilutive shares | 9,592,086 | 1,896,209 |
Summary of Significant Accoun_9
Summary of Significant Accounting Policies - Additional Information (Details) | Aug. 31, 2020USD ($)clientshares | Mar. 25, 2020shares | Oct. 31, 2021shares | Aug. 31, 2021USD ($)clientshares | Aug. 31, 2020USD ($)segmentclientshares | Aug. 31, 2021USD ($)clientshares | Feb. 28, 2021USD ($) | Dec. 31, 2020 | Jan. 01, 2020 |
Cash in excess by FDIC | $ 891,000 | $ 891,000 | |||||||
Advertising costs | $ 2,597,000 | $ 646,000 | |||||||
Weighted average number of common shares outstanding for the earnings per share increased | shares | 11,827,570 | 24,634,560 | |||||||
Salaries, Wages and Payroll taxes | $ 2,649,000 | $ 1,674,000 | |||||||
Concentration of credit Risk description | The Company had two and zero individual clients that represented more than 10% of its annual revenues in Fiscal 2021 and Fiscal 2020, respectively. Four clients represented 94% of total accounts receivable at August 31, 2021, compared to three clients representing approximately 92% of its total accounts receivable at August 31, 2020. | ||||||||
Short-term asset and workers compensation - deposits | $ 155,000 | 155,000 | |||||||
Long-term asset and workers compensation - deposits | 386,000 | 386,000 | |||||||
Short term accrued workers compensation | 663,000 | 663,000 | |||||||
Long term accrued workers compensation | 1,646,000 | 1,646,000 | |||||||
Impaired asset expense | 0 | $ 3,543,000 | |||||||
Short term assets | 356,000 | 356,000 | |||||||
Short term liabilities | 1,516,000 | 1,516,000 | |||||||
Long term assets | 883,000 | 883,000 | |||||||
Long term liabilities | 3,765,000 | 3,765,000 | |||||||
Discount rate (as a percent) | 15.00% | 15.00% | 15.00% | 10.00% | |||||
Research and developments costs | 6,802,000 | $ 4,165,000 | |||||||
Capitalized computer software cost | $ 0 | 0 | 0 | 0 | |||||
Shares conversion ratio | 1 | ||||||||
Unbilled accounts receivable | $ 2,303,000 | $ 2,741,000 | $ 2,303,000 | $ 2,741,000 | |||||
Number of clients represented | client | 2 | 2 | |||||||
Remaining outstanding Preferred Options Prior to their exercise | shares | 11,790,000 | ||||||||
Adjusted weighted average number of shares | shares | 21,932,537 | 10,394,875 | |||||||
Treasury stocks outstanding | shares | 0 | 0 | 0 | 0 | |||||
Transfers of financial assets or financial liabilities | $ 0 | $ 0 | |||||||
Derivative Liabilities | $ 0 | 0 | $ 0 | $ 0 | |||||
Common stock issued for preferred stock exchange (in shares) | shares | 12,500 | 12,794,790 | 24,634,560 | ||||||
Transfers out of level 3 | $ 0 | ||||||||
Number of Reportable Segments | segment | 1 | ||||||||
Customer Concentration Risk [Member] | Accounts Receivable [Member] | |||||||||
Number of client | client | 3 | 4 | 3 | 4 | |||||
Concentration Risk Threshold Percentage | 94.00% | 92.00% | |||||||
Sunz Program | |||||||||
Settlement claims | $ 500,000 |
Discontinued Operations (Detail
Discontinued Operations (Details) - USD ($) | Mar. 12, 2021 | Jan. 03, 2020 | Aug. 31, 2021 |
Overall business | |||
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 | 6,896,000 | |
Period for payment of gross proceeds (in years) | 4 years | ||
Customer retention period (in years) | 12 months | ||
Working capital changes | $ 10,700,000 | ||
Working capital adjustment | 2,600,000 | 2,604,000 | |
Additional potential claims and reserves | $ 2,900,000 | (2,892,000) | |
Gross note receivable | $ 9,500,000 | ||
PEO business | |||
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, 2021 | Aug. 31, 2020 | Mar. 12, 2021 |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||
Gain from asset sale | $ 15,682,000 | |||
Overall business | ||||
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) | |||
Gross note receivable | 9,500,000 | |||
Less: Transaction reconciliation - estimated working capital adjustment | (2,604,000) | $ (2,600,000) | ||
Adjusted note receivable | $ 9,500,000 | 6,896,000 | ||
Less: Reserve for estimated potential claims | (2,892,000) | $ 2,900,000 | ||
Long-term note receivable | 4,004,000 | |||
Overall business | Disposal by sale | ||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||
Less: Transaction reconciliation - estimated working capital adjustment | $ 2,600,000 | |||
Gain from asset sale | $ 15,600,000 |
Discontinued Operations - Notes
Discontinued Operations - Notes receivable (Details) - USD ($) | 12 Months Ended | |
Aug. 31, 2021 | Mar. 12, 2021 | |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Contingent consideration | $ 1,400,000 | |
Additional adjustment on disposal group including discontinued operation | 0 | |
Overall business | ||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Working capital adjustment | (2,604,000) | $ (2,600,000) |
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 | $ 2,500,000 | |
Disposal by sale | Overall business | ||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Lower percentage of gross wages | 90.00% | |
Working capital adjustment | $ 2,600,000 |
Discontinued Operations - Carry
Discontinued Operations - Carrying amounts of assets and liabilities (Details) - USD ($) | Aug. 31, 2021 | Aug. 31, 2020 |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Total current assets | $ 356,000 | $ 1,030,000 |
Total current liabilities | 1,516,000 | 1,746,000 |
Disposal by sale | Overall business | ||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Deposits - workers' compensation | 356,000 | 1,030,000 |
Total current assets | 356,000 | 1,030,000 |
Deposits - workers' compensation | 883,000 | 2,582,000 |
Total assets | 1,239,000 | 3,612,000 |
Accrued workers' compensation cost | 1,516,000 | 1,746,000 |
Total current liabilities | 1,516,000 | 1,746,000 |
Accrued workers' compensation cost | 5,411,000 | 4,377,000 |
Total liabilities | 6,927,000 | 6,123,000 |
Net liability | $ (5,688,000) | $ (2,511,000) |
Discontinued Operations - Repor
Discontinued Operations - Reported results for the discontinued operations (Details) - USD ($) | 12 Months Ended | |
Aug. 31, 2021 | Aug. 31, 2020 | |
Operating expenses: | ||
(Loss) income from discontinued operations | $ (2,509,000) | $ (561,000) |
Disposal by sale | Overall business | ||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
Revenues (gross billings of $120.7 million less WSE payroll cost of $103.0 million, respectively for the year ended August 31, 2020) | 17,632,000 | |
Cost of revenue | 2,509,000 | 16,899,000 |
Gross profit | (2,509,000) | 733,000 |
Operating expenses: | ||
Salaries, wages and payroll taxes | 553,000 | |
Commissions | 741,000 | |
Total operating expenses | 1,294,000 | |
(Loss) income from discontinued operations | $ (2,509,000) | (561,000) |
Revenues, Gross | 120,700,000 | |
Worksite employee payroll cost | $ 103,000,000 |
Discontinued Operations - Net o
Discontinued Operations - Net operating loss carryforwards (Details) - USD ($) | 12 Months Ended | ||
