Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Feb. 28, 2018 | Apr. 10, 2018 | |
Document And Entity Information | ||
Entity Registrant Name | SHIFTPIXY, INC. | |
Entity Central Index Key | 1,675,634 | |
Document Type | 10-Q | |
Document Period End Date | Feb. 28, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --08-31 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 28,800,676 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2,018 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Feb. 28, 2018 | Aug. 31, 2017 |
Current Assets | ||
Cash and cash equivalents | $ 904,421 | $ 5,896,705 |
Accounts receivable | 191,910 | 428,790 |
Prepaid expenses | 2,780,159 | 2,687,188 |
Other current assets | 33,279 | 15,916 |
Total Current Assets | 3,909,769 | 9,028,599 |
Fixed Assets, net | 1,061,901 | 288,065 |
Deposits and Other Assets | 158,415 | 126,480 |
Total Assets | 5,130,085 | 9,443,144 |
Current Liabilities | ||
Accounts payable | 1,359,927 | 1,160,474 |
Payroll related liabilities | 3,329,263 | 2,388,454 |
Other current liabilities | 688,311 | 278,982 |
Total Current Liabilities | 5,377,501 | 3,827,910 |
Commitments and Contingencies | ||
Stockholders'(Deficit)Equity | ||
Preferred stock, 50,000,000 authorized shares; $0.0001 par value; no shares issued and outstanding | ||
Common stock, 750,000,000 authorized shares; $0.0001 par value; 28,800,676 and 28,762,424 shares issued and outstanding, respectively | 2,881 | 2,877 |
Additional paid-in capital | 15,210,030 | 15,012,584 |
Accumulated deficit | (15,460,327) | (9,400,227) |
Total Stockholders'(Deficit) Equity | (247,416) | 5,615,234 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 5,130,085 | $ 9,443,144 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Feb. 28, 2018 | Aug. 31, 2017 |
Stockholders' Equity | ||
Preferred stock, par value | $ 0.0001 | $ 0.0001 |
Preferred stock, authorized | 50,000,000 | 50,000,000 |
Preferred stock, issued | 0 | 0 |
Preferred stock, outstanding | 0 | 0 |
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, authorized | 750,000,000 | 750,000,000 |
Common stock, issued | 28,800,676 | 28,762,424 |
Common stock, outstanding | 28,800,676 | 28,762,424 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Feb. 28, 2018 | Feb. 28, 2017 | Feb. 28, 2018 | Feb. 28, 2017 | |
Revenues (gross billings of $48.6m and $30.8 m less worksite employee payroll cost of $40.8m and $25.3m, respectively for the three months ended; gross billings of $88.8m and $65.8m less worksite employee payroll cost of $74.4m and $54.8m, respectively for six months ended) | $ 7,886,459 | $ 14,398,378 | ||
Cost of Revenues | 7,007,315 | 12,273,718 | ||
Gross Profit | 879,144 | 2,124,660 | ||
Operating Expenses | ||||
Payroll | 1,372,403 | 2,623,188 | ||
Commissions | 338,434 | 610,065 | ||
Professional fees | 508,787 | 1,001,242 | ||
Product development | 486,354 | 2,386,354 | ||
General and administrative | 892,049 | 1,563,911 | ||
Total Operating Expenses | 3,598,027 | 8,184,760 | ||
Net Loss | $ (2,718,883) | $ (6,060,100) | ||
Net Loss per common share available to Common Shareholders: | ||||
Basic and Diluted | $ (0.09) | $ (0.21) | ||
Weighted Average Number of Common Shares Used in Per Share Computations: | ||||
Basic and Diluted | 28,800,630 | 28,792,333 | ||
Restated [Member] | ||||
Revenues (gross billings of $48.6m and $30.8 m less worksite employee payroll cost of $40.8m and $25.3m, respectively for the three months ended; gross billings of $88.8m and $65.8m less worksite employee payroll cost of $74.4m and $54.8m, respectively for six months ended) | $ 5,408,743 | $ 11,090,419 | ||
Cost of Revenues | 4,302,972 | 8,033,525 | ||
Gross Profit | 1,105,771 | 3,056,894 | ||
Operating Expenses | ||||
Payroll | 906,484 | 1,837,475 | ||
Commissions | 201,282 | 304,583 | ||
Professional fees | 282,966 | 452,593 | ||
Product development | ||||
General and administrative | 675,391 | 1,044,496 | ||
Total Operating Expenses | 2,066,123 | 3,639,147 | ||
Net Loss | $ (960,352) | $ (582,253) | ||
Net Loss per common share available to Common Shareholders: | ||||
Basic and Diluted | $ (0.04) | $ (0.02) | ||
Weighted Average Number of Common Shares Used in Per Share Computations: | ||||
Basic and Diluted | 26,227,935 | 26,220,789 |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 6 Months Ended | |
Feb. 28, 2018 | Feb. 28, 2017 | |
OPERATING ACTIVITIES | ||
Net Loss | $ (6,060,100) | |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 75,644 | |
Stock issued for services | 50,354 | |
Stock based compensation | 97,096 | |
Changes in Operating Assets and Liabilities | ||
Accounts receivable | 236,880 | |
Prepaid expenses | (92,971) | |
Other current assets | (17,363) | |
Deposits and Other assets | (31,935) | |
Accounts payable | 199,453 | |
Payroll related liabilities | 940,809 | |
Other current liabilities | 409,329 | |
Net cash used in operating activities | (4,192,804) | |
INVESTING ACTIVITIES | ||
Purchase of fixed assets | (849,480) | |
Net cash used in investing activities | (849,480) | |
FINANCING ACTIVITIES | ||
Proceeds from exercise of warrants | 50,000 | |
Proceeds from sale of common stock | ||
Net cash provided by financing activities | 50,000 | |
Net Decrease in Cash and cash equivalents | (4,992,284) | |
Cash and cash equivalents at Beginning of Period | 5,896,705 | |
Cash and cash equivalents at End of Period | $ 904,421 | |
Restated [Member] | ||
OPERATING ACTIVITIES | ||
Net Loss | $ (582,253) | |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 32,673 | |
Stock issued for services | ||
Stock based compensation | ||
Changes in Operating Assets and Liabilities | ||
Accounts receivable | (66,799) | |
Prepaid expenses | (656,857) | |
Other current assets | (10,529) | |
Deposits and Other assets | (27,927) | |
Accounts payable | (388,641) | |
Payroll related liabilities | 435,251 | |
Other current liabilities | 446,266 | |
Net cash used in operating activities | (818,816) | |
INVESTING ACTIVITIES | ||
Purchase of fixed assets | (4,661) | |
Net cash used in investing activities | (4,661) | |
FINANCING ACTIVITIES | ||
Proceeds from exercise of warrants | ||
Proceeds from sale of common stock | 527,000 | |
Net cash provided by financing activities | 527,000 | |
Net Decrease in Cash and cash equivalents | (296,477) | |
Cash and cash equivalents at Beginning of Period | 868,532 | |
Cash and cash equivalents at End of Period | $ 572,055 |
Nature of Operations
Nature of Operations | 6 Months Ended |
Feb. 28, 2018 | |
Notes to Financial Statements | |
Note 1: Nature of Operations | ShiftPixy, Inc. (the Company) was incorporated in the State of Wyoming on June 3, 2015. The Company is a specialized staffing and human capital management service provider that provides solutions for large contingent part-time workforce demands, primarily in the restaurant, hospitality and maintenance service trades. The Companys initial focus is on the restaurant industry in Southern California. Shift Human Capital Management Inc. (SHCM), a wholly-owned subsidiary of ShiftPixy, Inc., is incorporated in the State of Wyoming. SHCM functions substantially as a professional employer organization (PEO) and provides comprehensive human resources solutions under our co-employment model. SHCM assumes certain of the responsibilities of being an employer and helps its clients mitigate employer-related risks and manage many of the complex and burdensome administrative and compliance responsibilities associated with employment. SHCM also functions as an-administrative-services only ("ASO") provider, in response to client needs for only administrative and processing services, performing functions in the nature of a payroll processor, human resources consultant, administrator of workers compensation coverages and claims, under circumstances wherein the client remains as the sole employer of the subject employees. These services are also available to businesses in all industries, not limited to the restaurant and hospitality industries. The Company hopes that this mechanism may become a way to onboard new clients into the ShiftPixy Ecosystem when eligible clients to whom the Company is providing these services recognize the value of the services provided by the parent Company. The Company is currently operating in one reportable segment. |
Summary of significant accounti
