Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Nov. 30, 2019 | Jan. 20, 2020 | |
Document And Entity Information | ||
Entity Registrant Name | ShiftPixy, Inc. | |
Entity Central Index Key | 0001675634 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Current Fiscal Year End Date | --08-31 | |
Entity Small Business | true | |
Entity Shell Company | false | |
Entity Emerging Growth Company | true | |
Entity Current Reporting Status | Yes | |
Document Period End Date | Nov. 30, 2019 | |
Entity Filer Category | Non-accelerated Filer | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2020 | |
Entity Ex Transition Period | false | |
Entity Common Stock Shares Outstanding | 1,020,050 | |
EntityFileNumber | 024-10557 | |
EntityAddressAddressLine1 | 1 VENTURE SUITE 150 | |
EntityAddressPostalZipCode | 92618 | |
EntityTaxIdentificationNumber | 474211438 | |
EntityAddressCityOrTown | Irvine | |
LocalPhoneNumber | 7989100 | |
CityAreaCode | 888 | |
EntityAddressStateOrProvince | CALIFORNIA |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Nov. 30, 2019 | Aug. 31, 2019 |
Current assets | ||
Cash | $ 49,000 | $ 1,561,000 |
Accounts receivable | 1,822,000 | 272,000 |
Unbilled accounts receivable | 11,347,000 | 9,478,000 |
Deposit - workers' compensation | 1,987,000 | 1,957,000 |
Prepaid expenses | 371,000 | 519,000 |
Other current assets | 164,000 | 244,000 |
Total current assets | 15,740,000 | 14,031,000 |
Fixed assets, net | 3,136,000 | 3,360,000 |
Deposits - workers' compensation | 6,167,000 | 6,281,000 |
Deposits and other assets | 124,000 | 124,000 |
Total assets | 25,167,000 | 23,796,000 |
Current liabilities | ||
Accounts payable and other current liabilities | 5,911,000 | 4,911,000 |
Payroll related liabilities | 17,469,000 | 16,412,000 |
Convertible notes, net | 3,426,000 | 3,351,000 |
Accrued workers' compensation costs | 1,987,000 | 1,957,000 |
Default penalties accrual | 1,800,000 | 1,800,000 |
Derivative Liability | 2,814,000 | 3,756,000 |
Total current liabilities | 33,407,000 | 32,187,000 |
Non-current liabilities | ||
Accrued workers' compensation costs | 6,194,000 | 4,379,000 |
Convertible notes, net | 778,000 | |
Total liabilities | 40,379,000 | 36,566,000 |
Commitments and contingencies | ||
Stockholders' deficit | ||
Preferred stock, 50,000,000 authorized shares; $0.0001 par value | ||
Common stock, 750,000,000 authorized shares; $0.0001 par value; 907,047 shares issued as of November 30, 2019 and August 31, 2019 | ||
Additional paid-in capital | 32,619,000 | 32,505,000 |
Treasury stock, at cost-13,953 shares as of November 30, 2019 and August 31, 2019 | (325,000) | (325,000) |
Accumulated deficit | (47,506,000) | (44,950,000) |
Total stockholders' deficit | (15,212,000) | (12,770,000) |
Total liabilities and stockholders' deficit | $ 25,167,000 | $ 23,796,000 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Nov. 30, 2019 | Aug. 31, 2019 |
Stockholders' deficit | ||
Preferred stock, shares authorized | 50,000,000 | 50,000,000 |
Preferred stock, shares par value | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 750,000,000 | 750,000,000 |
Common stock, shares par value | $ 0.0001 | $ 0.0001 |
Common stock, shares issued | 907,047 | 907,047 |
Treasury stock, shares | 13,953 | 13,953 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | |
Nov. 30, 2019 | Nov. 30, 2018 | |
Condensed Consolidated Statements of Operations (Unaudited) | ||
Revenues (gross billings of 110.7 million and 70.9 million less worksite employee payroll cost of 94.8 million and 60.4 million, respectively) | $ 15,866,000 | $ 10,520,000 |
Cost of revenue | 12,552,000 | 7,134,000 |
Gross profit | 3,314,000 | 3,386,000 |
Operating expenses: | ||
Salaries, wages and payroll taxes | 2,283,000 | 1,872,000 |
Commissions | 774,000 | 553,000 |
Professional fees | 840,000 | 624,000 |
External Software development | 353,000 | 310,000 |
General and administrative | 1,401,000 | 1,316,000 |
Total operating expenses | 5,651,000 | 4,675,000 |
Operating Loss | (2,337,000) | (1,289,000) |
Other income (expense) | ||
Interest expense | (1,161,000) | (957,000) |
Change in fair value of derivative liability | 942,000 | |
Total other income (expense) | (219,000) | (957,000) |
Net Loss | $ (2,556,000) | $ (2,246,000) |
Net loss per common share | ||
Basic and diluted | $ (2.86) | $ (3.11) |
Basic and diluted | 893,094 | 723,033 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Stockholders' Deficit (Unaudited) - USD ($) | Total | Treasury Stock [Member] | Common Stock [Member] | Additional Paid-in Capital [Member] | Accumulated Deficit [Member] |
Balance, shares at Aug. 31, 2018 | 721,295 | ||||
Balance, amount at Aug. 31, 2018 | $ (7,755,000) | $ 18,468,000 | $ (26,223,000) | ||
Net Income (Loss) | (2,246,000) | ||||
Common shares issued upon conversion of convertible notes and interestk, amount | 1,645,000 | 1,645,000 | |||
Stock-based compensation expense | 77,000 | 77,000 | |||
Common shares issued upon conversion of convertible notes and interest, shares | 16,624 | ||||
Warrants exercised for cash, amount | 660,000 | 660,000 | |||
Common stock issued for services rendered, amount | 113,000 | 113,000 | |||
Warrants exercised for cash, shares | 6,688 | ||||
Common stock issued for services rendered, shares | 966 | ||||
Net Income (Loss) | $ (2,246,000) | $ (2,246,000) | |||
Balance, shares at Nov. 30, 2018 | 745,573 | ||||
Balance, amount at Nov. 30, 2018 | $ (7,506,000) | $ 20,963,000 | $ (28,469,000) | ||
Balance, shares at Aug. 31, 2018 | 721,295 | ||||
Balance, amount at Aug. 31, 2018 | $ (7,755,000) | $ 18,468,000 | $ (26,223,000) | ||
Net Income (Loss) | $ (18,700,000) | ||||
Balance, shares at Aug. 31, 2019 | 907,047 | ||||
Balance, amount at Aug. 31, 2019 | $ (12,770,000) | $ (325,000) | $ 32,505,000 | $ (44,950,000) | |
Net Income (Loss) | (2,556,000) | ||||
Stock-based compensation expense | 114,000 | 114,000 | |||
Net Income (Loss) | $ (2,556,000) | $ (2,556,000) | |||
Balance, shares at Nov. 30, 2019 | 907,047 | ||||
Balance, amount at Nov. 30, 2019 | $ (15,212,000) | $ (325,000) | $ 32,619,000 | $ (47,506,000) |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 3 Months Ended | |
Nov. 30, 2019 | Nov. 30, 2018 | |
OPERATING ACTIVITIES | ||
Net Loss | $ (2,556,000) | $ (2,246,000) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 241,000 | 188,000 |
Amortization debt discount, debt issuance cost | 854,000 | 1,044,000 |
Share based compensation | 114,000 | 190,000 |
Gain on fair value of derivative liabilities | (942,000) | |
Changes in operating assets and liabilities | ||
Accounts receivable | (1,550,000) | (19,000) |
Unbilled accounts receivable | (4,469,000) | 1,434,000 |
Prepaid expenses | 148,000 | 184,000 |
Other current assets | 81,000 | (93,000) |
Deposits - workers' compensation | 82,000 | (892,000) |
Deposits and other assets | 26,000 | |
Accounts payable | 739,000 | 240,000 |
Payroll related liabilities | 3,656,000 | (1,988,000) |
Accrued workers' compensation | 1,847,000 | 1,068,000 |
Other current liabilities | 260,000 | (726,000) |
Net cash used in operating activities | (1,495,000) | (1,590,000) |
INVESTING ACTIVITIES | ||
Purchase of fixed assets | (17,000) | (493,000) |
Net cash used in investing activities | (17,000) | (493,000) |
FINANCING ACTIVITIES | ||
Proceeds from exercise of warrants | 660,000 | |
Net cash provided by financing activities | 660,000 | |
Net decrease in cash | (1,512,000) | (1,423,000) |
Cash - Beginning of Period | 1,561,000 | 1,650,000 |
Cash - End of Period | 49,000 | 227,000 |
Supplemental Disclosure of Cash Flows Information: | ||
Cash paid for interest | 133,000 | |
Non-cash Investing and Financing Activities: | ||
Conversion of debt and accrued interest into common stock | $ 1,645,000 |
Nature of Operations
Nature of Operations | 3 Months Ended |
Nov. 30, 2019 | |
Nature of Operations | |
Note 1: Nature of Operations | ShiftPixy, Inc. (the “Company”) was incorporated on June 3, 2015. The Company is a specialized staffing service provider that provides solutions for large contingent part-time workforce demands, primarily in the restaurant, hospitality and maintenance service trades. The Company’s focus is on the restaurant industry in Southern California. Both ShiftPixy, Inc and its wholly-owned subsidiary, Shift Human Capital Management Inc. (“SHCM”), function as an employment administrative services (“EAS”) provider including services such as administrative and processing services, performing functions in the nature of a payroll processor, human resources consultant, administrator of workers’ compensation coverages and claims and provides workers compensation coverage written in the names of the clients (as may be required by some states). The Company has built a human resources information systems platform to assist in customer acquisition and hopes that this mechanism may become a way to onboard new clients into the ShiftPixy Ecosystem when eligible clients 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 | 3 Months Ended |
Nov. 30, 2019 | |
Summary of significant accounting policies | |
Note 2: Summary of significant accounting policies | Basis of Presentation The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules of the Securities and Exchange Commission (“SEC”) applicable to interim reports of companies filing as a smaller reporting company. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation have been included. The results of operations for the three months ended November 30, 2019, are not necessarily indicative of the results that may be expected for the year ending August 31, 2020. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended August 31, 2019, filed with the SEC on December 13, 2019. Principles of Consolidation The Company and its wholly-owned subsidiary have been consolidated in the accompanying unaudited condensed consolidated financial statements. All intercompany balances have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include: · Liability for legal contingencies; · Useful lives of property and equipment; · Assumptions made in valuing embedded derivatives and freestanding equity-linked instruments classified as liabilities; · Deferred income taxes and related valuation allowance; and · Projected development of workers’ compensation claims. Revenue and Direct Cost Recognition The Company provides an array of human resources and business solutions designed to help improve business performance. The Company accounts for its EAS revenues in accordance with Accounting Standards Codification (“ASC”) 605-45, Revenue Recognition, Principal Agent Considerations The Company’s revenues are primarily attributable to fees for providing staffing solutions and EAS/HCM (“Employment Administration Services”/ “Human Capital Management”) services. The Company recognizes revenue when all of the following criteria are met: (i) persuasive evidence of an arrangement exists; (ii) the services have been rendered to the customer; (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured. The Company enters into contracts with its clients for EAS services based on a stated rate and price in the contract. Contracts generally have a term of 12 months but are cancellable at any time by either party with 30 days’ notice. Contract performance obligations are satisfied as services are rendered and the term between invoicing and when the performance obligations are satisfied is not significant. The Company does not have significant financing components or significant payment terms for its customers and consequently has no material credit losses. Gross billings are invoiced to each client concurrently with each periodic payroll of the Company’s worksite employees which coincides with the services provided and which is typically a fixed percentage of the payroll processed. Revenues, which exclude the payroll cost component of gross billings and therefore consist solely of markup are