Aug. 31, 2021 | Aug. 31, 2020 | Aug. 31, 2019 | |
Discontinued Operations | |||
Total net operating loss from discontinued operations | $ 8,632,000 | ||
Reserved net operating loss carryforwards fully utilized to offset income from discontinuing operations | $ 15,669,000 | $ 15,669,000 | |
Provision of income tax expense: | |||
Federal tax expense | (500,000) | 3,436,000 | |
State tax expense | (129,000) | 1,565,000 | |
Total tax expense | (629,000) | 5,001,000 | |
Tax benefit for utilization of tax loss carryforwards | (629,000) | 5,001,000 | |
Provision for income tax expense from discontinued operations | $ 0 | $ 0 |
Going Concern (Details)
Going Concern (Details) - USD ($) | 12 Months Ended | |
Aug. 31, 2021 | Aug. 31, 2020 | |
Going Concern | ||
Cash | $ 1,500,000 | |
Working capital deficit | 10,900,000 | |
Cash from its continuing operations | (20,534,000) | $ (15,628,000) |
Retained Earnings (Accumulated Deficit) | $ (149,338,000) | $ (119,462,000) |
Going Concern - Summary of chan
Going Concern - Summary of changes in cash flows (Details) - USD ($) | Sep. 03, 2021 | Aug. 31, 2021 | Aug. 31, 2020 |
Going Concern | |||
Net cash used in operating activities | $ (21,512,000) | $ (16,883,000) | |
Net cash provided by (used in) investing activities | (2,566,000) | 9,353,000 | |
Net cash provided by financing activities | 20,974,000 | 10,272,000 | |
Net increase (decrease) in cash | (3,104,000) | 2,742,000 | |
Deferring payment of taxes | $ 1,685,000 | $ 1,508,000 | |
Net of fees and expenses on sale securities transaction | $ 11,900,000 |
Accounts Receivable (Details)
Accounts Receivable (Details) - USD ($) | 12 Months Ended | |
Aug. 31, 2021 | Aug. 31, 2020 | |
Accounts Receivable | ||
Bad debt expense | $ 45,000 | $ 0 |
Deferred Offering Costs SPACs (
Deferred Offering Costs SPACs (Details) - USD ($) | Sep. 03, 2021 | Aug. 22, 2021 | Aug. 31, 2021 | Aug. 31, 2021 | Jun. 04, 2021 | Aug. 31, 2020 |
Minority Interest Deferred Offering Costs [Line Items] | ||||||
Common stock par value | $ 9.25 | $ 0.0001 | $ 0.0001 | $ 0.0001 | $ 0.0001 | |
Sale of units, price per share | $ 0.75 | $ 3.62 | $ 3.62 | |||
Deferred offering cost, discount percentage | 48.80% | |||||
Deferred offering cost, additional discount percentage | 21.00% | |||||
Deferred offering costs - SPACs | $ 48,261,000 | $ 48,261,000 | ||||
Deferred offering costs - Legal and accounting fees | $ 900,000 | 789,000 | ||||
Minority Interest | 47,472,000 | 47,472,000 | $ 0 | |||
SPAC IPO | ||||||
Minority Interest Deferred Offering Costs [Line Items] | ||||||
Sale of units, price per share | $ 10 | |||||
Deferred offering costs - SPACs | 48,261,000 | 48,261,000 | ||||
Deferred offering costs - Legal and accounting fees | 789,000 | |||||
Minority Interest | $ 47,472,000 | $ 47,472,000 | ||||
Firemark, TechStackery and Vital | ||||||
Minority Interest Deferred Offering Costs [Line Items] | ||||||
Deferred offering cost, discount percentage | 20.00% | |||||
IBC | ||||||
Minority Interest Deferred Offering Costs [Line Items] | ||||||
Deferred offering cost, discount percentage | 20.00% | |||||
Founder Shares | ||||||
Minority Interest Deferred Offering Costs [Line Items] | ||||||
Common Stock, Shares, Outstanding | 10,000,000 | |||||
Deferred compensation | $ 47,472,000 | |||||
Common stock par value | $ 4.7472 | |||||
Founder Shares | IHC. | ||||||
Minority Interest Deferred Offering Costs [Line Items] | ||||||
Common Stock, Shares, Outstanding | 2,000,000 | |||||
Founder Shares | TeachStackery | ||||||
Minority Interest Deferred Offering Costs [Line Items] | ||||||
Common Stock, Shares, Outstanding | 2,000,000 | |||||
Founder Shares | Vital | ||||||
Minority Interest Deferred Offering Costs [Line Items] | ||||||
Common Stock, Shares, Outstanding | 2,000,000 | |||||
Founder Shares | Firemark | ||||||
Minority Interest Deferred Offering Costs [Line Items] | ||||||
Common Stock, Shares, Outstanding | 4,000,000 |
Fixed Assets (Details)
Fixed Assets (Details) - USD ($) $ in Thousands | Aug. 31, 2021 | Aug. 31, 2020 |
Fixed Assets | $ 3,530,000 | $ 965,000 |
Accumulated depreciation & amortization | (746,000) | (390,000) |
Fixed assets, net | 2,784,000 | 575,000 |
Equipment [Member] | ||
Fixed Assets | 2,386,000 | 576,000 |
Furniture and Fixtures [Member] | ||
Fixed Assets | 599,000 | 348,000 |
Lyons Capital LLc [Member] | Leasehold Improvements [Member] | ||
Fixed Assets | $ 545,000 | $ 41,000 |
Fixed Assets - Capitalized soft
Fixed Assets - Capitalized software costs (Details) - USD ($) | Aug. 31, 2021 | Aug. 31, 2020 |
Fixed Assets (Details) | ||
Software costs capitalized | $ 0 | $ 3,737,000 |
Software costs impaired | $ 3,737,000 |
Fixed Assets - Additional Infor
Fixed Assets - Additional Information (Details) - USD ($) | 12 Months Ended | |
Aug. 31, 2021 | Aug. 31, 2020 | |
Fixed Assets (Details Narrative) | ||
Depreciation and amortization expense | $ 357,000 | $ 272,000 |
Equipment purchased | $ 961,000 |
Workers Compensation (Details)
Workers Compensation (Details) - USD ($) | 12 Months Ended | ||
Aug. 31, 2021 | Aug. 31, 2020 | Aug. 31, 2019 | |
Continuing operations | |||
Workers Comp Deposit Beginning Balance | $ 1,827,000 | ||
Paid in deposits | $ 446,000 | $ 601,000 | |
Claim losses | (934,000) | (1,399,000) | |
Workers' Comp Deposit Ending balance | 541,000 | 1,029,000 | |
Less Currents Amount | (155,000) | ||
Long Term Balance | 386,000 | ||
Discontinued operations. | |||
Workers Comp Deposit Beginning Balance | 6,411,000 | ||
Paid in deposits | 1,062,000 | 2,107,000 | |
Claim losses | (3,434,000) | (4,907,000) | |
Workers' Comp Deposit Ending balance | 1,239,000 | 3,611,000 | |
Less Currents Amount | (356,000) | ||
Long Term Balance | 883,000 | ||
Sunz Program | Continuing operations | |||
Workers Comp Deposit Beginning Balance | 1,827,000 | ||
Paid in deposits | 446,000 | 601,000 | |
Claim losses | (934,000) | (1,399,000) | |
Workers' Comp Deposit Ending balance | 541,000 | 1,029,000 | |
Less Currents Amount | (155,000) | ||
Long Term Balance | 386,000 | ||
Sunz Program | Discontinued operations. | |||
Workers Comp Deposit Beginning Balance | $ 6,411,000 | ||
Paid in deposits | 1,062,000 | 2,107,000 | |
Claim losses | (3,434,000) | (4,907,000) | |
Workers' Comp Deposit Ending balance | 1,239,000 | $ 3,611,000 | |
Less Currents Amount | (356,000) | ||
Long Term Balance | $ 883,000 |
Workers Compensation - Workers"
Workers Compensation - Workers" compensation liability (Details) - USD ($) | 12 Months Ended | ||
Aug. 31, 2021 | Aug. 31, 2020 | Aug. 31, 2019 | |
Continuing operations | |||
Workers Comp Liability Beginning Balance | $ 1,406,000 | ||
Claim loss development | $ 1,323,000 | $ 1,738,000 | |
Paid in losses | (760,000) | (1,399,000) | |
Workers' comp deposits | 2,308,000 | 1,745,000 | |
Less Current Amount | (663,000) | ||