Summary of significant accounting policies | 6 Months Ended |
Feb. 28, 2018 | |
Notes to Financial Statements | |
Note 2: Summary of significant accounting policies | Basis of Presentation The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules of the Securities and Exchange Commission (“SEC”) applicable to interim reports of companies filing as a smaller reporting company. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation have been included. The results of operations for the three and six months ended February 28, 2018, are not necessarily indicative of the results that may be expected for the year ending August 31, 2018. The condensed consolidated balance sheet as of August 31, 2017, has been derived from the audited consolidated financial statements at that date but does not include all the information and footnotes required by generally accepted accounting principles for complete financial information. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended August 31, 2017, filed with the SEC on December 14, 2017. The following table sets forth our gross profit for the three and six months ended February 28, 2017, as follows: · On an as reported basis and on an as restated basis; and · The restatement for the three and six months ended February 28, 2017, was for the following: (i) the Social Security Act requires a reduction in the Federal Unemployment Tax (“FUTA”) tax credit when a state has outstanding federal loans on January 1st of two consecutive years. The reduction in the FUTA tax credit is 0.3% for the first year and an additional 0.3% (or more) for each succeeding year until the loan is repaid. The state of California faced a potential FUTA credit reduction because there was an outstanding loan balance as of January 1 in each of the years of 2011 through 2017. As a result, and because a loan balance continued as of November 10, 2017, California had a 2.1% credit reduction for 2017, for a total FUTA rate of 2.7%. The state notified the Company of such credit reduction in November 2017 while the Company was reporting its fiscal year-end 2017 financial statements in Form 10-K. The Company recorded in the month of August 2017 all credit reductions from January 2017 to August 2017, hence negatively impacting the Company’s fourth fiscal quarter of FYE 2017. Had the accrual basis of accounting been applied in the three months ended February 28, 2017, employer-side taxes would have been $2,677,641 as opposed to $2,345,233. Had the accrual basis of accounting been applied in the six months ended February 28, 2017, employer-side taxes would have been $5,290,974 as opposed to the reported level of $4,813,566 and (ii) the workers’ compensation insurance premiums were recognized on a cash basis in the three and six months ended February 28, 2017, compared to an accrual basis in the three and six months ended February 28, 2018. Had the accrual basis of accounting been applied in the three months ended February 28, 2017, workers’ compensation expense would have been $1,451,438 as opposed to the reported level of $1,423,188. Had the accrual basis of accounting been applied in the six months ended February 28, 2017, workers’ compensation expense would have been $2,435,580 as opposed to the reported level of $2,091,110. For the Three Months Ended February 28, For the Six Months Ended February 28, As Reported Restated As Reported Restated Cost of Revenues $ 3,942,314 $ 4,302,972 $ 7,211,646 $ 8,033,525 Gross Profit 1,466,429 1,105,771 3,878,773 3,056,894 Net Income (Loss) 599,694 (960,352 ) 239,624 (582,253 ) Earnings/(loss) per share (Basic and Diluted) $ 0.02 $ (0.04 ) $ 0.01 $ (0.02 ) Principles of Consolidation The Company and its wholly-owned subsidiary have been consolidated in the accompanying unaudited condensed consolidated financial statements. All intercompany balances have been eliminated. Use of Estimates The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include: · Liability for legal contingencies, · Useful lives of property and equipment, · Assumptions made in valuing equity instruments issued for service, and · Deferred income taxes and related valuation allowance. Computer Software Development Software development costs relate primarily to software coding, systems interfaces and testing of our proprietary professional employer information systems and are accounted for in accordance with Accounting Standards Codification (“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. Capitalized software development costs are amortized using the straight-line method over the estimated useful life of the software. Revenue Recognition The Company’s revenues are primarily attributable to fees for providing staffing solutions and PEO/ASO services. The Company recognizes revenue when all of the following criteria are met: (i) persuasive evidence of an arrangement exists; (ii) the services have been rendered to the customer; (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured. We account for our PEO revenues in accordance with Accounting Standards Codification (“ASC”) 605-45, Revenue Recognition, Principal Agent Considerations. Our PEO solutions revenue is primarily derived from our gross billings, which are based on (i) the payroll cost of its worksite employees and (ii) a mark-up computed as a percentage of payroll costs. The gross billings are invoiced concurrently with each periodic payroll of its worksite employees. Revenues, which exclude the payroll cost component of gross billings and therefore consist solely of markup are recognized ratably over the payroll period as worksite employees perform their service at the client worksite. Consistent with our revenue recognition policy, our direct costs do not include the payroll cost of our worksite employees. Our cost of revenue is primarily comprised of all other costs related to our worksite employees, such as the employer portion of payroll-related taxes, employee benefit plan premiums and workers’ compensation insurance costs. Cash and Cash Equivalents and Concentration of Credit Risk The Company considers all highly liquid investments with an original maturity of three months or less when purchased as cash equivalents. The Company maintains cash with a commercial bank and from time to time exceed the federally insured limits. The deposits are made with a reputable financial institution, and the Company had not experienced losses from these deposits. The Company did not have any cash equivalents at February 28, 2018, and August 31, 2017. None of the Company’s clients represents more than 10% of our annualized revenues for fiscal years 2018 or 2017. Property, Equipment and Depreciation Property and equipment are stated at cost. Property and equipment are depreciated using the straight-line method over the estimated useful lives of the assets as follows: Equipment 5 years Furnitures & Fixtures: 5 – 7 years Leasehold Improvement: 5 years Software Development cost: 5 years Upon retirement or disposition of an asset, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in operations. Repairs and maintenance are charged to expense as incurred and expenditures for additions and improvements are capitalized. Impairment and Disposal of long-lived Assets The Company evaluates the carrying value of its long-lived assets when indicators of impairment are present. Impairment is assessed when the undiscounted future cash flows estimated to be generated by those assets are less than the assets’ carrying amount. If such assets are impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying value or fair value, less cost to sell. There were no impairments recognized for the periods ended February 28, 2018 and 2017. Workers’ compensation A portion of the Company’s workers’ compensation risk is covered by a retrospective rated policy, which calculates the final policy premium based on the Company’s loss experience during the term of the policy and the stipulated formula set forth in the policy. The Company funds the policy premium based on standard premium rates on a monthly basis and based on the gross payroll applicable to workers covered by the policy. During the policy term and thereafter, periodic adjustments may involve either a return of previously paid premiums or a payment of additional premiums by the Company or a combination of both. If the