recognized ratably over the payroll period as worksite employees perform their service at the client worksite. Revenues that have been recognized but not invoiced are included in unbilled accounts receivable on the Company’s consolidated balance sheets and were $11,347,000 and $9,478,000 as of November 30, 2019 and August 31, 2019, respectively. Consistent with the Company’s revenue recognition policy, direct costs do not include the payroll cost of its worksite employees. The cost of revenue associated with the Company’s revenue generating activities is primarily comprised of all other costs related to its worksite employees, such as the employer portion of payroll-related taxes, employee benefit plan premiums and workers’ compensation insurance costs. The Company has evaluated its revenue recognition policies in conjunction with its future expected business which may be migrating to a staffing business model. For fiscal years 2020 and 2019, there were no revenues which should have been evaluated under a staffing business model. Such a staffing business model would have included the payroll costs in revenues with a corresponding increase to cost of revenues for payroll costs associated with staffing services. The Company reviewed the costs associated with acquiring its customers under ASC 340-10 Other Assets and Deferred Costs Concentration of Credit Risk The Company considers all highly liquid investments with an original maturity of three months or less when purchased as cash equivalents. The Company maintains cash with a commercial bank and from time to time exceed the federally insured limits. The Company has not experienced losses from these deposits. No one individual client represents more than 10% of revenues for the three months ended November 30, 2019, and 2018, respectively. However, four clients represent 92% of total accounts receivable both at November 30, 2019 and August 31, 2019. 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 Workers’ compensation Everest Program Up to July 2018, a portion of the Company’s workers’ compensation risk was covered by a retrospective rated policy, which calculates the final policy premium based on the Company’s loss experience during the term of the policy and the stipulated formula set forth in the policy. The Company funds the policy premium based on standard premium rates on a monthly basis and based on the gross payroll applicable to workers covered by the policy. During the policy term and thereafter, periodic adjustments may involve either a return of previously paid premiums or a payment of additional premiums by the Company or a combination of both. If the Company’s losses under that policy exceed the expected losses under that policy, then the Company could receive a demand for additional premium payments. The Company utilizes a third-party to estimate its loss development rate, which is based primarily upon the nature of worksite employees’ job responsibilities, the location of worksite employees, the historical frequency and severity of workers’ compensation claims, and an estimate of future cost trends. Each reporting period, changes in the assumptions resulting from changes in actual claims experience and other trends are incorporated into its workers’ compensation claims cost estimates. As of November 30, 2019, the Company classified $0.2 million in short term accrued workers’ compensation and $0.3 million in long term accrued workers’ compensation in the Company’s consolidated balance sheets. Sunz Program Starting in July 2018, the Company’s workers’ compensation program for its worksite employees has been provided through an arrangement with United Wisconsin Insurance Company (“UWIC”) and administered by Sunz. Under this program, the Company has financial responsibility for the first $0.5 million of claims per occurrence. The Company provides and maintains a loss fund that will be used to pay claims and claim related expenses. The workers’ compensation insurance carrier established monthly funding requirements comprised of premium costs and funds to be set aside for payment of future claims (“claim loss funds”). The level of claim loss funds is primarily based upon anticipated worksite employee payroll levels and expected worker’s compensation loss rates, as determined by the insurance carrier. Monies funded into the program for incurred claims expected to be paid within one year are recorded as Deposit - workers’ compensation, a short-term asset, while the remainder of claim funds are included in deposits- workers’ compensation, a long-term asset in its consolidated balance sheets. As of November 30, 2019, the Company had $2.0 million in deposit – workers’ compensation classified as a short-term asset and $6.2 million classified as a long-term asset. The Company’s estimate of incurred claim costs expected to be paid within one year is included in short-term liabilities, while its estimate of incurred claim costs expected to be paid beyond one year is included in long-term liabilities on its consolidated balance sheets. As of November 30, 2019, the Company had short term accrued workers’ compensation costs of $1.8 million and long term accrued workers’ compensation costs of $5.9 million. Because the Company bears the financial responsibility for claims up to the level noted above, such claims, which are the primary component of its workers’ compensation costs, are recorded in the period incurred. Workers’ compensation insurance includes ongoing health care and indemnity coverage whereby claims are paid over numerous years following the date of injury. Accordingly, the accrual of related incurred costs in each reporting period includes estimates, which takes into account the ongoing development of claims and therefore requires a significant level of judgment. In estimating ultimate loss rates, the Company utilizes historical loss experience, exposure data, and actuarial judgment, together with a range of inputs which are primarily based upon the worksite employee’s job responsibilities, their location, the historical frequency and severity of workers’ compensation claims, and an estimate of future cost trends. For each reporting period, changes in the actuarial assumptions resulting from changes in actual claims experience and other trends are incorporated into its workers’ compensation claims cost estimates. The estimated incurred claims are based upon: (i) the level of claims processed during each quarter; (ii) estimated completion rates based upon recent claim development patterns under the plan; and (iii) the number of participants in the plan. Fair Value of Financial Instruments FASB ASC 825, “Financial Instruments,” requires entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized on the balance sheet, for which it is practical to estimate fair value. FASB 825 defines fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. At November 30, 2019 and August 31, 2019, the carrying value of certain financial instruments (cash, accounts receivable and payable, and other financial instruments) approximates fair value due to the short-term nature of the instruments. Convertible notes approximate fair value based on comparison of terms from similar instruments in the marketplace. The Company measures fair value under a framework that utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of inputs which prioritize the inputs used in measuring fair value are: · Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access. · Level 2: Inputs to the valuation methodology include: o Quoted prices for similar assets or liabilities in active markets; o Quoted prices for identical or similar assets or liabilities in inactive markets o Inputs other than quoted prices that are observable for the asset or liability; o Inputs that are derived principally from or corroborated by observable market data by correlation or other means. o If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability · Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement. The Company did not have any Level 1 or Level 2 assets and liabilities at November 30, 2019 or August 31, 2019. The derivative liabilities associated with its March 2019 Convertible Notes (see Note 4), consisted of conversion feature derivatives and warrants, are Level 3 fair value measurements. 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 November 30, 2019: March 2019 Conversion Feature March 2019 Warrant Liability Total Balance at August 31, 2019 $ 2,852,000 904,000 $ 3,756,000 Change in fair value (340,000 ) (602,000 ) (942,000 ) Balance at November 30, 2019 (unaudited) $ 2,512,000 302,000 $ 2,814,000 At November 30, 2019 and August 31, 2019, the Company estimated the fair value of the conversion feature derivatives embedded in the convertible debentures and the fair value of the warrant liabilities based on weighted probabilities of assumptions used in the Lattice-based option valuation model. The key valuation assumptions used consists, in part, of the price of the Company’s common stock, a risk free interest rate based on the average yield of a Treasury note and expected volatility of the Company’s common stock all as of the measurement dates, and the various estimated reset exercise prices weighted by probability. The Company used the following assumptions to estimate fair value of the derivatives as of November 30, 2019, using the default rate of 75% of market price as a conversion price: March 2019 Conversion Feature March 2019 Warrant Liability (unaudited) (unaudited) Risk free rate 1.60 % 1.62 % Market price per share $ 10.20 $ 10.20 Life of instrument in years 0.79 4.28 Volatility 91 % 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 may need to transfer those assets or liabilities to another level in the hierarchy based on the new inputs used. The Company recognizes these transfers at the end of the reporting period that the transfers occur. For the periods ended November 30, 2019 or 2018, there were no transfers of financial assets or financial liabilities between the hierarchy levels. Research and Development During the three months ended November 30, 2019 and 2018 the Company incurred research and development costs of approximately $0.9 million and $0.4 million, respectively. All costs were related to internally developed or externally contracted software and related technology for the Company’s HRIS system and related mobile application. In addition, $0 and $0.4 million of software costs were capitalized for the three months ended November 30, 2019 and 2018, respectively. Advertising Costs The Company expenses all advertising as incurred. The Company incurred advertising costs totaling $304,000 and $379,000 for the three months ended November 30, 2019, and 2018, respectively. Reverse Stock Split On December 17, 2019 the Company implemented a 1 for 40 reverse stock split for all common share and common share equivalents including, options, warrants, and convertible notes. All common shares and common share equivalents are presented retroactively to reflect the reverse split. 