Long Term Balance | 1,645,000 | ||
Continuing operations | Everest Program One | |||
Workers Comp Liability Beginning Balance | 94,000 | ||
Claim loss development | 50,000 | 110,000 | |
Workers' comp deposits | 254,000 | 204,000 | |
Less Current Amount | (133,000) | ||
Long Term Balance | 121,000 | ||
Continuing operations | Sunz Program | |||
Workers Comp Liability Beginning Balance | 1,312,000 | ||
Claim loss development | 1,273,000 | 1,628,000 | |
Paid in losses | (760,000) | (1,399,000) | |
Workers' comp deposits | 2,054,000 | 1,541,000 | |
Less Current Amount | (530,000) | ||
Long Term Balance | 1,524,000 | ||
Discontinued operations. | |||
Workers Comp Liability Beginning Balance | 4,930,000 | ||
Claim loss development | (3,583,000) | 6,099,000 | |
Paid in losses | 2,742,000 | (4,907,000) | |
Workers' comp deposits | 5,281,000 | 6,122,000 | |
Less Current Amount | (1,515,000) | ||
Long Term Balance | 3,766,000 | ||
Discontinued operations. | Everest Program One | |||
Workers Comp Liability Beginning Balance | 329,000 | ||
Claim loss development | 388,000 | ||
Paid in losses | 103,000 | ||
Workers' comp deposits | 820,000 | 717,000 | |
Less Current Amount | (275,000) | ||
Long Term Balance | 545,000 | ||
Discontinued operations. | Sunz Program | |||
Workers Comp Liability Beginning Balance | $ 4,601,000 | ||
Claim loss development | (3,583,000) | 5,711,000 | |
Paid in losses | 2,639,000 | (4,907,000) | |
Workers' comp deposits | 4,461,000 | $ 5,405,000 | |
Less Current Amount | (1,240,000) | ||
Long Term Balance | $ 3,221,000 |
Accrued Payroll and Related L_3
Accrued Payroll and Related Liabilities (Details) - USD ($) | Aug. 31, 2021 | Aug. 31, 2020 |
Accrued Payroll and Related Liabilities | ||
Accrued Payroll | $ 2,438,000 | $ 1,970,000 |
Accrued Payroll Taxes | 4,758,000 | 3,325,000 |
Corporate employee accrued paid time off | 680,000 | 457,000 |
Accrued Payroll and related liabilities | $ 7,876,000 | $ 5,752,000 |
Senior Convertible Notes Paya_3
Senior Convertible Notes Payable - Assumptions to conversion features and exchange warrants (Details) | 12 Months Ended |
Aug. 31, 2021$ / shares | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Risk free rate | 0.47% |
Volatility | 134.00% |
Minimum [Member] | |
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] | |
Market Price Per Share | $ 6.68 |
Dividend yield | 0.00% |
March 2020 Conversion Feature | Minimum [Member] | |
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% |
March 2020 Exchange Warrants | Minimum [Member] | |
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_4
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, 2021 | Aug. 31, 2020 | Aug. 31, 2019 | May 17, 2021 |
Gross principal | $ 6,808,000 | |||||||||||
Conversion price | $ 9.20 | $ 12.20 | ||||||||||
Value for debt conversion | $ 200,000 | |||||||||||
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 note discount | 567,000 | |||||||||||
Recovery from debt litigation settlement | 760,000 | |||||||||||
Debt instrument, conversion original amount | $ 1,047,000 | |||||||||||
Accrued default interest | $ 25,000 | |||||||||||
Debt instrument converted amount shares issued | 135,508 | |||||||||||
Loss on pro rata portion of the unamortized note discount and deferred financing fees | $ 413,000 | |||||||||||
Warrants exercise price | $ 2.425 | |||||||||||
Expense related to extinguishment of convertible notes | $ 1,592,000 | (1,592,000) | ||||||||||
Discount on the exchange dates | 2,825,000 | |||||||||||
Amortization debt discount, debt issuance cost | $ 2,419,000 | 6,749,000 | ||||||||||
Additional Loss On Conversion Of Debt | 57,000 | |||||||||||
Amortization debt discount, debt issuance cost | $ 2,419,000 | $ 6,749,000 | ||||||||||
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 | |||||||||||
Interest rate | 18.00% | |||||||||||
Coupon rate | 0.00% | |||||||||||
Percentage of principal increased | 10.00% | |||||||||||
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 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 | |||||||||||
Combined additional shares issued | $ 467,000 | |||||||||||
Additional notes issued in exchange | 267,000 | |||||||||||
Debt Instrument, Amount Converted to Shares | 293,000 | |||||||||||
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 | |||||||||||
Debt Instrument, Amount Converted to Shares | $ 500,000 | |||||||||||
Additional shares issued for settlement of default | 4,207 | |||||||||||
Debt default interest | $ 51,000 | |||||||||||
Debt amount converted to shares | $ 500,000 | |||||||||||
Exchange Agreement [Member] | December 2018 Notes [Member] | ||||||||||||
Principal outstanding | $ 222,000 | |||||||||||
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, 2021 | Aug. 31, 2020 | |
Number of shares | ||
Number of shares outstanding, beginning balance | 1,896,209 | |
Issued | 10,324,329 | |
(Cancelled) | 0 | |
(Exercised) | (2,628,453) | |
Number of shares outstanding, ending balance | 9,592,085 | |
Number of shares Exercisable | 9,344,662 | |
Weighted remaining life (years) | ||
Weighted remaining life (years), beginning | 4 years 8 months 12 days | |
Weighted remaining life (years), issued | 4 years 7 months 6 days | |
Weighted remaining life (years), cancelled | 0 years | |
Weighted remaining life (years), exercised | 4 years 9 months 18 days | |
Weighted remaining life (years), ending | 5 years 8 months 12 days | |
Weighted Remaining Life (Years) Exercisable | 4 years 4 months 24 days | |
Weighted average exercise prices | ||
Weighted average exercise prices, beginning | $ 7.91 | |
Weighted average exercise prices, issued | 2.03 | |
Weighted average exercise prices, cancelled | 0 | |
Weighted average exercise prices, exercised | 0 | |
Weighted average exercise prices, ending | 3.02 | |
Weighted Average Exercise Prices Exercisable | $ 3.84 |
Stockholders' Equity - Summar_2
Stockholders' Equity - Summary of information about warrants outstanding (Details) - $ / shares | Oct. 08, 2020 | Aug. 31, 2021 | Aug. 31, 2020 |
Exercise price (in dollars per share) | $ 2.61 | $ 5.30 | |
May 2021 Common Warrants | |||
Warrants Outstanding | 4,948,453 | ||
Weighted average Life of Outstanding Warrants in years | 4 years 9 months 18 days | ||
Exercise price (in dollars per share) | $ 2.43 | ||
May 2021 Underwriter Warrants | |||
Warrants Outstanding | 247,423 | ||
Weighted average Life of Outstanding Warrants in years | 4 years 2 months 12 days | ||
Exercise price (in dollars per share) | $ 2.67 | ||
October 2020 Common Warrants | |||
Warrants Outstanding | 200,000 | 2,300,000 | |
Weighted average Life of Outstanding Warrants in years | 4 years 1 month 6 days | ||
Exercise price (in dollars per share) | $ 3.30 | ||
October 2020 Underwriter Warrants | |||
Warrants Outstanding | 200,000 | ||
Weighted average Life of Outstanding Warrants in years | 4 years 1 month 6 days | ||