Company’s losses under that policy exceed the expected losses under that policy, then the Company could receive a demand for additional premium payments. The Company funded an initial deposit of $2.3 million, which is included in prepaid expenses on the condensed consolidated balance sheet. As of February 28, 2018, the Company has not been notified of any adverse loss ratio as compared to the standard premium. Fair Value Measurements The fair value accounting guidance defines the fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The definition is based on an exit price rather than an entry price, regardless of whether the entity plans to hold or sell the asset. This guidance establishes a fair value hierarchy to prioritize inputs used in measuring fair value as follows: Level 1: Observable inputs such as quoted prices in active markets; Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. The carrying value of accounts receivable, and accounts payable approximates the fair value due to their short-term maturities. Advertising Costs The Company expenses all advertising as incurred. The Company incurred advertising costs totaling $68,087 and $180,250 for the three and six months ended February 28, 2018, respectively compared to $4,067 and $30,249 for the three and six months ended February 28, 2017, respectively. Earnings (Loss) Per Share The Company utilizes Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 260, “Earnings per Share.” Basic earnings (loss) per share is computed by dividing earnings (loss) attributable to common stockholders by the weighted-average number of common shares outstanding during the reporting period. Diluted earnings (loss) per share is computed similar to basic earnings (loss) per share except that the denominator is increased to include additional common share equivalents available upon exercise of stock options and warrants using the treasury stock method. Dilutive common share equivalents include the dilutive effect of in-the-money share equivalents, which are calculated based on the average share price for each period using the treasury stock method, excluding any common share equivalents if their effect would be anti-dilutive. In periods in which a net loss has been incurred, all potentially dilutive common shares are considered anti-dilutive and thus are excluded from the calculation Securities that are excluded from the calculation of weighted average dilutive common shares, because their inclusion would have been antidilutive are: For the three Month Ended February 28, 2018 For the three Month Ended February 28, 2017 Options 820,000 - Warrants 2,570,413 2,160,725 Total potentially dilutive shares 3,390,413 2,160,725 Stock-Based Compensation The Company accounts for stock-based awards to employees in accordance with applicable accounting principles, which requires compensation expense related to share-based transactions, including employee stock options, to be measured and recognized in the financial statements based on a determination of the fair value of the stock options. The grant date fair value is determined using the Black-Scholes-Merton (“Black-Scholes”) pricing model. For all employee stock options, the Company recognizes expense over the requisite service period on an accelerated basis over the employee’s requisite service period (generally the vesting period of the equity grant). The Company’s option pricing model requires the input of highly subjective assumptions, including the expected stock price volatility and expected term. Any changes in these highly subjective assumptions significantly impact stock-based compensation expense. Following the adoption of Accounting Standards Update ASU 2016-09, the Company elected to account for forfeitures as they occur, as such, compensation cost previously recognized for an award that is forfeited because of a failure to satisfy a service condition is reversed in the period of the forfeiture. Recent Accounting Standards In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that “an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.” The standard provides enhancements to the quality and consistency of how revenue is reported by companies, while also improving comparability in the financial statements of companies reporting using International Financial Reporting Standards or U.S. GAAP. The new standard also will require enhanced revenue disclosures, provide guidance for transactions that were not previously addressed comprehensively, and improve guidance for multiple-element arrangements. This accounting standard becomes effective for the Company for reporting periods beginning after December 15, 2018, and interim reporting periods thereafter. Early adoption is permitted for annual reporting periods (including interim periods) beginning after December 15, 2016. This new standard permits the use of either the retrospective or cumulative effect transition method. In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations. The purpose of this standard is to clarify the implementation of guidance on principal versus agent considerations related to ASU 2014-09. The standard has the same effective date as ASU 2014-09 described above. In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which provides clarity related to ASU 2014-09 regarding identifying performance obligations and licensing implementation. The standard has the same effective date as ASU 2014-09 described above. In May 2016, the FASB issued ASU 2016-12: Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which provides narrow scope improvements and practical expedients related to ASU 2014-09. The purpose of this standard is to clarify certain narrow aspects of ASU 2014-09, such as assessing the collectability criterion, presentation of sales taxes, and other similar taxes collected from customers, noncash consideration, contract modifications at transition, completed contracts at transition, and technical correction. The standard has the same effective date as ASU 2014-09 described above. In December 2016, the FASB issued ASU 2016-20: Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers . The amendments in this standard affect narrow aspects of guidance issued in ASU 2014-09. The standard has the same effective date as ASU 2014-09 described above. The Company is currently developing an adoption plan of how it currently recognizes revenue compared to the accounting treatment required under the new guidance. This plan includes a review of client contracts and revenue transactions to determine the impact of the accounting treatment under the new guidance, evaluation of the adoption method and completing a rollout plan for the new guidance. Additionally, the Company is in the process of assessing the impact of the new standard on its disclosures and internal controls. In February 2016, the FASB issued new accounting guidance on leases ASU 2016-02, Leases. The new standard requires that a lessee recognize assets and liabilities on the balance sheet for leases with terms longer than 12 months. The recognition, measurement and presentation of lease expenses and cash flows by a lessee will depend on its classification as a finance or operating lease. The guidance also includes new disclosure requirements providing information on the amounts recorded in the financial statements. The ASU is effective for fiscal years beginning after December 15, 2019 and interim periods within fiscal years beginning after December 15, 2020.The Company is currently evaluating the impact that this standard will have on its consolidated financial statement. In the first quarter of 2018, the Company adopted ASU 2016-09 amending several aspects of share-based payment accounting. This guidance requires all excess tax benefits and tax deficiencies to be recorded in the income statement when the awards vest or are settled, with prospective application required. The guidance also changes the classification of such tax benefits or tax deficiencies on the statement of cash flows from a financing activity to an operating activity, with retrospective or prospective application allowed. Additionally, the standard also provides an accounting policy election to account for forfeitures as they occur, allows us to withhold more of an employee’s vesting shares for tax withholding purposes without triggering liability accounting, and clarifies that all cash payments made to tax authorities on an employee’s behalf for withheld shares should be presented as a financing activity on our cash flow statement. This ASU is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018. For the six months ended February 28, 2018, the impact of adopting this new guidance was immaterial. In the first quarter of 2018, the Company adopted ASU 2017-09 clarifying when changes to the terms and conditions of a share-based payment award must be accounted for as modifications. The new guidance will reduce diversity in practice and result in fewer changes to the terms of an award being accounted for as modifications. It does not change the accounting for modifications. The ASU is effective prospectively for reporting periods beginning after December 15, 2017, with early adoption permitted, including adoption in any interim period for which financial statements have not yet been issued. For the six months ended February 28, 2018, the impact of adopting this new guidance was immaterial. |