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. Securities that are excluded from the calculation of weighted average dilutive common shares, because their inclusion would have been antidilutive are: For the Three Months Ended November 30, 2019 For the Three Months Ended November 30, 2018 Options 45,463 37,271 Senior Secured Convertible Notes 889,935 84,756 Warrants 107,416 87,783 Total potentially dilutive shares 1,042,814 209,810 Stock-Based Compensation At November 30, 2019, the Company has one stock-based compensation plan under which the Company may issue awards. The Company accounts for this plan under the recognition and measurement principles of ASC 718, Compensation- Stock Compensation 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. The expected volatility is based on the historical volatility of the Company since our Initial Public Offering. Any changes in these highly subjective assumptions significantly impact stock-based compensation expense. The Company elected to account for forfeitures as they occur, as such, compensation cost previously recognized for an unvested award that is forfeited because of the failure to satisfy a service condition is revised in the period of forfeiture. Treasury Stock Treasury stock represents shares of common stock provided to the company in satisfaction of the related party advance, described in Note 13. Shares provided are recorded at cost as treasury stock. The Company intends to retire all of its treasury stock outstanding as of November 30, 2019 and August 31, 2019 in fiscal 2020. Any treasury stock retired is recorded to additional paid-in capital, limited to the amount previously credited to additional paid-in capital, if any. Any excess is charged to accumulated deficit. Reclassifications Certain reclassifications have been made to prior year’s data to confirm to the current year’s presentation. Such reclassifications had no impact on the Company’s financial condition, operating results, cash flows or stockholder’s equity. Revision of Financial Statements During the preparation of the restated condensed consolidated financial statements for the three and six months ended February 28, 2019, the Company determined that it had improperly calculated the volatility of the Company’s common stock, which had been used to calculate the relative fair value of the warrants issued in connection with the June 2018 convertible notes. This resulted in an overstatement of the net carrying amount of the convertible note by the understatement of the corresponding debt discount with the offset to additional paid-in capital as of February 28, 2019. The Company assessed the materiality of the misstatements in accordance with Staff Accounting Bulletin No.99, “Materiality” and No. 108, “Quantifying Misstatements”, and concluded that this error was not qualitatively material on the Company’s condensed consolidated balance sheet, statements of operations, statements of cash flows, statement of stockholders’ deficit and net loss for the periods then ended. The effect of this revision on the line items within the Company’s condensed financial statements as of and for the three months ended November 30, 2018, was as follows: November 30, 2018 As Previously Reported Adjustments As Restated Convertible note, net $ 6,309,000 (739,000 ) $ 5,570,000 Additional Paid-In Capital 19,729,000 1,232,000 20,961,000 Accumulated deficit (27,977,000 ) (493,000 ) (28,470,000 ) Net Loss (2,000,000 ) (246,000 ) (2,246,000 ) Net loss per share – Basic and diluted (2.77 ) (0.34 ) (3.11 ) 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 within annual reporting periods beginning after December 15, 2019. Early adoption is permitted for annual reporting periods (including interim periods) beginning after December 15, 2016. This new standard permits the use of either the retrospective or cumulative effect transition method. In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations. The purpose of this standard is to clarify the implementation of guidance on principal versus agent considerations related to ASU 2014-09. The standard has the same effective date as ASU 2014-09 described above. In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which provides clarity related to ASU 2014-09 regarding identifying performance obligations and licensing implementation. The standard has the same effective date as ASU 2014-09 described above. In May 2016, the FASB issued ASU 2016-12: Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which provides narrow scope improvements and practical expedients related to ASU 2014-09. The purpose of this standard is to clarify certain narrow aspects of ASU 2014-09, such as assessing the collectability criterion, presentation of sales taxes, and other similar taxes collected from customers, noncash considerations, contract modifications at transition, completed contracts are transition, and technical correction. The standard has the same effective date as ASU 2014-09 described above. In December 2016, the FASB issued ASU 2016-20: Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers. The amendments in this standard affect narrow aspects of guidance issued in ASU 2014-09. The standard has the same effective date as ASU 2014-09 described above. Topic 606 is effective for the company beginning with the fiscal year ending August 31, 2020. 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. |
Going Concern
Going Concern | 3 Months Ended |
Nov. 30, 2019 | |
Going Concern | |
Note 3: Going Concern | As of November 30, 2019, the Company had cash of $0.1 million and a working capital deficiency of $18.5 million. During the quarter ended November 30, 2019, the Company used approximately $1.5 million of cash in its operations, consisting of a net loss of $2.6 million, reduced by net non-cash charges and gains of $0.3 million and working capital changes of $0.8 million. During the year ended August 31, 2019, the Company used approximately $2.1 million of cash in its operations, consisting of a net loss of $18.7 million, reduced by net non-cash charges and gains of $10.8 million and working capital changes of $6.0 million. The Company has incurred recurring losses resulted in an accumulated deficit of $48 million as of November 30, 2019. These conditions raise substantial doubt as to the Company’s ability to continue as going concern within one year from 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. The Company has a recurring revenue business model that generated $12.4 million of gross profit for the year ended August 31, 2019 and $3.3 million for the quarter ended November 30, 2019. The Company’s plans and expectations for the next 12 months include raising additional capital to help fund expansion of its operations, including the continued development and support of its IT and HR platform and settling its outstanding debt as it comes due. The Company engaged an investment banking firm to assist the Company in (i) preparing information materials, (ii) advising the Company concerning the structure, price and conditions and (iii) organizing the marketing efforts with potential investors in connection with a financing transaction. Historically, the Company’s principal source of financing has come through the sale of its common stock and issuance of convertible notes. The Company successfully completed an Initial Public Offering (IPO) on NASDAQ on June 29, 2017, raising a total of $12 million ($10.9 million net of costs). In June 2018, the Company completed a private placement of 8% senior secured convertible notes to institutional investors raising $9 million of gross proceeds ($8.4 million net of costs). In March 2019, the Company completed a private placement of senior secured notes to institutional investors raising $3.75 million ($3.3 million net of costs). As of November 30, 2019 all of the $6.8 million of principal was in default. Subsequent to November 30, 2019, approximately $2.7 million of the notes in default were exchanged for new convertible notes payable. See Notes 4 and 9 for additional information. Subsequent to November 30, 2019 and as described in Note 9 below, in January 2020, the Company assigned approximately 60% of its customer contracts representing approximately 50% of its recurring gross profit in exchange for $9.7 million in cash and expects to receive $9.5 million ratably over the four years following the transaction close, subject to certain closing conditions. The Company will transfer $1.7 million of working capital after closing the transaction and approximately $6 million of the Company’s annualized gross profit. The Company believes that its current cash position, after collection of the proceeds from the January 2020 customer assignment transaction, along with its revenue growth and the financing from potential institutional investors will be sufficient to fund its operations for at least a year from the date these financials are available. If these sources do not provide the capital necessary to fund the Company’s operations during the next twelve months from the date of this report, the Company may need to curtail certain aspects of its operations or expansion activities, consider the sale of 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. As such, these conditions raise substantial doubt as to its ability to continue as a going concern within one year from the issuance date of the financial statements. These consolidated financial statements do not include any adjustments from this uncertainty. |
Senior Secured Convertible Note
Senior Secured Convertible Notes Payable (in default) | 3 Months Ended |
Nov. 30, 2019 | |
Senior Secured Convertible Notes Payable (in default) | |
Note 4: Senior Secured Convertible Notes Payable (in default) | The Company has issued three series of senior secured convertible notes payable. In general, each series is convertible into common shares of the Company. Senior Secured Convertible Notes Payable consist of the following: November 30, August 31, 2019 2019 (unaudited) Senior Secured Convertible notes, Principal $ 6,808,000 $ 6,808,000 Less debt discount and deferred financing costs (2,604,000 ) (3,457,000 ) Total outstanding convertible notes, net $ 4,204,000 $ 3,351,000 Less current portion of convertible notes payable (3,426,000 ) (3,351,000 ) Long-term convertible notes payable $ 778,000 $ - The following table rolls forward the Convertible Notes Payable balances from August 31, 2019 to November 30, 2019: Gross Principal Deferred Financing Costs Note Discount Net Balance at August 31, 2019 $ 6,808,000 (344,000 ) (3,113,000 ) $ 3,351,000 Amortization of Interest Expense - 80,000 773,000 853,000 Balance at November 30, 2019 $ 6,808,000 (264,000 ) (2,340,000 ) $ 4,204,000 Less Current Amount (5,141,000 ) 174,000 1,541,000 (3,426,000 ) Long Term Balance at November 30, 2019 1,667,000 (90,000) (799,000) $ 778,000 The following table outlines the gross principal balance rollforward for each series from August 31, 2019 to November 30, 2019. Each series is described in further detail below. June 2018 Notes December 2018 Notes March 2019 Notes Total Gross Balance at August 31, 2019 $ 1,466,000 867,000 4,475,000 $ 6,808,000 Less Discount and Debt Issuance Costs: Debt Issuance Costs - - (264,000 ) (264,000 ) Deferred Financing Costs - - (2,340,000 ) (2,340,000 ) Carrying Balance at November 30, 2019 $ 1,466,000 867,000 1,871,000 $ 4,204,000 Less Current Amount (1,466,000 ) (728,000 ) (1,232,000 ) (3,426,000 ) Long Term Balance at November 30, 2019 $ - 139,000 639,000 $ 778,000 During the quarters ended November 30, 2019 and 2018 the Company amortized $853,000 and $798,000, respectively, to interest expense from the combined amortization of deferred financing costs and note discounts recorded at issuance for the June 2018 and March 2019 Notes. To date, the holders of the June Notes have converted $8,534,000 of principal, holders of December 2018 Notes have converted $22,000 of principal, and holders of March 2019 Notes have converted $275,000 of principal into common shares of the Company. There were no conversions of convertible notes during the fiscal quarter ending November 30, 2019. On June 3, 2019, one of its institutional investors filed a claim in the United States District Court, Southern District of New York seeking preliminary injunctive relief against the Company to immediately deliver one million shares of the Company’s common stock and to honor all future conversion requests duly submitted in accordance with the terms of the notes. On June 7, 2019, and June 10, 2019, the Company received notices from two of its institutional investors that the Company was in default due to missed principal and interest payments under the terms of the Notes. On June 27, 2019, the Company reported that is has informed its convertible note holders that it will cease honoring conversion requests of the 2018 and 2019 Notes forcing a voluntary default of these instruments. The Company is pursuing a renegotiation and amendment of these instruments in an effort to avoid litigation. The Company is requesting to amend the terms of the notes to remove the conversion features and revise the cash amortization, among other items. On December 5, 2019, the Company entered into an exchange agreement with the holder of a majority of its March 2019 Convertible Notes. The exchange agreement and the related revised March 2019 note agreement revised the conversion price to $40.00 per share, extended the term of the March 2019 notes to March 1, 2022, provided for a revised quarterly amortization schedule beginning April 1, 2020, and removed certain anti-dilution terms of the related March 2019 warrants. The holder also exchanged $222,000 of December 2018 Notes by extending the term to coincide with the revised term of the March 2019 notes and for the revised amortization schedule. The Company agreed to issue an additional $200,000 of consideration to the holder, payable in common stock, as consideration for this exchange and agreed to increase the principal outstanding on the notes exchanged by 10% from $222,000 for the December 2018 notes to $244,000 and from $2,445,000 for the March 2019 notes to $2,890,000. 