Exercise price (in dollars per share) | $ 3.30 | ||
May 2020 Common Warrants | |||
Warrants Outstanding | 1,277,580 | ||
Weighted average Life of Outstanding Warrants in years | 3 years 9 months 18 days | ||
Exercise price (in dollars per share) | $ 5.40 | ||
May 2020 Underwriter Warrants | |||
Warrants Outstanding | 111,108 | ||
Weighted average Life of Outstanding Warrants in years | 3 years 9 months 18 days | ||
Exercise price (in dollars per share) | $ 5.40 | ||
March 2020 Exchange Warrants. | |||
Warrants Outstanding | 423,669 | ||
Weighted average Life of Outstanding Warrants in years | 4 years 1 month 6 days | ||
Exercise price (in dollars per share) | $ 10.17 | ||
Amended March 2019 Notes Warrants [Member] | |||
Warrants Outstanding | 66,288 | ||
Weighted average Life of Outstanding Warrants in years | 2 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 | 2 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 | 2 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 | 2 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 | ||
Exercise price (in dollars per share) | $ 276 | ||
Warrants [Member] | |||
Warrants Outstanding | 9,592,085 | ||
Weighted average Life of Outstanding Warrants in years | 4 years 4 months 24 days | ||
Exercise price (in dollars per share) | $ 3.84 |
Stockholders' Equity - Addition
Stockholders' Equity - Additional information (Details) | Sep. 03, 2021USD ($) | Aug. 13, 2021$ / shares | May 17, 2021USD ($)$ / sharesshares | Oct. 14, 2020USD ($) | Oct. 08, 2020USD ($)$ / sharesshares | Jul. 07, 2020USD ($)$ / sharesshares | Jul. 01, 2020shares | Jun. 11, 2020USD ($)$ / sharesshares | Jun. 04, 2020$ / sharesshares | May 26, 2020USD ($)$ / sharesshares | May 25, 2020 | May 20, 2020$ / sharesshares | Mar. 25, 2020USD ($)shares | Jan. 04, 2020$ / sharesshares | Nov. 30, 2020shares | Aug. 31, 2021USD ($)$ / sharesshares | Aug. 31, 2020USD ($)$ / sharesshares | Aug. 22, 2021$ / shares | Jun. 04, 2021shares | Jan. 31, 2020$ / shares |
Shares conversion ratio | 1 | |||||||||||||||||||
Preferred stock, per share | $ / shares | $ 0.0001 | $ 0.0001 | $ 0.0001 | |||||||||||||||||
Compensation expense | $ | $ 62,100,000 | $ 1,594,000 | $ 1,526,000 | |||||||||||||||||
Expected maturity period | 10 years | 3 years 9 months 7 days | ||||||||||||||||||
Risk-free interest rate | 0.47% | |||||||||||||||||||
Volatility | 134.00% | |||||||||||||||||||
Fair value exercise price per share | $ / shares | $ 0.0001 | |||||||||||||||||||
Price per share | $ / shares | $ 3.62 | $ 0.75 | ||||||||||||||||||
Number of options available for grant to founder shareholders | 3,000,000 | |||||||||||||||||||
Exercise price of warrants | $ / shares | $ 2.425 | |||||||||||||||||||
Gross proceeds from issuance of shares | $ | $ 12,000,000 | |||||||||||||||||||
Placement agent fees and costs | $ | $ 900,000 | $ 789,000 | ||||||||||||||||||
Percentage on aggregate number of shares of common stock | 7.00% | |||||||||||||||||||
Percentage of warrants exercisable price on offering price | 5.00% | |||||||||||||||||||
Common stock shares issued | 25,863,099 | 16,902,146 | ||||||||||||||||||
Share options, cancelled during the year | 148,959 | |||||||||||||||||||
Granted | 1,235,159 | 840,000 | 1,506,096 | |||||||||||||||||
Amended March 2019 Notes Warrants [Member] | ||||||||||||||||||||
Warrants Outstanding | 66,288 | |||||||||||||||||||
May 2020 Common Warrant [Member] | ||||||||||||||||||||
Price per share | $ / shares | $ 5.94 | |||||||||||||||||||
Warrants Outstanding | 111,108 | |||||||||||||||||||
Percentage on aggregate number of shares of common stock | 5.00% | |||||||||||||||||||
Percentage of warrants exercisable price on offering price | 110.00% | |||||||||||||||||||
May 2020 Common Warrant [Member] | Minimum [Member] | ||||||||||||||||||||
Warrants term | 6 months | |||||||||||||||||||
May 2020 Common Warrant [Member] | Maximum | ||||||||||||||||||||
Warrants term | 5 years | |||||||||||||||||||
June 2018 Notes Warrants [Member] | ||||||||||||||||||||
Warrants Outstanding | 6,276 | |||||||||||||||||||
October 2020 Common Warrants | ||||||||||||||||||||
Price per share | $ / shares | $ 3.300 | |||||||||||||||||||
Warrants Outstanding | 200,000 | 2,300,000 | ||||||||||||||||||
Percentage on aggregate number of shares of common stock | 5.00% | |||||||||||||||||||
Percentage of warrants exercisable price on offering price | 110.00% | |||||||||||||||||||
October 2020 Common Warrants | Minimum [Member] | ||||||||||||||||||||
Warrants term | 5 years | |||||||||||||||||||
May 2021 Underwriter Warrants | ||||||||||||||||||||
Warrants Outstanding | 247,423 | |||||||||||||||||||
May 2021 Common Warrants | ||||||||||||||||||||
Price per share | $ / shares | $ 2.425 | |||||||||||||||||||
Placement agent fees and costs | $ | $ 940,000 | |||||||||||||||||||
Warrants Outstanding | 4,948,453 | |||||||||||||||||||
Shares issued upon exercise of warrants | 2,320,000 | |||||||||||||||||||
Common stock shares issued | 4,948,453 | |||||||||||||||||||
May 2021 Common Warrants | securities purchase agreement | ||||||||||||||||||||
Price per share | $ / shares | $ 2.425 | |||||||||||||||||||
Shares of common stock issued | 2,320,000 | |||||||||||||||||||
May 2021 Prefunded Warrants | ||||||||||||||||||||
Exercise price of warrants | $ / shares | $ 0.0001 | |||||||||||||||||||
May 2021 Prefunded Warrants | securities purchase agreement | ||||||||||||||||||||
Price per share | $ / shares | $ 2.4249 | |||||||||||||||||||
Shares of common stock issued | 2,628,453 | |||||||||||||||||||
Amanda Murphy | ||||||||||||||||||||
Common stock issued for services rendered, shares | 856 | |||||||||||||||||||
Common stock issued for services | $ | $ 75,000 | |||||||||||||||||||
September 2016 grant | Maximum | ||||||||||||||||||||
Share options, cancelled during the year | 11,790,000 | |||||||||||||||||||
Convertible Notes Payable [Member] | ||||||||||||||||||||
Stock Issued During Period, Shares, Conversion of Convertible Securities | 628,353 | |||||||||||||||||||
Preferred Stock | ||||||||||||||||||||
Shares conversion ratio | 1 | |||||||||||||||||||
Preferred options Exercised | 12,794,220 | |||||||||||||||||||
Preferred Stock | May 2020 Common Warrant [Member] | ||||||||||||||||||||
Price per share | $ / shares | $ 2.52 | |||||||||||||||||||
Preferred Stock | Scott W Absher | ||||||||||||||||||||
Shares conversion ratio | 1 | |||||||||||||||||||
Preferred stock, per share | $ / shares | $ 0.0001 | $ 0.0001 | ||||||||||||||||||
Preferred options Exercised | 12,500,000 | 294,490 | ||||||||||||||||||
Number of options available for grant to founder shareholders | 12,500,000 | |||||||||||||||||||
Share options additional grants during the period | 12,500,000 | |||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Weighted Average Remaining Contractual Term | 24 months | |||||||||||||||||||