Going Concern
Going Concern | 6 Months Ended |
Feb. 28, 2018 | |
Notes to Financial Statements | |
Note 3: Going Concern | As of February 28, 2018, the Company had cash and cash equivalents of $0.9 million and a working capital deficiency of $1.5 million. During the six months ended February 28, 2018, the Company used approximately $4.2 million of cash in its operations, of which $3.2 million was attributed to the mobile application development costs and $0.3 million was attributed to the workers’ compensation deposit. The Company has incurred recurring losses resulting in an accumulated deficit of $15.5 million as of February 28, 2018. These conditions indicate that there is substantial doubt about the Company’s ability to continue as a going concern within one year from the issuance date of the financial statements. The ability of the Company to continue as a going concern is dependent upon generating profitable operations in the future and obtaining additional funds by way of public or private offering to meet the Company’s obligations and repay its liabilities when they become due. Historically, the Company’s principal source of financing has come through the sale of its common stock. The Company successfully completed an Initial Public Offering (IPO) on June 29, 2017, raising a gross Exclusive of the development costs, the Company is currently using $0.3 million each quarter from its operations or less than $0.1 million per month. As a consequence of changing certain providers and achieving some economies of scale, the Company has already realized a significant reduction to its workers’ compensation expense, which has factored into its reduced cash burn. In addition, the Company continues to experience significant growth in the number of worksite employees. Subsequent to February 28, 2018, the Company has added through executed service agreements, approximately 6 clients, servicing 1,300 worksite employees with approximately $93 million in additional gross billings per year, representing an increase of approximately $1.7 million in gross profit. Our gross billings for the month of March grew 21% sequentially over the month of February. The key features of the Company’s mobile application have been fully developed, one of the key feature has been released and two other key features are now ready to be released at no additional costs, except for the post implementation expenditures. The deployment of these features, expected in the second calendar quarter of 2018, would further accelerate growth as the Company’s clients would be able to remediate their turnover issues. The Company’s plans and expectations for the next 12 months include raising capital to help fund expansion of its operations, including product development. The Company engaged an investment banking firm to assist the Company in (i) preparing information materials, (ii) advising the Company concerning the structure, price and conditions and (iii) organizing the marketing efforts with potential investors in connection with a financing transaction We believe that our current cash position, along with our revenue growth and the financing from potential institutional investors will be sufficient to fund our operations for at least a year from the date these financials are available. If these sources do not provide the capital necessary to fund the Company’s operations during the next twelve months from the date of this report, the Company may need to curtail certain aspects of its operations or expansion activities, consider the sale of its assets, or consider other means of financing. The Company can give no assurance that it will be successful in implementing its business plan and obtaining financing on terms advantageous to the Company or that any such additional financing would be available to the Company. These consolidated condensed financial statements do not include any adjustments from this uncertainty. |
Stockholders' Equity
Stockholders' Equity | 6 Months Ended |
Feb. 28, 2018 | |
Notes to Financial Statements | |
Note 4: Stockholders' Equity | Preferred Stock In September of 2016, the Company issued options to purchase preferred stock at $0.0001 per share. This issuance was approved by our shareholders. The number of options is equal to the lesser of (a) the number of shares of common stock held by such Shareholder on September 28, 2016, which accounts for approximately 25.6 million shares, or (b) the number of shares of common stock held by such Shareholder on date of the Shareholders exercise of the aforesaid option. The preferred stock that is the subject of such contingent option provides a right to elect a majority of the directors on the Board of Directors of the Corporation and does not include any rights to dividends, conversion to shares of common stock, or preference upon liquidation of the Corporation. The contingent option is exercisable only upon the acquisition of a 20% or greater voting interest in the Corporation by a party other than the founding shareholders, or prior to any proposed merger, consolidation (in which the Corporations common stock is changed or exchanged) or sale of at least 50% of the Corporations assets or earning power (other than a reincorporation). The right to exercise the option terminates on December 31, 2023. Common Stock and Warrants During the six months ended February 28, 2018, the Company issued 25,000 shares of common stock following the exercise of warrants with an exercise price of $2 and received gross proceeds of $50,000. On March 16, 2017, the Company granted 50,000 common shares, through the ShiftPixy, Inc., 2017 Stock Option /Stock Issuance Plan (the Plan) to Kenneth W. Weaver, of which 25,000 common shares were committed at an assumed fair market value of $3.80 per share, and deemed to have been purchased and vested on December 5, 2017 as a consequence of Mr. Weavers continued service as director through that date. During the six months ended February 28, 2018, the Company recognized 13,252 shares of common stock for services that vested during the six months ended February 28, 2018, at a fair value of $50,354. There was no common stock issued for services during the three and six months ended February 28, 2017. On September 28, 2017, the Company granted each 26,316 common shares, through the ShiftPixy, Inc., Plan to each of our two other independent directors, Whitney White and Sean Higgins at a fair value of $2.95 per share, of which 50% will vest on the date marking the six months anniversary and the remaining 50% of the shares vesting on the first anniversary of service under the executed agreement. For the six months ended February 28, 2018, the Company recognized $97,095 of compensation expense in our statement of operation. During the three and six months ended February 28, 2017, the Company sold 131,750 shares of common stock for $527,000 in cash. Each share includes one warrant to purchase a share of common stock at an exercise price of $4 per share expiring on March 1, 2019. The following tables summarize our warrants outstanding as of February 28, 2018: Number of shares Weighted average remaining life (years) Weighted average exercise price Warrants outstanding, August 31, 2017, 2,595,413 1.0 $ 2.99 Issued - - - (Exercised) (25,000 ) - $ 2.00 (Cancelled) - - - (Expired) - - - Warrants outstanding, February 28, 2018, 2,570,413 1.0 $ 3.00 Warrants exercisable, February 28, 2018, 2,570,413 1.0 $ 3.00 The following table summarizes information about warrants outstanding as of February 28, 2018: Exercise price Warrants Outstanding Weighted average life of outstanding warrants in years $ 2.00 931,300 1.0 $ 3.00 1,003,800 1.0 $ 4.00 535,313 1.0 $ 6.90 100,000 1.0 2,570,413 1.0 |