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. As of November 30, 2019, after the exchange as described in Note 9, the Company classified $778,000 of the $1,245,000 carrying value of the notes exchanged as long-term liabilities. See also Note 8 for litigation related to the Convertible Notes Payable. From June 10, 2019 until November 30, 2019, the Company has accrued interest at the default interest rate for all note series representing approximately $0.6 million of additional interest payable of which $0.3 million is attributable to the quarter ending November 30, 2019. The Company has accrued an additional $1.8 million to accrued default liabilities as of November 30, 2019 and August 31, 2019, representing potential liability associated with the default of the notes payable for default premium, potential liquidating damages, and other costs associated with the notes in default. June 2018 Senior Convertible Notes (in default) On June 4, 2018, the Company issued $10 million of senior convertible notes (“June 2018 Notes”) to institutional investors with an original issue discount of $1 million for a purchase price of $9 million. The notes bear interest at a rate of 8%, with one year’s interest guaranteed, and have a maturity date of September 4, 2019. The Notes remain outstanding as of November 22, 2019. The company received cash proceeds of $8.4 million representing the $9 million purchase price, reduced by approximately $0.6 million of financing costs directly related to the issuance of the June 2018 Notes. Concurrent with the sale of the June 2018 Notes, the Company granted warrants to purchase 25,101 shares of common stock to its institutional investors and warrants to purchase 5,422 shares of common stock to its investment banker as placement fees, at an exercise price of $99.60, subject to down round price protection adjustment, as defined in the agreements. The warrants were valued at the date of issuance using the lattice-based option pricing model at $86.80 per warrant. Both the June 2018 Notes and the related warrants were issued with registration rights, whereby the Company was obligated to register the shares underlying the June 2018 Notes or was subject to registration rights penalties. The terms of June 2018 notes are summarized as follows: · Term: September 4, 2019; · Coupon: 8%; Default interest rate: 18%; · Convertible at the option of the holder at any time; · Conversion price is initially set at $99.60 but subject to down round price protection. After maturity, the conversion price will be set subsequently at the lesser of the then conversion price and 85% of the volume weighted average price for the trading date immediately prior to the application conversion date; and · Monthly amortization of principal either in cash at a 10% premium or in stock, subject to equity conditions, at a 15% discount to the lowest volume weighted average price, at the option of the Company. December 2018 Notes (in default) On December 20, 2018, the Company entered into settlement agreements with its institutional investors, which resolved all disputes relating to technical defaults by the Company in failing to meet deadlines for filing a registration statement and for having a registration statement effective by the SEC. As a result of such settlement, the Company issued additional notes (“December 2018 Notes” in the amount of $889,000 on substantially the same terms as the June 2018 Notes except that the stated interest rate was 0% and the term of the December 2018 Notes was December 31, 2019. There was no recorded discount or deferred financing costs for the December 2018 Notes issued. March 2019 Bridge Financing (in default) On March 12, 2019, the Company issued convertible notes in the principal amount of $4,750,000 with an original issue discount of $1 million for a purchase price of $3,750,000 to certain of its existing institutional investors (“March 2019 Notes”) and mature on September 12, 2020. The Company received net cash proceeds of $3.3 million to be used for mobile application development and working capital. The Company incurred approximately $0.5 million of debt issuance costs that are incremental costs directly related to the issuance of the bridge financing senior convertible notes payable. The terms of the March 2019 convertible notes are summarized as follows: · Term: September 12, 2020; · Coupon: 0%; · Default interest rate: 18%; · Original issue discount: $1,000,000; · Convertible at the option of the holder at any time; · Initial conversion price is set at $1.67 but subject to down round price protection; · Alternate conversion price at the greater of the floor price of $0.31 and the lower of the conversion price in effect and alternate conversion percentage of the lowest VWAP of the common share during the 10 consecutive trading day prior to the applicable conversion date; · Alternate conversion percentage is 75% if the alternate conversion is an alternate conversion event of default as a result of bankruptcy or 80% for all alternate event of default conversion or 85% is such alternate conversion is an alternate optional conversion; · Redemption at the option of the Company at 15% premium at any time after 45 days from March 12, 2019. In connection with the note, the Company issued 74,387 warrants (“March 2019 Warrants”), exercisable at $70, with a five-year term. The Company evaluated the warrants issued and determined that they were derivative liabilities. The Company estimated the fair value of the warrants using the Lattice pricing model. The key valuation assumptions used consist, in part, of the price of the Company’s common stock of $63.60, a risk-free interest rate of 2.49% and expected volatility of the Company’s common stock of 122%, resulting in a fair value of $3,917,000. The Company estimated the aggregate fair value of the conversion feature derivative embedded in the debenture (“March 2019 Conversion Feature”) at issuance at $2,421,000 based on weighted probabilities of assumptions using the Lattice pricing model. The key valuation assumptions used consist, in part, of the price of the Company’s common stock of $63.60, a risk-free interest rate of 2.49% and expected volatility of the Company’s common stock of 122%, and the various estimated reset exercise prices weighted by probability. This resulted in the calculated fair value of the debt discount resulted from bifurcating the warrants and the conversion feature being greater than the face amount of the debt and the original issue discount, and the excess amount of $2.6 million was immediately expensed as financing costs. |
Stockholders' Equity
Stockholders' Equity | 3 Months Ended |
Nov. 30, 2019 | |
Stockholders' deficit | |
Note 5: Stockholders' Equity | Common Stock and Warrants The Company issued no common shares or common stock warrants during the quarter ended November 30, 2019. No warrants were exercised, expired, or cancelled during the quarter ended November 30, 2019. The following tables summarize our warrants outstanding as of November 30, 2019: Exercise price Warrants Outstanding Weighted average life of outstanding warrants in years March 2019 Notes Warrants $ 70.00 74,390 4.3 June 2018 Notes Warrants $ 70.00 30,526 3.5 2017 PIPE Warrants $ 276.00 2,500 2.6 107,416 4.0 All warrants outstanding and exercise prices have been adjusted to reflect the 1:40 reverse split. |
Share based Compensation
Share based Compensation | 3 Months Ended |
Nov. 30, 2019 | |
Share based Compensation | |
Note 6: Share based compensation | In March 2017, the Company adopted the 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 (“Options”) or shares of common stock (“share grants”). The Company has reserved a total of 250,000 shares of common stock for issuance under the Plan as of November 30, 2019. Of these shares, as of November 30, 2019, approximately 83,000 options and 7,000 shares have been designated by the Board of Directors for issuance and approximately 38,000 of the options have been forfeited and returned to the option pool under the Plan due to employment terminations. As of November 30, 2019, approximately 200,000 shares remain issuable of which 167,000 are eligible to be issued as ISOs and 200,000 are eligible to be issued as either share grants or NQ stock options. No options or shares were granted during the quarter ended November 30, 2019. For all options granted thus far to November 30, 2019, 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, and the balance vest in equal monthly installments over the next 36 months of service. All options granted to date have a ten-year term. Share 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 the adoption of Accounting Standards Update ASU 2016-09, the Company elected to account for forfeitures as they occur. Any compensation cost previously recognized for an unvested award that is forfeited because of a failure to satisfy a service condition is reversed in the period of the forfeiture. Share based compensation expense consisted of employee stock option compensation expense of $114,000 and $77,000 for the quarters ended November 30, 2019 and 2018, respectively. At November 30, 2019, the total unrecognized deferred share-based compensation expected to be recognized over the remaining weighted average vesting periods of 2.1 years for outstanding grants was $1.4 million. A summary of option activity was as follows: Options Outstanding and Exercisable Weighted Average Weighted Number Remaining Average of Contractual Exercise Options Life Price (In years) Balance, August 31, 2019 50,749 8.95 $ 95.20 Granted – – $ – Exercised – – $ – Forfeited (5,286 ) 8.44 $ 69.01 Balance at November 30, 2019 45,463 8.67 $ 98.30 Options outstanding as of November 30, 2019 had aggregate intrinsic value of $0. Option vesting activity was as follows: Weighted Weighted Number Remaining Average of Contractual Exercise Options Vested Options Life Price (In years) Balance, August 31, 2019 10,291 8.04 $ 152.80 Vested 2,232 8.44 $ 146.82 Exercised – – $ – Forfeited (488 ) 0.08 $ 116.32 Balance at November 30, 2019 12,035 7.87 $ 153.19 The following table summarizes information about stock options outstanding and vested at November 30, 2019: Options Outstanding and Exercisable Options Vested Weighted Average Weighted Weighted Weighted Number Remaining Average Number Remaining Average of Contractual Exercise of Contractual Exercise Exercise Prices Options Life Price Options Life Price (In years) (In years) $18.80-$40.00 6,625 9.52 $ 23.31 – – $ – $40.01–$80.00 13,729 9.34 $ 51.21 – – $ – $80.01–$120.00 11,224 8.45 $ 103.15 4,384 8.41 $ 103.53 $120.01–$160.00 12,625 7.79 $ 157.71 6.860 7.56 $ 157.41 $160.01-$391.60 1,260 7.63 $ 391.60 791 7.63 $ 391.60 45,463 8.67 $ 98.30 12,035 7.87 $ 153.19 The number of options and exercise prices have been presented retroactively for the 1 for 40 December 17, 2019 reverse split. |