Percentage of sale or distribution of company assets or earning power. | 50 | |||||||||||||||||||
Preferred Stock | Scott W Absher | Maximum | ||||||||||||||||||||
Granted | 25,000,000 | |||||||||||||||||||
Preferred Stock | September 2016 grant | Vensure asset sale | ||||||||||||||||||||
Preferred stock options, unexercised | 11,827,570 | |||||||||||||||||||
Stock Option | Preferred Stock | ||||||||||||||||||||
Convertible preferred stock | 24,634,560 | |||||||||||||||||||
Common Share Units [Member] | May 2020 Common Warrant [Member] | ||||||||||||||||||||
Units issued | 166,500 | |||||||||||||||||||
Number of Shares of Common Stock to be Purchased Accompanied by Common Warrant | 0.5 | |||||||||||||||||||
Common Share Units [Member] | October 2020 Common Warrants | ||||||||||||||||||||
Price per share | $ / shares | $ 3 | |||||||||||||||||||
Shares of common stock issued | 4,000,000 | |||||||||||||||||||
Common Share Units [Member] | Scott W Absher | ||||||||||||||||||||
Price per share | $ / shares | $ 1,250 | |||||||||||||||||||
Shares issued upon conversion | 12,500,000 | 294,490 | ||||||||||||||||||
Common shares lock up period | 24 months | 6 months | ||||||||||||||||||
Shares that are freely tradeable | 294,490 | |||||||||||||||||||
Warrants [Member] | ||||||||||||||||||||
Warrants to acquire shares of common stock | 323,310 | |||||||||||||||||||
Warrants Outstanding | 9,592,085 | |||||||||||||||||||
Warrants [Member] | May 2021 Common Warrants | ||||||||||||||||||||
Price per share | $ / shares | $ 2.4249 | |||||||||||||||||||
Shares issued upon exercise of warrants | 2,628,453 | |||||||||||||||||||
Warrants [Member] | May 2021 Prefunded Warrants | ||||||||||||||||||||
Price per share | $ / shares | $ 2.425 | |||||||||||||||||||
Exercise price of warrants | $ / shares | $ 2.6675 | |||||||||||||||||||
Shares issued upon exercise of warrants | 2,628,453 | |||||||||||||||||||
Common Stock | May 2021 Common Warrants | ||||||||||||||||||||
Price per share | $ / shares | $ 0.0001 | |||||||||||||||||||
Shares of common stock issued | 2,320,000 | |||||||||||||||||||
Common Stock | May 2021 Prefunded Warrants | ||||||||||||||||||||
Price per share | $ / shares | $ 2.4249 | |||||||||||||||||||
Underwritten Public Offering [Member] | May 2020 Common Warrant [Member] | ||||||||||||||||||||
Shares of common stock issued | 2,472,500 | |||||||||||||||||||
Warrants to acquire shares of common stock | 1,277,580 | |||||||||||||||||||
Placement agent fees and costs | $ | $ 1,700,000 | |||||||||||||||||||
Underwritten Public Offering [Member] | October 2020 Common Warrants | ||||||||||||||||||||
Price per share | $ / shares | $ 3 | |||||||||||||||||||
Exercise price of warrants | $ / shares | $ 3.30 | |||||||||||||||||||
Gross proceeds from issuance of shares | $ | $ 12,000,000 | |||||||||||||||||||
Placement agent fees and costs | $ | $ 1,300,000 | |||||||||||||||||||
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] | ||||||||||||||||||||
Price per share | $ / shares | $ 5.40 | |||||||||||||||||||
Shares of common stock issued | 1,898,850 | |||||||||||||||||||
Exercise price of warrants | $ / shares | $ 5.40 | $ 5.40 | ||||||||||||||||||
Underwritten Public Offering [Member] | Warrants [Member] | May 2020 Common Warrant [Member] | ||||||||||||||||||||
Price per share | $ / shares | $ 5.399 | |||||||||||||||||||
Shares of common stock issued | 323,310 | |||||||||||||||||||
Underwritten Public Offering [Member] | Warrants [Member] | October 2020 Common Warrants | ||||||||||||||||||||
Shares of common stock issued | 2,300,000 | 2,300,000 | ||||||||||||||||||
Underwritten Public Offering [Member] | Common Stock | October 2020 Common Warrants | ||||||||||||||||||||
Shares of common stock issued | 4,000,000 | |||||||||||||||||||
Number of Shares of Common Stock to be Purchased Accompanied by Common Warrant | 0.5 | |||||||||||||||||||
Overallotment | May 2020 Common Warrant [Member] | ||||||||||||||||||||
Price per share | $ / shares | $ 5.40 | |||||||||||||||||||
Shares of common stock issued | 166,500 | |||||||||||||||||||
Units issued | 83,840 | |||||||||||||||||||
Gross proceeds from issuance of shares | $ | $ 450,000 | |||||||||||||||||||
Proceeds from issuance of units | $ | $ 900,000 | |||||||||||||||||||
Overallotment | October 2020 Common Warrants | ||||||||||||||||||||
Shares of common stock issued | 300,000 | |||||||||||||||||||
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, 2021 | Aug. 31, 2020 | Aug. 31, 2019 |
Number of Options | ||||
Options outstanding, beginning balance | 1,398,740 | 50,749 | ||
Granted | 1,235,159 | 840,000 | 1,506,096 | |
Forfeited | (461,720) | (158,105) | ||
Options outstanding, ending balance | 1,776,115 | 1,398,740 | 50,749 | |
Weighted Average Remaining Contractual Life (In years) | ||||
Weighted Average Remaining Contractual Life In Years, beginning balance | 9 years | |||
Weighted Average Remaining Contractual Life In Years, Granted | 8 years 6 months | 10 years | ||
Weighted Average Remaining Contractual Life In Years, Exercised | 0 years | 0 years | ||
Weighted Average Remaining Contractual Life In Years, Forfeited | 5 years 10 months 24 days | 9 years 7 months 6 days | ||
Weighted Average Remaining Contractual Life In Years, Ending balance | 8 years 10 months 24 days | 9 years 6 months | ||
Weighted Average Exercise Price | ||||
Weighted Average Exercise Price Beginning | $ 95.20 | |||
Granted | $ 2.61 | 5.30 | ||
Forfeited | 2.72 | 56.08 | ||
Weighted Average Exercise Price Ending | $ 6.53 | $ 8.18 |
Stock Based Compensation - Op_2
Stock Based Compensation - Option vesting activity (Details) - $ / shares | 12 Months Ended | ||
Aug. 31, 2021 | Aug. 31, 2020 | Aug. 31, 2019 | |
Number of Option | |||
Options Vested, Beginning balance | 10,291 | ||
Vested | 281,622 | 19,414 | |
Forfeited | (775) | (1,295) | |
Options Vested, Ending balance | 309,257 | 28,410 | |
Weighted Average Remaining Contractual Life (In years) | |||
Weighted Average Remaining Contractual Life In Years, beginning balance | 8 years | ||
Weighted Average Remaining Contractual Life In Years, Vested | 8 years 9 months 18 days | 8 years 1 month 6 days | |
Weighted Average Remaining Contractual Life In Years Exercised Options Vested | 0 years | 0 years | |
Weighted Average Remaining Contractual Life In Years, Forfeited | 6 years 1 month 6 days | 6 years 4 months 24 days | |
Weighted Average Remaining Contractual Life In Years, Ending balance | 8 years 7 months 6 days | 7 years 2 months 12 days | |
Weighted Average Exercise Price | |||
Weighted Average Exercise Price Beginning | $ 152.80 | ||
Vested | $ 7.15 | 89.06 | |
Exercised | 0 | ||
Forfeited | 67.17 | 140.09 | |
Weighted Average Exercise Price Ending | $ 16.91 | $ 115.10 |
Stock Based Compensation - Stoc