Stock based Compensation
Stock based Compensation | 6 Months Ended |
Feb. 28, 2018 | |
Notes to Financial Statements | |
Note 5: Stock based Compensation | The Company granted options to purchase an aggregate total of 155,000 shares of Common Stock during the six months ended February 28, 2018. The Company recognized $97,096 of compensation expense in the six months ended February 28, 2018. The weighted average remaining contract life of the options is 9.22 years. The aggregate intrinsic value of the options outstanding as of February 28, 2018, is $0. Stock option activity during the six months ended February 28, 2018, is summarized as follows: Options Outstanding Weighted Average Exercise Price Options outstanding at August 31, 2017 790,000 $ 4.44 Exercised - $ - Granted 155,000 2.85 Forfeited (125,000 ) $ 4.00 Expired - Options outstanding at February 28, 2018 820,000 $ 4.38 Options Exercisable at February 28, 2018 - - |
Related Parties
Related Parties | 6 Months Ended |
Feb. 28, 2018 | |
Notes to Financial Statements | |
Note 6: Related Parties | Our Sales Manager is an advisor to and significant shareholder of the Company. The Company incurred $180,000 and $350,000 in professional fees for management consulting services in the three and six months ended February 28, 2018, respectively compared to $120,000 in the three and six months ended February 28, 2017. |
Income Taxes
Income Taxes | 6 Months Ended |
Feb. 28, 2018 | |
Notes to Financial Statements | |
Note 7: Income Taxes | The Company accounts for income taxes pursuant to Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 740, Income Taxes. Under FASB 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. FASB ASC 740 also provides criteria for the recognition, measurement, presentation and disclosure of uncertain tax positions. Under FASB 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. On December 22, 2017, the President signed into legislation the Tax Cuts and Jobs Act (the Act), The Act changes existing U.S. tax law and includes numerous provisions that will affect our business, including our income tax accounting, disclosure and tax compliance. The most impactful changes within the Act are those that will reduce the U.S. corporate tax rates, business-related exclusions and deductions and credits. ASC 740, Income Taxes (Topic 740), requires the effects of changes in tax rates and laws on deferred tax balances to be recognized in the period in which the legislation is enacted. Consequently, as of the date of enactment, and during the three months ended February 28, 2018, the Company valued all deferred tax assets and liabilities at the newly enacted Corporate U.S income tax rate. The Company has had losses and has a full valuation allowance on its deferred tax assets. |
Contingencies
Contingencies | 6 Months Ended |
Feb. 28, 2018 | |
Notes to Financial Statements | |
Note 8: 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 Companys 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 Companys financial position, results of operations or cash flow. |
Subsequent Events
Subsequent Events | 6 Months Ended |
Feb. 28, 2018 | |
Notes to Financial Statements | |
Note 9: Subsequent Events | The Company has analyzed its transactions subsequent to February 28, 2018, through the date these financial statements were issued for consideration of any material subsequent events to disclose in these financial statements. Management has determined that no subsequent events exist through the date of this filing. |
Summary of significant accoun15
Summary of significant accounting policies (Policies) | 6 Months Ended |
Feb. 28, 2018 | |
Summary Of Significant Accounting Policies Policies | |
Basis of Presentation | Basis of Presentation The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules of the Securities and Exchange Commission (“SEC”) applicable to interim reports of companies filing as a smaller reporting company. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation have been included. The results of operations for the three and six months ended February 28, 2018, are not necessarily indicative of the results that may be expected for the year ending August 31, 2018. The condensed consolidated balance sheet as of August 31, 2017, has been derived from the audited consolidated financial statements at that date but does not include all the information and footnotes required by generally accepted accounting principles for complete financial information. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended August 31, 2017, filed with the SEC on December 14, 2017. The following table sets forth our gross profit for the three and six months ended February 28, 2017, as follows: · On an as reported basis and on an as restated basis; and · The restatement for the three and six months ended February 28, 2017, was for the following: (i) the Social Security Act requires a reduction in the Federal Unemployment Tax (“FUTA”) tax credit when a state has outstanding federal loans on January 1st of two consecutive years. The reduction in the FUTA tax credit is 0.3% for the first year and an additional 0.3% (or more) for each succeeding year until the loan is repaid. The state of California faced a potential FUTA credit reduction because there was an outstanding loan balance as of January 1 in each of the years of 2011 through 2017. As a result, and because a loan balance continued as of November 10, 2017, California had a 2.1% credit reduction for 2017, for a total FUTA rate of 2.7%. The state notified the Company of such credit reduction in November 2017 while the Company was reporting its fiscal year-end 2017 financial statements in Form 10-K. The Company recorded in the month of August 2017 all credit reductions from January 2017 to August 2017, hence negatively impacting the Company’s fourth fiscal quarter of FYE 2017. Had the accrual basis of accounting been applied in the three months ended February 28, 2017, employer-side taxes would have been $2,677,641 as opposed to $2,345,233. Had the accrual basis of accounting been applied in the six months ended February 28, 2017, employer-side taxes would have been $5,290,974 as opposed to the reported level of $4,813,566 and (ii) the workers’ compensation insurance premiums were recognized on a cash basis in the three and six months ended February 28, 2017, compared to an accrual basis in the three and six months ended February 28, 2018. Had the accrual basis of accounting been applied in the three months ended February 28, 2017, workers’ compensation expense would have been $1,451,438 as opposed to the reported level of $1,423,188. Had the accrual basis of accounting been applied in the six months ended February 28, 2017, workers’ compensation expense would have been $2,435,580 as opposed to the reported level of $2,091,110. For the Three Months Ended February 28, For the Six Months Ended February 28, As Reported Restated As Reported Restated Cost of Revenues $ 3,942,314 $ 4,302,972 $ 7,211,646 $ 8,033,525 Gross Profit 1,466,429 1,105,771 3,878,773 3,056,894 Net Income (Loss) 599,694 (960,352 ) 239,624 (582,253 ) Earnings/(loss) per share (Basic and Diluted) $ 0.02 $ (0.04 ) $ 0.01 $ (0.02 ) |
Principles of Consolidation | The Company and its wholly-owned subsidiary have been consolidated in the accompanying unaudited condensed consolidated financial statements. All intercompany balances have been eliminated. |
Use of Estimates | The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include: · Liability for legal contingencies, · Useful lives of property and equipment, · Assumptions made in valuing equity instruments issued for service, and · Deferred income taxes and related valuation allowance. |