Related Parties
Related Parties | 3 Months Ended |
Nov. 30, 2019 | |
Related Parties | |
Note 7: Related Parties | J. Stephen Holmes, our Sales Manager is an advisor to and significant shareholder of the Company. The Company incurred $180,000 and $180,000 in professional fees for management consulting services in the three months ended November 30, 2019, and 2018, respectively. |
Contingencies
Contingencies | 3 Months Ended |
Nov. 30, 2019 | |
Contingencies | |
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 Company’s management, in consultation with its legal counsel as appropriate, assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. During the ordinary course of business, the Company is subject to various claims and litigation. Management believes that the outcome of such claims or litigation will not have a material adverse effect on the Company’s financial position, results of operations or cash flow. Convertible Note related litigation: During 2019, three of the Company’s note holders have filed complaints: Alpha Capital v. ShiftPixy, Inc. On July 3, 2019 ShiftPixy was served with a complaint filing by Alpha Capital Anstalt (ACA) in the United States District Court, Southern District of New York alleging breach of contract in refusing to honor the conversion of certain convertible notes, specifically one for $310,000 submitted on June 20, 2019. ACA sought an injunction requiring the Company to issue 25,000 common shares, damages for the claimed breaches, and attorney’s fees. In August 2019, the court denied the motion for a preliminary injunction but granted accelerated discovery which was completed in September 2019. As of November 30, 2019, the Company had convertible notes outstanding with ACA for approximately $1.7 million consisting of $0.3 million of the June 2018 series, $0.2 million of the December 2018 series and $1.2 million of the March 2019 series. In January 2020, Alpha was awarded a judgement for $500,000 consisting of the $310,000 notes and $190,000 of damages. The damages are fully accrued for as of November 30, 2019 in the default penalty accrual as described in Note 4 above. On January 16, 2020 Alpha Capital converted all remaining June and December 2018 Note balances at $12.20 per share. On January 20, 2020 the Company paid the damages award in cash. Dominion Capital LLC v. ShiftPixy, Inc.; On July 18, 2019 ShiftPixy was served with a complaint filing by Dominion Capital LLC in the United States District Court, Southern District of New York alleging breach of contract in refusing to honor the conversion of certain convertible notes. Dominion sought injunctive relief, injunction to prohibit buyback, breach of contract on the June 2018, December 2018, and March 2019 notes, and declaratory judgment. In August 2019, the court denied the motion for a preliminary injunction but granted accelerated discovery which was completed in September 2019. As of November 30, 2019, the Company had convertible notes outstanding with Dominion for approximately $1.5 million consisting of $0.7 million of the June 2018 series, $0.2 million of the December 2018 series and $0.6 million of the March 2019 series.The Company expects to have a judgment awarded to Dominion later in January 2020 and is in discussions to settle the litigation. MEF I, LP v. ShiftPixy, Inc.; On August 27, 2019 MEF filed a complaint in the United States District Court, Southern District of New York. MEF seeks monetary relief of $2.1 million and seeks to appoint themselves as receiver of the Company. As of November 30, 2019 the Company had convertible notes outstanding to MEF at approximately $0.7 million face value consisting of approximately $0.5 million and $0.2 million for the June 2018 and December 2018 notes respectively. In November 2019 the Company filed a motion in response to the receiver request. On January 17, 2020 the Company and MEF I settled all claims and repaid all note principal remaining, accrued damages, and accrued interest and with issuance of 20,000 shares of common stock and payment of $725,000 in cash. The total of $969,000 was fully accrued for as of November 30, 2019. Kadima Ventures The Company is in dispute with its software developer, Kadima Ventures, over incomplete but paid for software development work. In May 2016, the Company entered into a contract with Kadima Ventures for the development and deployment of user features that were proposed by Kadima for an original build cost of $8.5 million to complete. As of the date of this filing, the Company has spent approximately $11 million but has not received the majority of certain software modules. In addition to the non-delivery of the paid for user features, Kadima Ventures asserts that it is owed additional funds to turn over the work completed. The Company initiated litigation to force the delivery of the software modules paid for through fiscal 2019 and exit the development engagement. In April 2019, Kadima filed a complaint against ShiftPixy in the County of Maricopa, AZ alleging breach of contract, promissory estoppel and unjust enrichment and has demands for an additional $10 million prior to releasing the remaining features. The parties agreed to a transfer of the matter to an Arizona Commercial Court with the expectation that the matter would be sent to arbitration or mediation. In October 2019, Kadima provided the software code to a third party for technical evaluation of the software in question. The Company expects to enter into mediation once the technical evaluation is completed later in fiscal 2020. An answer to the Complaint is due January 31, 2020. Splond Litigation On April 8, 2019, claimant, Corey Splond, filed a class action lawsuit, naming ShiftPixy, Inc. and its client as defendants, claiming that he was scheduled to work for more than 8 hours during 24-hour periods without being paid overtime, to which he was entitled. In addition, claimant is seeking waiting time penalties for the delay in payment. This lawsuit is in the initial stages; the financial impact to the Company, if any, cannot be estimated. No liability has been recorded for this matter at this time. In the event of an unfavorable outcome the Company’s client is contractually obligated to indemnify the Company for misreported hours and portions of the claim would be covered under the Company’s employment practices liability insurance. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Nov. 30, 2019 | |
Subsequent Events | |
Note 9: Subsequent Events | On December 5, 2019, the Company entered into an exchange agreement with the holder of a majority of its March 2019 Convertible Notes. The exchange agreement and the related revised March 2019 note agreement revised the conversion price to $40.00 per share, extended the term of the March 2019 notes to March 1, 2022, provided for a revised quarterly amortization schedule beginning April 1, 2020, and removed certain anti-dilution terms of the related March 2019 warrants. The holder also exchanged $222,000 of December 2018 Notes by extending the term to coincide with the revised term of the March 2019 notes and for the revised amortization schedule. The Company agreed to issue an additional $200,000 of consideration to the holder, payable in common stock, as consideration for this exchange and agreed to increase the principal outstanding on the notes exchanged by 10% from $222,000 for the December 2018 notes to $244,000 and from $2,445,000 for the March 2019 notes to $2,890,000. 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. As of November 30, 2019, the Company classified $778,000 of the $1,245,000 carrying value of the notes exchanged as long-term liabilities. On December 17, 2019 the Company effected a 1 for 40 reverse stock split. All common shares, common share warrants, common share options, and convertible note conversion prices have been retroactively adjusted. On December 23, 2019, the Company issued 428 shares to each of Messrs. Higgins and White, both Directors of the Company, in settlement of shares promised in December 2018 but not issued. The fair value on the date issued for the combined issuance of 856 shares was $7,000. On January 6, 2020 the Company entered into an asset purchase agreement with a third party that assigned client contracts representing approximately 60% of the recurring business as of November 30, 2019 and certain operating assets in exchange for up to approximately $19.2 million of consideration. The Company received $9.7 million upon closing and expects to receive additional proceeds of approximately $2.4 million per year, payable monthly, for the next four years after certain transaction conditions are met. The Company evaluated the transaction and determined that as of November 30, 2019 the criteria were not met to designate any assets as assets held for sale. In January 2020, the Company paid the damages claim with Alpha Capital as described in Note 8 above. On January 17, 2020, the Company settled all claims with MEF I, LP as described in Note 8 above. Management has evaluated subsequent events pursuant to the issuance of the interim unaudited consolidated financial statements and has determined that other than listed above, no other subsequent events exist through the date of this filing. |
Summary of significant accoun_2
Summary of significant accounting policies (Policies) | 3 Months Ended |
Nov. 30, 2019 | |
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 months ended November 30, 2019, are not necessarily indicative of the results that may be expected for the year ending August 31, 2020. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended August 31, 2019, filed with the SEC on December 13, 2019. |
Principles of Consolidation | The Company and its wholly-owned subsidiary have been consolidated in the accompanying unaudited condensed consolidated financial statements. All intercompany balances have been eliminated in consolidation. |
Use of Estimates | The preparation of financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include: · Liability for legal contingencies; · Useful lives of property and equipment; · Assumptions made in valuing embedded derivatives and freestanding equity-linked instruments classified as liabilities; · Deferred income taxes and related valuation allowance; and · Projected development of workers’ compensation claims. |