Stock Based Compensation - Stock options outstanding and vested (Details) - $ / shares | 12 Months Ended | |
Aug. 31, 2021 | Aug. 31, 2020 | |
Weighted Average Exercise Price | $ 0 | |
Exercise Prices One [Member] | Minimum [Member] | ||
Exercise Prices | $ 3.44 | |
Exercise Prices One [Member] | Maximum | ||
Exercise Prices | 10 | |
Exercise Prices Two [Member] | Minimum [Member] | ||
Exercise Prices | 10.01 | |
Exercise Prices Two [Member] | Maximum | ||
Exercise Prices | 40 | |
Exercise Prices Three [Member] | Minimum [Member] | ||
Exercise Prices | 40.01 | |
Exercise Prices Three [Member] | Maximum | ||
Exercise Prices | 80 | |
Exercise Prices Four [Member] | Minimum [Member] | ||
Exercise Prices | 80.01 | |
Exercise Prices Four [Member] | Maximum | ||
Exercise Prices | 120 | |
Exercise Prices Five [Member] | Minimum [Member] | ||
Exercise Prices | 120.01 | |
Exercise Prices Five [Member] | Maximum | ||
Exercise Prices | 160 | |
Exercise Prices Six [Member] | Minimum [Member] | ||
Exercise Prices | 160.01 | |
Exercise Prices Six [Member] | Maximum | ||
Exercise Prices | $ 391.60 | |
Options Outstanding and Exercisable One [Member] | ||
Number of shares non-exercisable | 0 | |
Number of options | 1,735,418 | |
Weighted Average Remaining Contractual Life In Years | 9 years 3 months 18 days | |
Weighted Average Exercise Price | $ 4.72 | |
Options Outstanding and Exercisable Two [Member] | ||
Number of shares non-exercisable | 0 | |
Number of options | 3,500 | |
Weighted Average Remaining Contractual Life In Years | 7 years 9 months 18 days | |
Weighted Average Exercise Price | $ 21.69 | |
Options Outstanding and Exercisable Three [Member] | ||
Number of shares non-exercisable | 0 | |
Number of options | 13,396 | |
Weighted Average Remaining Contractual Life In Years | 7 years 7 months 6 days | |
Weighted Average Exercise Price | $ 51.21 | |
Options Outstanding and Exercisable Four [Member] | ||
Number of shares non-exercisable | 0 | |
Number of options | 10,302 | |
Weighted Average Remaining Contractual Life In Years | 6 years 8 months 12 days | |
Weighted Average Exercise Price | $ 102.90 | |
Options Outstanding and Exercisable Five [Member] | ||
Number of shares non-exercisable | 0 | |
Number of options | 12,375 | |
Weighted Average Remaining Contractual Life In Years | 6 years | |
Weighted Average Exercise Price | $ 155.20 | |
Options Outstanding Six [Member] | ||
Number of shares non-exercisable | 0 | |
Number of options | 1,125 | |
Weighted Average Remaining Contractual Life In Years | 5 years 10 months 24 days | |
Weighted Average Exercise Price | $ 391.60 | |
Options Outstanding and Exercisable [Member] | ||
Number of shares non-exercisable | 0 | |
Number of options | 1,776,115 | |
Weighted Average Remaining Contractual Life In Years | 8 years 10 months 24 days | |
Weighted Average Exercise Price | $ 6.53 | |
Options Vested One [Member] | ||
Number of options vested | 275,104 | |
Weighted Average Remaining Contractual Life In Years | 8 years 10 months 24 days | |
Weighted Average Exercise Price | $ 5.30 | |
Options Vested Two [Member] | ||
Number of options vested | 2,086 | |
Weighted Average Remaining Contractual Life In Years | 7 years 9 months 18 days | |
Weighted Average Exercise Price | $ 21.68 | |
Options Vested Three [Member] | ||
Number of options vested | 10,072 | |
Weighted Average Remaining Contractual Life In Years | 7 years 7 months 6 days | |
Weighted Average Exercise Price | $ 51.22 | |
Options Vested Four [Member] | ||
Weighted Average Remaining Contractual Life In Years | 6 years 8 months 12 days | |
Number of options vested | 8,987 | |
Weighted Average Exercise Price | $ 102.84 | |
Options Vested Five [Member] | ||
Weighted Average Remaining Contractual Life In Years | 6 years | |
Number of options vested | 11,883 | |
Weighted Average Exercise Price | $ 155.48 | |
Options Vested Six [Member] | ||
Number of options vested | 1,125 | |
Weighted Average Remaining Contractual Life In Years | 5 years 10 months 24 days | |
Weighted Average Exercise Price | $ 391.60 | |
Options Vested [Member] | ||
Weighted Average Remaining Contractual Life In Years | 8 years 7 months 6 days | |
Number of options vested | 309,257 | |
Weighted Average Exercise Price | $ 16.91 |
Stock Based Compensation - Addi
Stock Based Compensation - Additional Information (Details) - USD ($) | Jul. 01, 2020 | Mar. 25, 2020 | Aug. 31, 2021 | Aug. 31, 2020 | Aug. 22, 2021 | Jun. 04, 2021 |
Number of shares authorized | 1,235,159 | 840,000 | 1,506,096 | |||
Exercise price (in dollars per share) | $ 2.61 | $ 5.30 | ||||
Par value per share | $ 0.0001 | $ 0.0001 | $ 9.25 | $ 0.0001 | ||
Number of options available for grant to founder shareholders | 3,000,000 | |||||
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 | $ 1,594,000 | $ 1,526,000 | |||
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 | |||||
Share Based Compensation [Member] | ||||||
Compensation expense | 1,594,000 | 1,300,000 | ||||
Share based compensation | $ 4,191,000 | |||||
Remaining weighted average vesting periods | 3 years | |||||
Aggregate intrinsic value | $ 0 | 22,000 | ||||
Accounts payable and other accrued liabilities | $ 169,000 | $ 150,000 | ||||
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 [Member] | 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 period | 1 year | |||||
Vesting prior to July 1, 2020 | ||||||
Number of shares of common stock issuable | 3,000,000 | |||||
Vesting percentage | 25.00% | |||||
Contractual life | 12 months | |||||
Vesting period | 36 months |
Related Parties (Details)
Related Parties (Details) - USD ($) | Jun. 02, 2021 | Dec. 23, 2019 | Aug. 31, 2021 | Aug. 31, 2020 | Aug. 22, 2021 |
Common stock shares issued | 25,863,099 | 16,902,146 | |||
Common stock, shares value | $ 3,000 | $ 1,000 | |||
Exercise price (in dollars per share) | $ 2.61 | $ 5.30 | |||
Price per share | $ 3.62 | $ 0.75 | |||
Professional fees | $ 4,089,000 | $ 3,366,000 | |||
Employee relocation expenses | 650,000 | ||||
Chief Executive Officer | |||||
Related party transaction, relocation expenses | 88,000 | ||||
Amanda Murphy | |||||
Related party transaction, relocation expenses | 80,000 | ||||
Scott W Absher | |||||
Related party transaction, relocation expenses | 160,000 | ||||
Phil Eastvold | |||||
Officers compensation | 224,000 | 0 | |||
David May | |||||
Compensation and sales commissions | 149,000 | 132,000 | |||
Scott absher | Chief Executive Officer | |||||
Cash bonus amount | $ 240,000 | ||||
Connie Abher, Elizabeth Eastvold, Hannah Absher | |||||
Officers compensation | 240,000 | 220,000 | |||
Whitney white | |||||
Common stock shares issued | 428 | ||||
Common stock, shares value | $ 37,500 | ||||
Exercise price (in dollars per share) | $ 87.62 | ||||
Mrs Amanda Murphy | Chief operating officer | |||||
Officers compensation | 264,000 | 240,000 | |||
J. Stephan Holmes [Member] | |||||