Computer Software Development | Software development costs relate primarily to software coding, systems interfaces and testing of our proprietary professional employer information systems and are accounted for in accordance with Accounting Standards Codification (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. Capitalized software development costs are amortized using the straight-line method over the estimated useful life of the software. |
Revenue Recognition | The Companys revenues are primarily attributable to fees for providing staffing solutions and PEO/ASO services. The Company recognizes revenue when all of the following criteria are met: (i) persuasive evidence of an arrangement exists; (ii) the services have been rendered to the customer; (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured. We account for our PEO revenues in accordance with Accounting Standards Codification (ASC) 605-45, Revenue Recognition, Principal Agent Considerations. Our PEO solutions revenue is primarily derived from our gross billings, which are based on (i) the payroll cost of its worksite employees and (ii) a mark-up computed as a percentage of payroll costs. The gross billings are invoiced concurrently with each periodic payroll of its worksite employees. Revenues, which exclude the payroll cost component of gross billings and therefore consist solely of markup are recognized ratably over the payroll period as worksite employees perform their service at the client worksite. Consistent with our revenue recognition policy, our direct costs do not include the payroll cost of our worksite employees. Our cost of revenue is primarily comprised of all other costs related to our worksite employees, such as the employer portion of payroll-related taxes, employee benefit plan premiums and workers compensation insurance costs. |
Cash and Cash Equivalents and Concentration of Credit Risk | The Company considers all highly liquid investments with an original maturity of three months or less when purchased as cash equivalents. The Company maintains cash with a commercial bank and from time to time exceed the federally insured limits. The deposits are made with a reputable financial institution, and the Company had not experienced losses from these deposits. The Company did not have any cash equivalents at February 28, 2018, and August 31, 2017. None of the Companys clients represents more than 10% of our annualized revenues for fiscal years 2018 or 2017. |
Property, Equipment and Depreciation | Property and equipment are stated at cost. Property and equipment are depreciated using the straight-line method over the estimated useful lives of the assets as follows: Equipment 5 years Furnitures & Fixtures: 5 7 years Leasehold Improvement: 5 years Software Development cost: 5 years Upon retirement or disposition of an asset, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in operations. Repairs and maintenance are charged to expense as incurred and expenditures for additions and improvements are capitalized. |
Impairment and Disposal of long-lived Assets | The Company evaluates the carrying value of its long-lived assets when indicators of impairment are present. Impairment is assessed when the undiscounted future cash flows estimated to be generated by those assets are less than the assets carrying amount. If such assets are impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying value or fair value, less cost to sell. There were no impairments recognized for the periods ended February 28, 2018 and 2017. |
Workers' compensation | A portion of the Companys workers compensation risk is covered by a retrospective rated policy, which calculates the final policy premium based on the Companys 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 Companys losses under that policy exceed the expected losses under that policy, then the Company could receive a demand for additional premium payments. The Company funded an initial deposit of $2.3 million, which is included in prepaid expenses on the condensed consolidated balance sheet. As of February 28, 2018, the Company has not been notified of any adverse loss ratio as compared to the standard premium. |
Fair Value Measurements | The fair value accounting guidance defines the fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The definition is based on an exit price rather than an entry price, regardless of whether the entity plans to hold or sell the asset. This guidance establishes a fair value hierarchy to prioritize inputs used in measuring fair value as follows: Level 1: Observable inputs such as quoted prices in active markets; Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. The carrying value of accounts receivable, and accounts payable approximates the fair value due to their short-term maturities. |
Advertising Costs | The Company expenses all advertising as incurred. The Company incurred advertising costs totaling $68,087 and $180,250 for the three and six months ended February 28, 2018, respectively compared to $4,067 and $30,249 for the three and six months ended February 28, 2017, respectively. |
Earnings (Loss) Per Share | The Company utilizes Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 260, Earnings per Share. Basic earnings (loss) per share is computed by dividing earnings (loss) attributable to common stockholders by the weighted-average number of common shares outstanding during the reporting period. Diluted earnings (loss) per share is computed similar to basic earnings (loss) per share except that the denominator is increased to include additional common share equivalents available upon exercise of stock options and warrants using the treasury stock method. Dilutive common share equivalents include the dilutive effect of in-the-money share equivalents, which are calculated based on the average share price for each period using the treasury stock method, excluding any common share equivalents if their effect would be anti-dilutive. In periods in which a net loss has been incurred, all potentially dilutive common shares are considered anti-dilutive and thus are excluded from the calculation Securities that are excluded from the calculation of weighted average dilutive common shares, because their inclusion would have been antidilutive are: For the three Month Ended February 28, 2018 For the three Month Ended February 28, 2017 Options 820,000 - Warrants 2,570,413 2,160,725 Total potentially dilutive shares 3,390,413 2,160,725 |
Stock-Based Compensation | The Company accounts for stock-based awards to employees in accordance with applicable accounting principles, which requires compensation expense related to share-based transactions, including employee stock options, to be measured and recognized in the financial statements based on a determination of the fair value of the stock options. The grant date fair value is determined using the Black-Scholes-Merton (Black-Scholes) pricing model. For all employee stock options, the Company recognizes expense over the requisite service period on an accelerated basis over the employees requisite service period (generally the vesting period of the equity grant). The Companys option pricing model requires the input of highly subjective assumptions, including the expected stock price volatility and expected term. Any changes in these highly subjective assumptions significantly impact stock-based compensation expense. Following the adoption of Accounting Standards Update ASU 2016-09, the Company elected to account for forfeitures as they occur, as such, compensation cost previously recognized for an award that is forfeited because of a failure to satisfy a service condition is reversed in the period of the forfeiture. |