Revenue Recognition | The Company provides an array of human resources and business solutions designed to help improve business performance. The Company accounts for its EAS revenues in accordance with Accounting Standards Codification (“ASC”) 605-45, Revenue Recognition, Principal Agent Considerations The Company’s revenues are primarily attributable to fees for providing staffing solutions and EAS/HCM (“Employment Administration Services”/ “Human Capital Management”) services. The Company recognizes revenue when all of the following criteria are met: (i) persuasive evidence of an arrangement exists; (ii) the services have been rendered to the customer; (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured. The Company enters into contracts with its clients for EAS services based on a stated rate and price in the contract. Contracts generally have a term of 12 months but are cancellable at any time by either party with 30 days’ notice. Contract performance obligations are satisfied as services are rendered and the term between invoicing and when the performance obligations are satisfied is not significant. The Company does not have significant financing components or significant payment terms for its customers and consequently has no material credit losses. Gross billings are invoiced to each client concurrently with each periodic payroll of the Company’s worksite employees which coincides with the services provided and which is typically a fixed percentage of the payroll processed. Revenues, which exclude the payroll cost component of gross billings and therefore consist solely of markup are recognized ratably over the payroll period as worksite employees perform their service at the client worksite. Revenues that have been recognized but not invoiced are included in unbilled accounts receivable on the Company’s consolidated balance sheets and were $11,347,000 and $9,478,000 as of November 30, 2019 and August 31, 2019, respectively. Consistent with the Company’s revenue recognition policy, direct costs do not include the payroll cost of its worksite employees. The cost of revenue associated with the Company’s revenue generating activities is primarily comprised of all other costs related to its worksite employees, such as the employer portion of payroll-related taxes, employee benefit plan premiums and workers’ compensation insurance costs. The Company has evaluated its revenue recognition policies in conjunction with its future expected business which may be migrating to a staffing business model. For fiscal years 2020 and 2019, there were no revenues which should have been evaluated under a staffing business model. Such a staffing business model would have included the payroll costs in revenues with a corresponding increase to cost of revenues for payroll costs associated with staffing services. The Company reviewed the costs associated with acquiring its customers under ASC 340-10 Other Assets and Deferred Costs |
Concentration of Credit Risk | The Company considers all highly liquid investments with an original maturity of three months or less when purchased as cash equivalents. The Company maintains cash with a commercial bank and from time to time exceed the federally insured limits. The Company has not experienced losses from these deposits. No one individual client represents more than 10% of revenues for the three months ended November 30, 2019, and 2018, respectively. However, four clients represent 92% of total accounts receivable both at November 30, 2019 and August 31, 2019. |
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 |
Workers' compensation | Everest Program Up to July 2018, a portion of the Company’s workers’ compensation risk was covered by a retrospective rated policy, which calculates the final policy premium based on the Company’s loss experience during the term of the policy and the stipulated formula set forth in the policy. The Company funds the policy premium based on standard premium rates on a monthly basis and based on the gross payroll applicable to workers covered by the policy. During the policy term and thereafter, periodic adjustments may involve either a return of previously paid premiums or a payment of additional premiums by the Company or a combination of both. If the Company’s losses under that policy exceed the expected losses under that policy, then the Company could receive a demand for additional premium payments. The Company utilizes a third-party to estimate its loss development rate, which is based primarily upon the nature of worksite employees’ job responsibilities, the location of worksite employees, the historical frequency and severity of workers’ compensation claims, and an estimate of future cost trends. Each reporting period, changes in the assumptions resulting from changes in actual claims experience and other trends are incorporated into its workers’ compensation claims cost estimates. As of November 30, 2019, the Company classified $0.2 million in short term accrued workers’ compensation and $0.3 million in long term accrued workers’ compensation in the Company’s consolidated balance sheets. Sunz Program Starting in July 2018, the Company’s workers’ compensation program for its worksite employees has been provided through an arrangement with United Wisconsin Insurance Company (“UWIC”) and administered by Sunz. Under this program, the Company has financial responsibility for the first $0.5 million of claims per occurrence. The Company provides and maintains a loss fund that will be used to pay claims and claim related expenses. The workers’ compensation insurance carrier established monthly funding requirements comprised of premium costs and funds to be set aside for payment of future claims (“claim loss funds”). The level of claim loss funds is primarily based upon anticipated worksite employee payroll levels and expected worker’s compensation loss rates, as determined by the insurance carrier. Monies funded into the program for incurred claims expected to be paid within one year are recorded as Deposit - workers’ compensation, a short-term asset, while the remainder of claim funds are included in deposits- workers’ compensation, a long-term asset in its consolidated balance sheets. As of November 30, 2019, the Company had $2.0 million in deposit – workers’ compensation classified as a short-term asset and $6.2 million classified as a long-term asset. The Company’s estimate of incurred claim costs expected to be paid within one year is included in short-term liabilities, while its estimate of incurred claim costs expected to be paid beyond one year is included in long-term liabilities on its consolidated balance sheets. As of November 30, 2019, the Company had short term accrued workers’ compensation costs of $1.8 million and long term accrued workers’ compensation costs of $5.9 million. Because the Company bears the financial responsibility for claims up to the level noted above, such claims, which are the primary component of its workers’ compensation costs, are recorded in the period incurred. Workers’ compensation insurance includes ongoing health care and indemnity coverage whereby claims are paid over numerous years following the date of injury. Accordingly, the accrual of related incurred costs in each reporting period includes estimates, which takes into account the ongoing development of claims and therefore requires a significant level of judgment. In estimating ultimate loss rates, the Company utilizes historical loss experience, exposure data, and actuarial judgment, together with a range of inputs which are primarily based upon the worksite employee’s job responsibilities, their location, the historical frequency and severity of workers’ compensation claims, and an estimate of future cost trends. For each reporting period, changes in the actuarial assumptions resulting from changes in actual claims experience and other trends are incorporated into its workers’ compensation claims cost estimates. The estimated incurred claims are based upon: (i) the level of claims processed during each quarter; (ii) estimated completion rates based upon recent claim development patterns under the plan; and (iii) the number of participants in the plan. |
Fair Value of Financial Instruments | FASB ASC 825, “Financial Instruments,” requires entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized on the balance sheet, for which it is practical to estimate fair value. FASB 825 defines fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. At November 30, 2019 and August 31, 2019, the carrying value of certain financial instruments (cash, accounts receivable and payable, and other financial instruments) approximates fair value due to the short-term nature of the instruments. Convertible notes approximate fair value based on comparison of terms from similar instruments in the marketplace. The Company measures fair value under a framework that utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of inputs which prioritize the inputs used in measuring fair value are: · Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access. · Level 2: Inputs to the valuation methodology include: o Quoted prices for similar assets or liabilities in active markets; o Quoted prices for identical or similar assets or liabilities in inactive markets o Inputs other than quoted prices that are observable for the asset or liability; o Inputs that are derived principally from or corroborated by observable market data by correlation or other means. o If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability · Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement. The Company did not have any Level 1 or Level 2 assets and liabilities at November 30, 2019 or August 31, 2019. The derivative liabilities associated with its March 2019 Convertible Notes (see Note 8), consisted of conversion feature derivatives and warrants, are Level 3 fair value measurements. 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 November 30, 2019: March 2019 Conversion Feature March 2019 Warrant Liability Total Balance at August 31, 2019 $ 2,852,000 904,000 $ 3,756,000 Change in fair value (340,000 ) (602,000 ) (942,000 ) Balance at November 30, 2019 (unaudited) $ 2,512,000 302,000 $ 2,814,000 At November 30, 2019 and August 31, 2019, the Company estimated the fair value of the conversion feature derivatives embedded in the convertible debentures and the fair value of the warrant liabilities based on weighted probabilities of assumptions used in the Lattice-based option valuation model. The key valuation assumptions used consists, in part, of the price of the Company’s common stock, a risk free interest rate based on the average yield of a Treasury note and expected volatility of the Company’s common stock all as of the measurement dates, and the various estimated reset exercise prices weighted by probability. The Company used the following assumptions to estimate fair value of the derivatives as of November 30, 2019, using the default rate of 75% of market price as a conversion price: March 2019 Conversion Feature March 2019 Warrant Liability (unaudited) (unaudited) Risk free rate 1.60 % 1.62 % Market price per share $ 10.20 $ 10.20 Life of instrument in years 0.79 4.28 Volatility 91 % 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 may need to transfer those assets or liabilities to another level in the hierarchy based on the new inputs used. The Company recognizes these transfers at the end of the reporting period that the transfers occur. For the periods ended November 30, 2019 or 2018, there were no transfers of financial assets or financial liabilities between the hierarchy levels. |
Research and Development | During the three months ended November 30, 2019 and 2018 the Company incurred research and development costs of approximately $0.9 million and $0.4 million, respectively. All costs were related to internally developed or externally contracted software and related technology for the Company’s HRIS system and related mobile application. In addition, $0 and $0.4 million of software costs were capitalized for the three months ended November 30, 2019 and 2018, respectively. |
Advertising Costs | The Company expenses all advertising as incurred. The Company incurred advertising costs totaling $304,000 and $379,000 for the three months ended November 30, 2019, and 2018, respectively. |
Reverse Stock Split | On December 17, 2019 the Company implemented a 1 for 40 reverse stock split for all common share and common share equivalents including, options, warrants, and convertible notes. All common shares and common share equivalents are presented retroactively to reflect the reverse split. |
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. Securities that are excluded from the calculation of weighted average dilutive common shares, because their inclusion would have been antidilutive are: For the Three Months Ended November 30, 2019 For the Three Months Ended November 30, 2018 Options 45,463 37,271 Senior Secured Convertible Notes 889,935 84,756 Warrants 107,416 87,783 Total potentially dilutive shares 1,042,814 209,810 |