Professional fees | 750,000 | $ 750,000 | |||
Mark Absher One [Member] | Scott W Absher | |||||
Related party transaction, relocation expenses | 80,000 | ||||
Hannah Absher [Member] | |||||
Employee relocation expenses | 18,000 | ||||
Related party transaction, relocation expenses | 18,000 | ||||
Jared Holmes | |||||
Related party transaction, relocation expenses | $ 18,000 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) | Aug. 31, 2021 | Aug. 31, 2020 |
Deferred tax liabilities: | ||
Depreciation | $ (597,000) | $ (111,000) |
Software development costs | (265,000) | |
Note receivable | (1,088,000) | (1,132,000) |
Total deferred tax liabilities | (1,685,000) | (1,508,000) |
Deferred tax assets: | ||
Net operating loss carryforward | 18,198,000 | 9,362,000 |
Business Interest | 2,998,000 | 3,087,000 |
Other accruals | 458,000 | |
Workers' compensation accruals | 2,061,000 | 2,202,000 |
Stock-based compensation | 207,000 | 759,000 |
Deferred rent | 168,000 | 14,000 |
Other | 6,000 | |
Total deferred tax assets | 24,096,000 | 15,424,000 |
Valuation allowance | (22,411,000) | (13,916,000) |
Total net deferred tax assets | 1,685,000 | 1,508,000 |
Net deferred tax assets | $ 0 | $ 0 |
Income Taxes - Income tax expen
Income Taxes - Income tax expense (Details) - USD ($) | 12 Months Ended | |
Aug. 31, 2021 | Aug. 31, 2020 | |
Current | ||
State | $ 42,000 | |
Total current | 42,000 | |
Deferred | ||
Federal | (5,059,000) | $ (4,669,000) |
State | (2,807,000) | (1,915,000) |
Total deferred | (7,866,000) | (6,584,000) |
Change in valuation allowance | 7,866,000 | $ 6,584,000 |
Total Income Tax Expense (Benefit) | $ 42,000 |
Income Taxes - Effective income
Income Taxes - Effective income tax rate (Details) - USD ($) | 12 Months Ended | |
Aug. 31, 2021 | Aug. 31, 2020 | |
Income Taxes | ||
Federal statutory rate (21%) | $ (5,738,000) | $ (19,000,000) |
Non-deductible penalties and other permanent differences | 333,000 | 49,000 |
State and local income taxes, net of federal benefit | (1,607,000) | (1,688,000) |
Redetermination of prior year taxes | (812,000) | 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 | 7,866,000 | $ 6,584,000 |
Net income tax provision | $ 42,000 |
Income Taxes - Additional Infor
Income Taxes - Additional Information (Details) - USD ($) | 12 Months Ended | |
Aug. 31, 2021 | Aug. 31, 2020 | |
Income Taxes | ||
State operating loss carryforwards | $ 68,034,000 | $ 42,185,000 |
Federal operating loss carryforwards | 64,652,000 | 34,115,000 |
Change in valuation allowance | $ 7,866,000 | 6,584,000 |
Federal statutory rate (in percent) | 21.00% | |
Deferred Tax Assets, Other | $ 6,000 | |
Net operating losses | $ 37,809,000 | 8,067,000 |
Net operating loss carryforwards, limitations on use | which have an indefinite life but are limited to 80% | |
Accrued interest and penalties | $ 0 | $ 0 |
Commitments - Future minimum le
Commitments - Future minimum lease payments under non-cancelable operating leases (Details) - Operating Lease [Member] | Aug. 31, 2021USD ($) |
2022 | $ 1,198,000 |
2023 | 1,014,000 |
2024 | 1,075,000 |
2025 | 1,108,000 |
2026 | 814,000 |
Thereafter | 838,000 |
Total minimum payments | $ 6,047,000 |
Commitments - Additional Inform
Commitments - Additional Information (Details) | Mar. 17, 2021USD ($) | Aug. 31, 2021USD ($) | Aug. 31, 2021USD ($) | Aug. 31, 2020USD ($) | Jun. 21, 2021USD ($) | Jun. 07, 2021USD ($) | Oct. 01, 2020USD ($) | Aug. 13, 2020item | Apr. 15, 2016 |
Employer contribution plan | $ 0 | $ 0 | |||||||
Lease agreement with Verifone Inc. to sublease | |||||||||
Square feet of industrial space | 8,000 | ||||||||
Lease term | 3 years | ||||||||
Lease agreement to lease premises | |||||||||
Square feet of industrial space | 13,418 | ||||||||
Lease term | 77 months | ||||||||
Irvine Facility [Member] | |||||||||
Term of operating lease | 5 years | ||||||||
Miami Facility | |||||||||
Term of operating lease | 64 months | 7 years | |||||||
Square feet of industrial space | 23,500 | 13,246 | |||||||
Miami Facility | Master service agreement for the construction of six ghost kitchens | |||||||||
Additional Funds | $ 97,000 | ||||||||
Total cost | $ 962,000 | ||||||||
Payments | 865,000 | ||||||||
Additional Funds | $ 97,000 |
Commitments - Special Purpose A
Commitments - Special Purpose Acquisition Company ("SPAC") Sponsorship (Details) | Apr. 29, 2021USD ($)item$ / sharesshares | Oct. 31, 2021USD ($) | Aug. 31, 2021USD ($) | Aug. 31, 2020USD ($) | May 17, 2021$ / shares |
Exercise price of warrants | $ / shares | $ 2.425 | ||||
Aggregate purchase price | $ 25,000 | ||||
Percentage of founder shares representing outstanding shares in each SPAC | 20 | ||||
Proceeds from initial public offering | $ 10,701,000 | $ 11,479,000 | |||
Maximum loan amount to each SPAC | $ 500,000 | ||||
Aggregate loan amount to SPAC'S | $ 2,000,000 | ||||
Loan amount advanced to SPAC'S | $ 820,000 | ||||
Placement Warrants | |||||
Exercise price of warrants | $ / shares | $ 11.50 | ||||
IHC | |||||
Exercise price of warrants | $ / shares | $ 1 | ||||
Aggregate purchase price | $ 17,531,408 | ||||
Proceeds from initial public offering | 115,000,000 | ||||
IHC | Maximum | |||||
Aggregate purchase price | $ 18,656,408 | ||||
IHC | Placement Warrants | |||||
Warrants to purchase shares of common stock | shares | 4,639,102 | ||||
Exercise price of warrants | $ / shares | $ 1 | ||||
Aggregate purchase price | $ 4,639,102 | ||||
Sponsor | |||||
Number of SPACs | item | 4 |
Contingencies (Details)
Contingencies (Details) - USD ($) | Mar. 19, 2021 | Dec. 18, 2020 | Apr. 30, 2019 | Mar. 31, 2016 | May 31, 2020 | Aug. 31, 2020 | Aug. 31, 2021 |
Common stock shares issued | 16,902,146 | 25,863,099 | |||||
Kadima Ventures [Member] | Software Development [Member] | |||||||
Software development cost | $ 2,200,000 | ||||||
Revised development costs | 7,200,000 | ||||||
Software modules cost | $ 11,000,000 | ||||||
Additional software modules cost demanded | $ 12,000,000 | ||||||
Additional cost | $ 11,000,000 | ||||||
Damages in excess amount | $ 11,000,000 | ||||||
Everest Litigation [Member] | |||||||
Additional cost | $ 600,000 | ||||||
Sunz Litigation | |||||||
Amount of allegation against the company | $ 10,000,000 | ||||||
Internal Revenue Service | |||||||
Federal income tax | $ 1,983,051 | ||||||
Tax payments | $ 880,109 |
Subsequent Events (Details)
Subsequent Events (Details) | Jan. 01, 2022USD ($) | Dec. 31, 2021USD ($) | Nov. 29, 2021USD ($) | Oct. 22, 2021USD ($)shares | Sep. 07, 2021USD ($)installment | Sep. 03, 2021USD ($)$ / sharesshares | Apr. 29, 2021USD ($)$ / sharesshares | Oct. 08, 2020shares | Oct. 31, 2021USD ($)shares | Aug. 31, 2021USD ($)$ / shares | Aug. 31, 2021USD ($)$ / shares | Aug. 31, 2020USD ($)$ / shares | Mar. 03, 2022 | Aug. 22, 2021$ / shares | Jun. 21, 2021USD ($) | Jun. 07, 2021USD ($) | Jun. 04, 2021$ / shares | May 17, 2021$ / shares | Mar. 12, 2021USD ($) |