Recent Accounting Standards | In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that “an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.” The standard provides enhancements to the quality and consistency of how revenue is reported by companies, while also improving comparability in the financial statements of companies reporting using International Financial Reporting Standards or U.S. GAAP. The new standard also will require enhanced revenue disclosures, provide guidance for transactions that were not previously addressed comprehensively, and improve guidance for multiple-element arrangements. This accounting standard becomes effective for the Company for reporting periods beginning after December 15, 2018, and interim reporting periods thereafter. Early adoption is permitted for annual reporting periods (including interim periods) beginning after December 15, 2016. This new standard permits the use of either the retrospective or cumulative effect transition method. In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations. The purpose of this standard is to clarify the implementation of guidance on principal versus agent considerations related to ASU 2014-09. The standard has the same effective date as ASU 2014-09 described above. In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which provides clarity related to ASU 2014-09 regarding identifying performance obligations and licensing implementation. The standard has the same effective date as ASU 2014-09 described above. In May 2016, the FASB issued ASU 2016-12: Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which provides narrow scope improvements and practical expedients related to ASU 2014-09. The purpose of this standard is to clarify certain narrow aspects of ASU 2014-09, such as assessing the collectability criterion, presentation of sales taxes, and other similar taxes collected from customers, noncash consideration, contract modifications at transition, completed contracts at transition, and technical correction. The standard has the same effective date as ASU 2014-09 described above. In December 2016, the FASB issued ASU 2016-20: Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers . The amendments in this standard affect narrow aspects of guidance issued in ASU 2014-09. The standard has the same effective date as ASU 2014-09 described above. The Company is currently developing an adoption plan of how it currently recognizes revenue compared to the accounting treatment required under the new guidance. This plan includes a review of client contracts and revenue transactions to determine the impact of the accounting treatment under the new guidance, evaluation of the adoption method and completing a rollout plan for the new guidance. Additionally, the Company is in the process of assessing the impact of the new standard on its disclosures and internal controls. In February 2016, the FASB issued new accounting guidance on leases ASU 2016-02, Leases. The new standard requires that a lessee recognize assets and liabilities on the balance sheet for leases with terms longer than 12 months. The recognition, measurement and presentation of lease expenses and cash flows by a lessee will depend on its classification as a finance or operating lease. The guidance also includes new disclosure requirements providing information on the amounts recorded in the financial statements. The ASU is effective for fiscal years beginning after December 15, 2019 and interim periods within fiscal years beginning after December 15, 2020.The Company is currently evaluating the impact that this standard will have on its consolidated financial statement. In the first quarter of 2018, the Company adopted ASU 2016-09 amending several aspects of share-based payment accounting. This guidance requires all excess tax benefits and tax deficiencies to be recorded in the income statement when the awards vest or are settled, with prospective application required. The guidance also changes the classification of such tax benefits or tax deficiencies on the statement of cash flows from a financing activity to an operating activity, with retrospective or prospective application allowed. Additionally, the standard also provides an accounting policy election to account for forfeitures as they occur, allows us to withhold more of an employee’s vesting shares for tax withholding purposes without triggering liability accounting, and clarifies that all cash payments made to tax authorities on an employee’s behalf for withheld shares should be presented as a financing activity on our cash flow statement. This ASU is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018. For the six months ended February 28, 2018, the impact of adopting this new guidance was immaterial. In the first quarter of 2018, the Company adopted ASU 2017-09 clarifying when changes to the terms and conditions of a share-based payment award must be accounted for as modifications. The new guidance will reduce diversity in practice and result in fewer changes to the terms of an award being accounted for as modifications. It does not change the accounting for modifications. The ASU is effective prospectively for reporting periods beginning after December 15, 2017, with early adoption permitted, including adoption in any interim period for which financial statements have not yet been issued. For the six months ended February 28, 2018, the impact of adopting this new guidance was immaterial. |
Summary of significant accoun16
Summary of significant accounting policies (Tables) | 6 Months Ended |
Feb. 28, 2018 | |
Summary Of Significant Accounting Policies Tables | |
Schedule financial statements table text block | For the Three Months Ended February 28, For the Six Months Ended February 28, As Reported Restated As Reported Restated Cost of Revenues $ 3,942,314 $ 4,302,972 $ 7,211,646 $ 8,033,525 Gross Profit 1,466,429 1,105,771 3,878,773 3,056,894 Net Income (Loss) 599,694 (960,352 ) 239,624 (582,253 ) Earnings/(loss) per share (Basic and Diluted) $ 0.02 $ (0.04 ) $ 0.01 $ (0.02 ) |
Schedule of average dilutive common shares | For the three Month Ended February 28, 2018 For the three Month Ended February 28, 2017 Options 820,000 - Warrants 2,570,413 2,160,725 Total potentially dilutive shares 3,390,413 2,160,725 |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 6 Months Ended |
Feb. 28, 2018 | |
Stockholders Equity Tables | |
Summary of warrants outstanding | Number of shares Weighted average remaining life (years) Weighted average exercise price Warrants outstanding, August 31, 2017, 2,595,413 1.0 $ 2.99 Issued - - - (Exercised) (25,000 ) - $ 2.00 (Cancelled) - - - (Expired) - - - Warrants outstanding, February 28, 2018, 2,570,413 1.0 $ 3.00 Warrants exercisable, February 28, 2018, 2,570,413 1.0 $ 3.00 |
Summary of information about warrants outstanding | Exercise price Warrants Outstanding Weighted average life of outstanding warrants in years $ 2.00 931,300 1.0 $ 3.00 1,003,800 1.0 $ 4.00 535,313 1.0 $ 6.90 100,000 1.0 2,570,413 1.0 |
Stock based Compensation (Table
Stock based Compensation (Tables) | 6 Months Ended |
Feb. 28, 2018 | |
Stock Based Compensation Tables | |
Summary of stock option activity | Options Outstanding Weighted Average Exercise Price Options outstanding at August 31, 2017 790,000 $ 4.44 Exercised - $ - Granted 155,000 2.85 Forfeited (125,000 ) $ 4.00 Expired - Options outstanding at February 28, 2018 820,000 $ 4.38 Options Exercisable at February 28, 2018 - - |
Nature of Operations (Details N
Nature of Operations (Details Narrative) | 6 Months Ended |
Feb. 28, 2018 | |
Nature Of Operations Details Narrative | |
Entity Incorporation, State Country Name | Wyoming |
Entity Incorporation, Date of Incorporation | Jun. 3, 2015 |
Summary of significant accoun20
Summary of significant accounting policies (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Feb. 28, 2018 | Feb. 28, 2017 | Feb. 28, 2018 | Feb. 28, 2017 | |
Cost of Revenue | $ 7,007,315 | $ 12,273,718 | ||
Gross Profit | 879,144 | 2,124,660 | ||
Net Income (Loss) | $ (2,718,883) | $ (6,060,100) | ||
Earnings/(loss) per share (Basic and Diluted) | $ (0.09) | $ (0.21) | ||
As Reported [Member] | ||||
Cost of Revenue | $ 3,942,314 | $ 7,211,646 | ||
Gross Profit | 1,466,429 | 3,878,773 | ||
Net Income (Loss) | $ 599,694 | $ 239,624 | ||
Earnings/(loss) per share (Basic and Diluted) | $ 0.02 | $ 0.01 | ||
Restated [Member] | ||||
Cost of Revenue | $ 4,302,972 | $ 8,033,525 | ||
Gross Profit | 1,105,771 | 3,056,894 | ||
Net Income (Loss) | $ (960,352) | $ (582,253) | ||
Earnings/(loss) per share (Basic and Diluted) | $ (0.04) | $ (0.02) |
Summary of significant accoun21
Summary of significant accounting policies (Details 1) - shares | 3 Months Ended | |
Feb. 28, 2018 | Feb. 28, 2017 | |
Potentially dilutive shares | 3,390,413 | 2,160,725 |
Warrants [Member] | ||
Potentially dilutive shares | 2,570,413 | 2,160,725 |
Options [Member] | ||
Potentially dilutive shares | 820,000 |
Summary of significant accoun22