Stock-Based Compensation | At November 30, 2019, the Company has one stock-based compensation plan under which the Company may issue awards. The Company accounts for this plan under the recognition and measurement principles of ASC 718, Compensation- Stock Compensation 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. The expected volatility is based on the historical volatility of the Company since our Initial Public Offering. Any changes in these highly subjective assumptions significantly impact stock-based compensation expense. The Company elected to account for forfeitures as they occur, as such, compensation cost previously recognized for an unvested award that is forfeited because of the failure to satisfy a service condition is revised in the period of forfeiture. |
Treasury Stock | Treasury stock represents shares of common stock provided to the company in satisfaction of the related party advance, described in Note 13. Shares provided are recorded at cost as treasury stock. The Company intends to retire all of its treasury stock outstanding as of November 30, 2019 and August 31, 2019 in fiscal 2020. Any treasury stock retired is recorded to additional paid-in capital, limited to the amount previously credited to additional paid-in capital, if any. Any excess is charged to accumulated deficit. |
Reclassifications | Certain reclassifications have been made to prior year’s data to confirm to the current year’s presentation. Such reclassifications had no impact on the Company’s financial condition, operating results, cash flows or stockholder’s equity. |
Revision of Financial Statements | During the preparation of the restated condensed consolidated financial statements for the three and six months ended February 28, 2019, the Company determined that it had improperly calculated the volatility of the Company’s common stock, which had been used to calculate the relative fair value of the warrants issued in connection with the June 2018 convertible notes. This resulted in an overstatement of the net carrying amount of the convertible note by the understatement of the corresponding debt discount with the offset to additional paid-in capital as of February 28, 2019. The Company assessed the materiality of the misstatements in accordance with Staff Accounting Bulletin No.99, “Materiality” and No. 108, “Quantifying Misstatements”, and concluded that this error was not qualitatively material on the Company’s condensed consolidated balance sheet, statements of operations, statements of cash flows, statement of stockholders’ deficit and net loss for the periods then ended. The effect of this revision on the line items within the Company’s condensed financial statements as of and for the three months ended November 30, 2018, was as follows: November 30, 2018 As Previously Reported Adjustments As Restated Convertible note, net $ 6,309,000 (739,000 ) $ 5,570,000 Additional Paid-In Capital 19,729,000 1,232,000 20,961,000 Accumulated deficit (27,977,000 ) (493,000 ) (28,470,000 ) Net Loss (2,000,000 ) (246,000 ) (2,246,000 ) Net loss per share – Basic and diluted (2.77 ) (0.34 ) (3.11 ) |
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 within annual reporting periods beginning after December 15, 2019. Early adoption is permitted for annual reporting periods (including interim periods) beginning after December 15, 2016. This new standard permits the use of either the retrospective or cumulative effect transition method. In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations. The purpose of this standard is to clarify the implementation of guidance on principal versus agent considerations related to ASU 2014-09. The standard has the same effective date as ASU 2014-09 described above. In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which provides clarity related to ASU 2014-09 regarding identifying performance obligations and licensing implementation. The standard has the same effective date as ASU 2014-09 described above. In May 2016, the FASB issued ASU 2016-12: Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which provides narrow scope improvements and practical expedients related to ASU 2014-09. The purpose of this standard is to clarify certain narrow aspects of ASU 2014-09, such as assessing the collectability criterion, presentation of sales taxes, and other similar taxes collected from customers, noncash considerations, contract modifications at transition, completed contracts are transition, and technical correction. The standard has the same effective date as ASU 2014-09 described above. In December 2016, the FASB issued ASU 2016-20: Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers. The amendments in this standard affect narrow aspects of guidance issued in ASU 2014-09. The standard has the same effective date as ASU 2014-09 described above. Topic 606 is effective for the company beginning with the fiscal year ending August 31, 2020. The Company is evaluating the effect of adopting this new accounting guidance and is currently finalizing its analysis of the financial impact of the adoption. The Company expects to adopt the guidance using the modified retrospective method. |
Summary of significant accoun_3
Summary of significant accounting policies (Tables) | 3 Months Ended |
Nov. 30, 2019 | |
Summary of significant accounting policies (Tables) | |
Schedule of fair value of the Company's derivative liabilities | March 2019 Conversion Feature March 2019 Warrant Liability Total Balance at August 31, 2019 $ 2,852,000 904,000 $ 3,756,000 Change in fair value (340,000 ) (602,000 ) (942,000 ) Balance at November 30, 2019 (unaudited) $ 2,512,000 302,000 $ 2,814,000 March 2019 Conversion Feature March 2019 Warrant Liability (unaudited) (unaudited) Risk free rate 1.60 % 1.62 % Market price per share $ 10.20 $ 10.20 Life of instrument in years 0.79 4.28 Volatility 91 % 102 % Dividend yield 0 % 0 % |
Schedule of weighted average dilutive common shares | For the Three Months Ended November 30, 2019 For the Three Months Ended November 30, 2018 Options 45,463 37,271 Senior Secured Convertible Notes 889,935 84,756 Warrants 107,416 87,783 Total potentially dilutive shares 1,042,814 209,810 |
Schedule of financial statements | November 30, 2018 As Previously Reported Adjustments As Restated Convertible note, net $ 6,309,000 (739,000 ) $ 5,570,000 Additional Paid-In Capital 19,729,000 1,232,000 20,961,000 Accumulated deficit (27,977,000 ) (493,000 ) (28,470,000 ) Net Loss (2,000,000 ) (246,000 ) (2,246,000 ) Net loss per share – Basic and diluted (2.77 ) (0.34 ) (3.11 ) |
Senior Secured Convertible No_2
Senior Secured Convertible Notes Payable (in default) (Tables) | 3 Months Ended |
Nov. 30, 2019 | |
Senior Secured Convertible Notes Payable (in default) (Tables) | |
Schedule of senior secured convertible notes payable | November 30, August 31, 2019 2019 (unaudited) Senior Secured Convertible notes, Principal $ 6,808,000 $ 6,808,000 Less debt discount and deferred financing costs (2,604,000 ) (3,457,000 ) Total outstanding convertible notes, net $ 4,204,000 $ 3,351,000 Less current portion of convertible notes payable (3,426,000 ) (3,351,000 ) Long-term convertible notes payable $ 778,000 $ - |
Schedule of rolls forward the Convertible Notes Payable balances | Gross Principal Deferred Financing Costs Note Discount Net Balance at August 31, 2019 $ 6,808,000 (344,000 ) (3,113,000 ) $ 3,351,000 Amortization of Interest Expense - 80,000 773,000 853,000 Balance at November 30, 2019 $ 6,808,000 (264,000 ) (2,340,000 ) $ 4,204,000 Less Current Amount (5,141,000 ) 174,000 1,541,000 (3,426,000 ) Long Term Balance at November 30, 2019 1,667,000 (90,000) (799,000) $ 778,000 |
Gross principal balance rollforward | June 2018 Notes December 2018 Notes March 2019 Notes Total Gross Balance at August 31, 2019 $ 1,466,000 867,000 4,475,000 $ 6,808,000 Less Discount and Debt Issuance Costs: Debt Issuance Costs - - (264,000 ) (264,000 ) Deferred Financing Costs - - (2,340,000 ) (2,340,000 ) Carrying Balance at November 30, 2019 $ 1,466,000 867,000 1,871,000 $ 4,204,000 Less Current Amount (1,466,000 ) (728,000 ) (1,232,000 ) (3,426,000 ) Long Term Balance at November 30, 2019 $ - 139,000 639,000 $ 778,000 |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 3 Months Ended |
Nov. 30, 2019 | |
Stockholders' Equity (Tables) | |
Summary of information about warrants outstanding | Exercise price Warrants Outstanding Weighted average life of outstanding warrants in years March 2019 Notes Warrants $ 70.00 74,390 4.3 June 2018 Notes Warrants $ 70.00 30,526 3.5 2017 PIPE Warrants $ 276.00 2,500 2.6 107,416 4.0 |
Share based compensation (Table
Share based compensation (Tables) | 3 Months Ended |
Nov. 30, 2019 | |
Share based compensation (Tables) | |
Summary of option activity | Options Outstanding and Exercisable Weighted Average Weighted Number Remaining Average of Contractual Exercise Options Life Price (In years) Balance, August 31, 2019 50,749 8.95 $ 95.20 Granted – – $ – Exercised – – $ – Forfeited (5,286 ) 8.44 $ 69.01 Balance at November 30, 2019 45,463 8.67 $ 98.30 |
Schedule of Option vesting activity | Weighted Weighted Number Remaining Average of Contractual Exercise Options Vested Options Life Price (In years) Balance, August 31, 2019 10,291 8.04 $ 152.80 Vested 2,232 8.44 $ 146.82 Exercised – – $ – Forfeited (488 ) 0.08 $ 116.32 Balance at November 30, 2019 12,035 7.87 $ 153.19 |
Summarizes of stock options outstanding | Options Outstanding and Exercisable Options Vested Weighted Average Weighted Weighted Weighted Number Remaining Average Number Remaining Average of Contractual Exercise of Contractual Exercise Exercise Prices Options Life Price Options Life Price (In years) (In years) $18.80-$40.00 6,625 9.52 $ 23.31 – – $ – $40.01–$80.00 13,729 9.34 $ 51.21 – – $ – $80.01–$120.00 11,224 8.45 $ 103.15 4,384 8.41 $ 103.53 $120.01–$160.00 12,625 7.79 $ 157.71 6.860 7.56 $ 157.41 $160.01-$391.60 1,260 7.63 $ 391.60 791 7.63 $ 391.60 45,463 8.67 $ 98.30 12,035 7.87 $ 153.19 |
Nature of Operations (Details N
Nature of Operations (Details Narrative) | 3 Months Ended |
Nov. 30, 2019 | |
Nature of Operations (Details Narrative) | |
Date of incorporation | Jun. 3, 2015 |
State of incorporation | Wyoming |
Summary of significant accoun_4
Summary of significant accounting policies (Details ) | 3 Months Ended |
Nov. 30, 2019USD ($) | |
Beginning balance | $ 3,756,000 |
Change in fair value | (942,000) |
Ending balance | 2,814,000 |
March 2019 Warrant Liability [Member] | |
Beginning Balance of warrant liability | 904,000 |
Change in fair value of warrant liabilty | (602,000) |
Ending balance of warrant liability | 302,000 |
March 2019 Conversion Feature [Member] | |
Beginning balance of Conversion features | 2,852,000 |
Change in fair value of conversion features | (340,000) |
Ending balance of conversion features | $ 2,512,000 |
Summary of significant accoun_5
Summary of significant accounting policies (Details 1) | 3 Months Ended |
Nov. 30, 2019$ / shares | |
March 2019 Warrant Liability [Member] | |
Risk free rate | 1.62% |
Market price per share | $ 10.20 |
Life of instrument in years | 4 years 3 months 11 days |
Volatility | 102.00% |
Dividend yield | 0.00% |
March 2019 Conversion Feature [Member] | |
Risk free rate | 1.60% |
Life of instrument in years | 9 months 14 days |
Volatility | 91.00% |
Dividend yield | 0.00% |
Market price per share conversion feature | $ 10.20 |
Summary of significant accoun_6
Summary of significant accounting policies (Details 2) - shares | 3 Months Ended | |
Nov. 30, 2019 | Nov. 30, 2018 | |
Total potentially dilutive shares | 1,042,814 | 209,810 |
Options [Member] | ||
Total potentially dilutive shares | 45,463 | 37,271 |
Senior Secured Convertible Notes [Member] | ||
Total potentially dilutive shares | 889,935 | 84,756 |