Subsequent Event [Line Items] | |||||||||||||||||||
Common stock par value | $ / shares | $ 0.0001 | $ 0.0001 | $ 0.0001 | $ 9.25 | $ 0.0001 | ||||||||||||||
Number of Preferred Options cancelled | shares | 11,790,000 | ||||||||||||||||||
Percentage of warrants exercisable price on offering price | 5.00% | ||||||||||||||||||
Percentage on aggregate number of shares of common stock | 7.00% | ||||||||||||||||||
Exercise price (in dollars per share) | $ / shares | $ 2.61 | $ 5.30 | |||||||||||||||||
Exercise price of warrants | $ / shares | $ 2.425 | ||||||||||||||||||
Placement agent fees and costs | $ 900,000 | $ 789,000 | |||||||||||||||||
Aggregate purchase price | $ 25,000 | ||||||||||||||||||
Percentage of founder shares representing outstanding shares in each SPAC | 20 | ||||||||||||||||||
Proceeds from initial public offering | 10,701,000 | $ 11,479,000 | |||||||||||||||||
Maximum loan amount to each SPAC | $ 500,000 | ||||||||||||||||||
Aggregate loan amount to SPAC'S | $ 2,000,000 | ||||||||||||||||||
Loan amount advanced to SPAC'S | $ 820,000 | ||||||||||||||||||
Lease agreement with Verifone Inc. to sublease | |||||||||||||||||||
Subsequent Event [Line Items] | |||||||||||||||||||
Square feet of office space under sublease | 8,000 | ||||||||||||||||||
Lease term | 3 years | ||||||||||||||||||
Lease agreement to lease premises | |||||||||||||||||||
Subsequent Event [Line Items] | |||||||||||||||||||
Square feet of office space under sublease | 13,418 | ||||||||||||||||||
Lease term | 77 months | ||||||||||||||||||
September 2021 Private Placement | |||||||||||||||||||
Subsequent Event [Line Items] | |||||||||||||||||||
Placement agent fees and costs | $ 12,000,000 | ||||||||||||||||||
Vensure | Vensure Employer Services, Inc. | |||||||||||||||||||
Subsequent Event [Line Items] | |||||||||||||||||||
Consideration to be paid in cash | $ 9,500,000 | ||||||||||||||||||
Amount owed | $ 1,519,991 | ||||||||||||||||||
Negotiation period | 30 days | ||||||||||||||||||
Amount owed withdrawn | $ 1,500,000 | $ 1,500,000 | |||||||||||||||||
May 2021 Prefunded Warrants | |||||||||||||||||||
Subsequent Event [Line Items] | |||||||||||||||||||
Exercise price of warrants | $ / shares | $ 0.0001 | ||||||||||||||||||
Placement Warrants | |||||||||||||||||||
Subsequent Event [Line Items] | |||||||||||||||||||
Exercise price of warrants | $ / shares | $ 11.50 | ||||||||||||||||||
October 2020 Public Offering | Common Stock | |||||||||||||||||||
Subsequent Event [Line Items] | |||||||||||||||||||
Shares of common stock issued | shares | 2,850,000 | ||||||||||||||||||
IHC | |||||||||||||||||||
Subsequent Event [Line Items] | |||||||||||||||||||
Exercise price of warrants | $ / shares | $ 1 | ||||||||||||||||||
Proceeds from initial public offering | $ 115,000,000 | ||||||||||||||||||
IHC | Placement Warrants | |||||||||||||||||||
Subsequent Event [Line Items] | |||||||||||||||||||
Exercise price of warrants | $ / shares | $ 1 | ||||||||||||||||||
Warrants to purchase shares of common stock | shares | 4,639,102 | ||||||||||||||||||
Subsequent Event [Member] | |||||||||||||||||||
Subsequent Event [Line Items] | |||||||||||||||||||
Number of Preferred Options cancelled | shares | 11,790,000 | ||||||||||||||||||
Discretionary bonuses | $ 0 | ||||||||||||||||||
Subsequent Event [Member] | Vensure | Vensure Employer Services, Inc. | |||||||||||||||||||
Subsequent Event [Line Items] | |||||||||||||||||||
Total consideration | $ 19,000,000 | ||||||||||||||||||
Number of instalments for remaining consideration to be paid | installment | 48 | ||||||||||||||||||
Threshold period for Proposed Closing Statement | 90 days | ||||||||||||||||||
Threshold period for right to challenge the proposed adjustments | 30 days | ||||||||||||||||||
Threshold period for resolve of dispute | 30 days | ||||||||||||||||||
Threshold period for obtain Proposed Closing Statement | 1 year | ||||||||||||||||||
Subsequent Event [Member] | Chief Executive Officer | |||||||||||||||||||
Subsequent Event [Line Items] | |||||||||||||||||||
Annual salary | $ 1,000,000 | $ 764,673 | |||||||||||||||||
Subsequent Event [Member] | Chief Financial Officer | |||||||||||||||||||
Subsequent Event [Line Items] | |||||||||||||||||||
Annual salary | 750,000 | 474,152 | |||||||||||||||||
Subsequent Event [Member] | Amanda Murphy | |||||||||||||||||||
Subsequent Event [Line Items] | |||||||||||||||||||
Annual salary | 500,000 | 264,152 | |||||||||||||||||
Subsequent Event [Member] | Scott W Absher | |||||||||||||||||||
Subsequent Event [Line Items] | |||||||||||||||||||
Discretionary bonuses payable on board approval (in percent) | 50.00% | ||||||||||||||||||
Discretionary bonuses | $ 500,000 | ||||||||||||||||||
Subsequent Event [Member] | Domonic J carney | |||||||||||||||||||
Subsequent Event [Line Items] | |||||||||||||||||||
Discretionary bonuses | 150,000 | ||||||||||||||||||
Subsequent Event [Member] | Robert. S .Gans | |||||||||||||||||||
Subsequent Event [Line Items] | |||||||||||||||||||
Discretionary bonuses | 150,000 | ||||||||||||||||||
Annual salary | $ 750,000 | $ 474,152 | |||||||||||||||||
Subsequent Event [Member] | May 2021 Prefunded Warrants | |||||||||||||||||||
Subsequent Event [Line Items] | |||||||||||||||||||
Common stock par value | $ / shares | $ 0.0001 | ||||||||||||||||||
Subsequent Event [Member] | September 2021 Common Warrants | |||||||||||||||||||
Subsequent Event [Line Items] | |||||||||||||||||||
Common stock par value | $ / shares | $ 1.595 | ||||||||||||||||||
Warrants exercised | shares | 1 | ||||||||||||||||||
Warrants term | 5 years | ||||||||||||||||||
Combined offering price per share | $ / shares | 1.5949 | ||||||||||||||||||
Warrants to purchase shares of common stock | shares | 2,850,000 | ||||||||||||||||||
Subsequent Event [Member] | September 2021 Prefunded Warrants | |||||||||||||||||||
Subsequent Event [Line Items] | |||||||||||||||||||
Placement agent fees and costs | $ 890,000 | ||||||||||||||||||
Percentage of aggregate gross proceeds cash fee | 7.00% | 5.00% | |||||||||||||||||
Subsequent Event [Member] | September Placement Agent Warrants | |||||||||||||||||||
Subsequent Event [Line Items] | |||||||||||||||||||
Warrants term | 6 months | 4 years | |||||||||||||||||
Exercise price of warrants | $ / shares | $ 1.7545 | ||||||||||||||||||
Subsequent Event [Member] | October 2020 Public Offering | October 2020 Common warrants | |||||||||||||||||||
Subsequent Event [Line Items] | |||||||||||||||||||
Gross proceeds from issuance of private placement | $ 12,000,000 | ||||||||||||||||||
Subsequent Event [Member] | Overallotment | September 2021 Prefunded Warrants | |||||||||||||||||||
Subsequent Event [Line Items] | |||||||||||||||||||
Warrants to purchase shares of common stock | shares | 4,673,511 |