Summary of significant accounting policies (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Feb. 28, 2018 | Feb. 28, 2017 | Feb. 28, 2018 | Feb. 28, 2017 | Aug. 31, 2017 | |
Prepaid expenses | $ 2,780,159 | $ 2,780,159 | $ 2,687,188 | ||
Federal unemployment tax description | The reduction in the FUTA tax credit is 0.3% for the first year and an additional 0.3% (or more) for each succeeding year until the loan is repaid. The state of California faced a potential FUTA credit reduction because there was an outstanding loan balance as of January 1, 2017 in each of the years of 2011 through 2017. As a result, and because a loan balance continued as of November 10, 2017, California had a 2.1% credit reduction for 2017, for a total FUTA rate of 2.7%. | ||||
Tax credit reduction description | The accrual basis of accounting been applied in the three months ended February 28, 2017, employer-side taxes would have been $2,677,641 as opposed to its current level of $2,345,233. Had the accrual basis of accounting been applied in the six months ended February 28, 2017, employer-side taxes would have been $5,290,974 as opposed to its current level of $4,813,566 | ||||
Workers’ compensation insurance premiums description | The workers compensation insurance premiums were recognized on a cash basis in the three and six months ended February 28, 2017, compared to an accrual basis in the three and six months ended February 28, 2018. Had the accrual basis of accounting been applied in the three months ended February 28, 2017, workers compensation expense would have been $1,451,438 as opposed to its current level of $1,423,188. Had the accrual basis of accounting been applied in the six months ended February 28, 2017, workers compensation expense would have been $2,435,580 as opposed to its current level of $2,091,110. | ||||
Advertising costs | 68,087 | $ 4,067 | $ 180,250 | $ 30,249 | |
Leases terms period | 1 year | ||||
Workers' Compensation [Member] | |||||
Prepaid expenses | $ 2,300,000 | $ 2,300,000 | |||
Equipment [Member] | |||||
Property and equipment estimated useful lives | 5 years | ||||
Furniture and Fixtures [Member] | Minimum [Member] | |||||
Property and equipment estimated useful lives | 5 years | ||||
Furniture and Fixtures [Member] | Maximum [Member] | |||||
Property and equipment estimated useful lives | 7 years | ||||
Leasehold Improvements [Member] | |||||
Property and equipment estimated useful lives | 5 years | ||||
Software Development [Member] | |||||
Property and equipment estimated useful lives | 5 years |
Going Concern (Details Narrativ
Going Concern (Details Narrative) | 1 Months Ended | 6 Months Ended | |
Jun. 29, 2017USD ($) | Feb. 28, 2018USD ($)Integer | Aug. 31, 2017USD ($) | |
Accumulated deficit | $ (15,460,327) | $ (9,400,227) | |
Cash and cash equivalents | 904,421 | $ 5,896,705 | |
Working capital deficit | (1,500,000) | ||
Net cash used in operating activities | (4,192,804) | ||
Mobile application development costs | 3,200,000 | ||
Workers' compensation deposit | 300,000 | ||
Additional gross billings | $ 93,000,000 | ||
Numbers of worksite employees | Integer | 1,300 | ||
Number of worksite clients | Integer | 6 | ||
Quarterly payment from operations | $ 300,000 | ||
Monthly payment from operations | $ 100,000 | ||
Gross billings liquidity percentage | 21.00% | ||
Increase in gross profit | $ 1,700,000 | ||
IPO [Member] | |||
Proceeds from initial public offering | $ 12,000,000 | ||
Proceeds from initial public offering, net of costs | $ 10,900,000 |
Stockholders' Equity (Details)
Stockholders' Equity (Details) | 6 Months Ended |
Feb. 28, 2018USD ($)$ / sharesshares | |
Ending balance | shares | 2,570,413 |
Weighted average remaining life Begning | 1 year |
Warrants [Member] | |
Beginning balance | shares | 2,595,413 |
Issued | $ | |
Exercised | shares | (25,000) |
Cancelled | shares | |
Expired | shares | |
Ending balance | shares | 2,570,413 |
Warrants exercisable Ending | shares | 2,570,413 |
Weighted average remaining life Begning | 1 year |
Weighted average remaining life Ending | 1 year |
Weighted average remaining life of warrants exercisable | 1 year |
Weighted Average Exercise Price Begning | $ / shares | $ 2.99 |
Issued | $ / shares | |
Exercised | $ / shares | 2 |
Cancelled | $ / shares | |
Expired | $ / shares | |
Weighted Average Exercise Price Ending | $ / shares | 3 |
Weighted average exercise price of warrants exercisable | $ / shares | $ 3 |
Stockholders' Equity (Details 1
Stockholders' Equity (Details 1) | 6 Months Ended |
Feb. 28, 2018shares | |
Warrants Outstanding | 2,570,413 |
Weighted average life of outstanding warrants in years | 1 year |
$2.00 Per Share [Member] | |
Warrants Outstanding | 931,300 |
Weighted average life of outstanding warrants in years | 1 year |
$3.00 Per Share [Member] | |
Warrants Outstanding | 1,003,800 |
Weighted average life of outstanding warrants in years | 1 year |
$4.00 Per Share [Member] | |
Warrants Outstanding | 535,313 |
Weighted average life of outstanding warrants in years | 1 year |
$6.90 Per Share [Member] | |
Warrants Outstanding | 100,000 |
Weighted average life of outstanding warrants in years | 1 year |
Stockholders' Equity (Details N
Stockholders' Equity (Details Narrative) - USD ($) | 1 Months Ended | 6 Months Ended | |||||
Sep. 28, 2017 | Mar. 16, 2017 | Sep. 28, 2016 | Feb. 28, 2018 | Feb. 28, 2017 | Aug. 31, 2017 | Sep. 30, 2016 | |
Preferred stock, par value | $ 0.0001 | $ 0.0001 | $ 0.0001 | ||||
Conversion description | The contingent option is exercisable only upon the acquisition of a 20% or greater voting interest in the Corporation by a party other than the founding shareholders, or prior to any proposed merger, consolidation (in which the Corporation's common stock is changed or exchanged) or sale of at least 50% of the Corporation's assets or earning power (other than a reincorporation). The right to exercise the option terminates on December 31, 2023. | ||||||
Number of shares of common stock held | 25,600,000 | ||||||
Proceeds from exercise of warrants | $ 50,000 | ||||||
Stock issued for services | $ 50,354 | ||||||
Stock option granted | 26,316 | ||||||
Fair market value price per share | $ 2.95 | ||||||
Investment warrants expiration date | Mar. 1, 2019 | ||||||
Stock based compensation | $ 97,096 | ||||||
Sale of common stock | 131,750 | ||||||
Common stock exercise price | $ 4 | ||||||
Common stock sale value | $ 527,000 | ||||||
2017 Stock Option [Member] | |||||||
Stock option granted | 50,000 | ||||||
Committed shares of common stock at assumed fair market value | 25,000 | ||||||
Fair market value price per share | $ 3.80 | ||||||
Common Stock [Member] | |||||||
Common stock issued for cash and warrants | 25,000 | ||||||
Proceeds from exercise of warrants | $ 50,000 | ||||||
Exercise price per share | $ 2 | ||||||
Common stock issued for services | 13,252 | ||||||
Stock issued for services | $ 50,354 | ||||||
First Anniversary [Member] | |||||||
Vesting rights percentage | 50.00% | ||||||
Six Months Anniversary [Member] | |||||||
Vesting rights percentage | 50.00% |
Stock based Compensation (Detai
Stock based Compensation (Details) | 6 Months Ended |
Feb. 28, 2018$ / sharesshares | |
Granted | 155,000 |
Ending balance | 2,570,413 |
Options [Member] | |
Beginning balance | 790,000 |
Exercised | |
Granted | 155,000 |
Forfeited | (125,000) |
Expired | |
Ending balance | 820,000 |
Stock option exercisable | |
Weighted Average Exercise Price Begning | $ / shares | $ 4.44 |
Exercised | $ / shares | |
Granted | $ / shares | 2.85 |
Forfeited | $ / shares | 4 |
Expired | $ / shares | |
Weighted Average Exercise Price Ending | $ / shares | 4.38 |
Stock option exercisable | $ / shares |
Stock based Compensation (Det28
Stock based Compensation (Details Narrative) | 6 Months Ended |
Feb. 28, 2018USD ($)shares | |
Stock Based Compensation Details Narrative | |
Stock option granted | shares | 155,000 |
Stock based compensation | $ 97,096 |
Weighted average remaining contract life | 9 years 2 months 19 days |
Aggregate intrinsic value | $ 0 |
Related Parties (Details Narrat
Related Parties (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Feb. 28, 2018 | Feb. 28, 2017 | Feb. 28, 2018 | Feb. 28, 2017 | |
Professional fees | $ 508,787 | $ 1,001,242 | ||
Management Consulting Services [Member] | ||||
Professional fees | $ 180,000 | $ 120,000 | $ 350,000 | $ 120,000 |