Warrant [Member] | ||
Total potentially dilutive shares | 107,416 | 87,783 |
Summary of significant accoun_7
Summary of significant accounting policies (Details 3) - USD ($) | 3 Months Ended | 12 Months Ended | |
Nov. 30, 2019 | Nov. 30, 2018 | Aug. 31, 2019 | |
Additional Paid-In Capital | $ 32,619,000 | $ 32,505,000 | |
Accumulated deficit | (47,506,000) | (44,950,000) | |
Net Loss | $ (2,556,000) | $ (2,246,000) | $ (18,700,000) |
Net loss per share - Basic and diluted | $ (2.86) | $ (3.11) | |
As Restated [Member] | |||
Convertible note, net | $ 5,570,000 | ||
Additional Paid-In Capital | 20,961,000 | ||
Accumulated deficit | (28,470,000) | ||
Net Loss | $ (2,246,000) | ||
Net loss per share - Basic and diluted | $ (3.11) | ||
Adjustments [Member] | |||
Convertible note, net | $ (739,000) | ||
Additional Paid-In Capital | 1,232,000 | ||
Accumulated deficit | (493,000) | ||
Net Loss | $ (246,000) | ||
Net loss per share - Basic and diluted | $ (0.34) | ||
As Previously Reported [Member] | |||
Convertible note, net | $ 6,309,000 | ||
Additional Paid-In Capital | 19,729,000 | ||
Accumulated deficit | (27,977,000) | ||
Net Loss | $ (2,000,000) | ||
Net loss per share - Basic and diluted | $ (2.77) |
Summary of significant accoun_8
Summary of significant accounting policies (Details Narrative) - USD ($) | 1 Months Ended | 3 Months Ended | 12 Months Ended | |
Dec. 17, 2019 | Nov. 30, 2019 | Nov. 30, 2018 | Aug. 31, 2019 | |
Advertising costs | $ 304,000 | $ 379,000 | ||
Reverse stock split | 1 for 40 reverse stock split for all common share | |||
Unbilled accounts receivable | $ 11,347,000 | 9,478,000 | ||
Research and developments costs | 900,000 | 400,000 | ||
Software cost | $ 0 | 400,000 | ||
Concentration of credit risk, description | No one individual client represents more than 10% of revenues for the three months ended November 30, 2019, and 2018, respectively | |||
Options [Member] | ||||
Short term accrued workers compensation | $ 1,800,000 | |||
Long term accrued workers compensation | 5,900,000 | |||
Senior Secured Convertible Notes [Member] | ||||
Settlement claims | ||||
Warrant [Member] | ||||
Short term accrued workers compensation | 200,000 | |||
Long term accrued workers compensation | 300,000 | |||
Short-term asset and workers compensation - deposits | 2,000,000 | |||
Short-term asset and workers compensation - deposits | $ 6,200,000 | |||
Treasury Stock [Member] | ||||
Concentration of credit risk percent | 92.00% | 92.00% |
Going Concern (Details Narrativ
Going Concern (Details Narrative) - USD ($) | 1 Months Ended | 3 Months Ended | 12 Months Ended | |||
Mar. 31, 2019 | Jun. 30, 2018 | Jun. 29, 2017 | Nov. 30, 2019 | Nov. 30, 2018 | Aug. 31, 2019 | |
Cash | $ 100,000 | $ 2,100,000 | ||||
Working capital deficit | (18,500,000) | |||||
Net Loss | (2,556,000) | $ (2,246,000) | (18,700,000) | |||
Gross profit | 3,314,000 | 3,386,000 | 3,300,000 | |||
Net non-charge charges and gains | (219,000) | (957,000) | 10,800,000 | |||
Accumulated deficit | (47,506,000) | (44,950,000) | ||||
Working capital changes | 800,000 | 6,000,000 | ||||
Proceeds from initial public offering, net of costs | ||||||
Net cash used in operating activities | (1,495,000) | $ (1,590,000) | ||||
Stock Option [Member] | ||||||
Proceeds from initial public offering, net of costs | $ 10,900,000 | |||||
Proceeds from initial public offering | $ 12,000,000 | |||||
Convertible Debt [Member] | ||||||
Proceeds from initial public offering, net of costs | $ 3,300,000 | $ 8,400,000 | ||||
Proceeds from initial public offering | $ 3,750,000 | $ 9,000,000 | ||||
Principal amount | 6,800,000 | |||||
Convertible notes payable | $ 2,700,000 | |||||
January 2020 [Member] | Subsequent Event [Member] | ||||||
Description for recurring gross profit in exchange | The Company assigned approximately 60% of its customer contracts representing approximately 50% of its recurring gross profit in exchange for $9.7 million in cash and expects to receive $9.5 million ratably over the four years following the transaction close, subject to certain closing conditions. The Company will transfer $1.7 million of working capital after closing the transaction and approximately $6 million of the Company’s annualized gross profit. |
Senior Secured Convertible No_3
Senior Secured Convertible Notes Payable (in default) (Details) - USD ($) | Nov. 30, 2019 | Aug. 31, 2019 |
Senior Secured Convertible Notes Payable (in default) (Details) | ||
Senior Secured Convertible notes, Principal | $ 6,808,000 | $ 6,808,000 |
Less debt discount and deferred financing costs | (2,604,000) | (3,457,000) |
Total outstanding convertible notes, net | 4,204,000 | 3,351,000 |
Less current portion of convertible notes payable | (3,426,000) | (3,351,000) |
Long-term convertible notes payable | $ 778,000 |
Senior Secured Convertible No_4
Senior Secured Convertible Notes Payable (in default) (Details 1) | 3 Months Ended |
Nov. 30, 2019USD ($) | |
Gross Principal | |
Beginning Balance at August 31, 2019, Gross Principal | $ 6,808,000 |
Amortization of Interest Expense, Gross Principle | |
Ending Balance at November 30, 2019, Gross Principal | 6,808,000 |
Less Current Gross Principal Amount | (5,141,000) |
Ending Balance Long Term Gross Principal balance at November 30, 2019 | 1,667,000 |
Deferred Financing Costs | |
Beginning Balance at August 31, 2019, Deferred Financing Costs | (344,000) |
Amortization of Interest Expense, Deferred Financing Costs | 80,000 |
Ending Balance at November 30, 2019, Deferred Financing Costs | (264,000) |
Less Current Amount, Deferred Financing Costs | 174,000 |
Ending Long-term Balance at November 30, 2019, Deferred Financing Costs | (90,000) |
Note Discount | |
Beginning Balance at August 31, 2019, Note Discount | (3,113,000) |
Amortization of Interest Expense, Note discount | 773,000 |
Ending Balance at November 30, 2019, Note Discount | (2,340,000) |
Less Current Amount, Note Discount | 1,541,000 |
Long-term Balance at November 30, 2019, Note Discount | (799,000) |
Net | |
Beginning Balance at August 31, 2019, Net | 3,351,000 |
Amortization of Interest Expense, Net | 853,000 |
Ending Balance at November 30, 2019, Net | 4,204,000 |
Less Curent Amount, Net | (3,426,000) |
Ending Long Term Balance at November 30, 2019, net | $ 778,000 |
Senior Secured Convertible No_5
Senior Secured Convertible Notes Payable (in default) (Details 2) | 3 Months Ended |
Nov. 30, 2019USD ($) | |
Gross Balance, Beginning | $ 6,808,000 |
Less Discount and Debt Issuance Costs: | |
Debt Issuance Costs | (264,000) |
Deferred Financing Costs | (2,340,000) |
Carrying Balance | 4,204,000 |
Less Current Amount, debt issuance costs | (3,426,000) |
Long Term Balance | 778,000 |
June 2018 [Member] | |
Gross Balance, Beginning | 1,466,000 |
Less Discount and Debt Issuance Costs: | |
Debt Issuance Costs | |
Deferred Financing Costs | |
Carrying Balance | 1,466,000 |
Less Current Amount | (1,466,000) |
Long Term Balance | |
December 2018 Notes [Member] | |
Less Discount and Debt Issuance Costs: | |
Long Term Balance | 139,000 |
Less Current Amount | (728,000) |
Gross Balance, Beginning | 867,000 |
Less Discount and Debt Issuance Costs: | |
Debt Issuance Costs | |
Deferred Financing Costs | |
Carrying Balance | 867,000 |
March 2019 Notes [Member] | |
Less Discount and Debt Issuance Costs: | |
Long Term Balance | 639,000 |
Less Current Amount | (1,232,000) |
Less Discount and Debt Issuance Costs: | |
Gross Balance, Beginning | 4,475,000 |
Less Discount and Debt Issuance Costs: | |
Debt Issuance Costs | (264,000) |
Deferred Financing Costs | (2,340,000) |
Carrying Balance | $ 1,871,000 |
Senior Secured Convertible No_6
Senior Secured Convertible Notes Payable (in default) (Details Narrative) - USD ($) | Dec. 05, 2019 | Mar. 12, 2019 | Jun. 04, 2018 | Dec. 31, 2018 | Dec. 20, 2018 | Jun. 30, 2018 | Nov. 30, 2019 | Nov. 30, 2018 | Aug. 31, 2019 | Aug. 31, 2018 | Dec. 11, 2019 | Jun. 10, 2019 |
Long term liabilities | $ 1,245,000 | |||||||||||
Convertible notes, net | 778,000 | |||||||||||
Amortized Interest expense | 853,000 | $ 798,000 | ||||||||||
Interest expense | 300,000 | |||||||||||
Additional accrued liabilities | 1,800,000 | |||||||||||
Accrued interest payable | 600,000 | |||||||||||
Additional interest payable | 300,000 | |||||||||||
Amortization debt discount and debt issuance cost | 854,000 | $ 1,044,000 | ||||||||||
Settlement amount | ||||||||||||
Additional liquidating damages | $ 1,800,000 | |||||||||||
Debt instrument converted amount, interest | ||||||||||||
Debt instrument converted amount shares issued | ||||||||||||
Amortized in cash amount | ||||||||||||
Interest rate | 18.00% | 8.00% | ||||||||||
Original issue discount | $ 1,000,000 | |||||||||||
Description for event of default | Alternate conversion percentage is 75% if the alternate conversion is an alternate conversion event of default as a result of bankruptcy or 80% for all alternate event of default conversion or 85% is such alternate conversion is an alternate optional conversion; Redemption at the option of the holder at 25% premium upon an event of default; Redemption at the option of the Company at 15% premium at any time after 45 days from March 12, 2019. | |||||||||||
Common stock, shares issued | 907,047 | 907,047 | ||||||||||
Warrants granted | ||||||||||||
Institutional Investors [Member] | ||||||||||||
Convertible notes, Principal | 10,000,000 | |||||||||||
Reduced accrued loss | ||||||||||||
Conversion price | ||||||||||||
Warrants purchase common stock, shares | 5,422 | |||||||||||
Warrants granted | 25,101 | |||||||||||
Debt issuance costs | $ 600,000 | |||||||||||
Proceeds from issuance of notes | $ 8,400,000 | |||||||||||
Maturity date | Sep. 4, 2019 | |||||||||||
Original issue discount | $ 1,000,000 | |||||||||||
Purchase price | $ 9,000,000 | |||||||||||
Conversion price description | ||||||||||||
Warrants exercise price | $ 99.60 | |||||||||||
Price per share | $ 86.80 | $ 63.60 | ||||||||||
Risk-free interest rate | 2.49% | |||||||||||
Expected volatility | 122.00% | |||||||||||
Fair value of the conversion feature derivative | $ 2,421,000 | |||||||||||
Financing costs | $ 2,600,000 | |||||||||||
Institutional Investors [Member] | Warrant [Member] | ||||||||||||
Warrants exercise price | 70 | |||||||||||
Warrants granted | 74,387 | |||||||||||
Price per share | $ 63.60 | |||||||||||
Risk-free interest rate | 2.49% | |||||||||||
Expected volatility | 122.00% | |||||||||||
Maturity term | 5 years | |||||||||||
Fair value of common stovk | $ 3,917,000 | |||||||||||
June 2018 Senior Convertible Note [Member] | ||||||||||||
Maturity date | Sep. 4, 2019 | |||||||||||
Coupon rate | 8.00% | |||||||||||
Price per share | $ 99.60 | |||||||||||
Conversion price | 85.00% | |||||||||||
Amortization of principal in cash premium | 10.00% | |||||||||||
Lowest volume weighted average price | 15.00% | |||||||||||
Exercise Prices Four [Member] | Maximum [Member] | ||||||||||||
Convertible notes, Principal | $ 4,750,000 | |||||||||||
Conversion price | $ 1.67 | |||||||||||
Warrants exercise price | ||||||||||||
Warrants purchase common stock, shares | ||||||||||||
Warrants granted | 74,387 | |||||||||||
Conversion price description | Alternate conversion price at the greater of the floor price of $0.31 and the lower of the conversion price in effect and alternate conversion percentage of the lowest VWAP of the common share during the 10 consecutive trading day prior to the applicable conversion date; | |||||||||||
Debt issuance costs | $ 500,000 | |||||||||||
Proceeds from issuance of notes | $ 3,300,000 | |||||||||||
Maturity date | Sep. 12, 2020 | |||||||||||
Purchase price of notes | $ 3,750,000 | |||||||||||
December 2018 Notes [Member] | ||||||||||||
Convertible notes, Principal | $ 244,000 | 22,000 | ||||||||||
Reduced accrued loss | 889,000 | |||||||||||
March 2019 Notes [Member] | ||||||||||||
Convertible notes, Principal | 2,890,000 | 275,000 | ||||||||||
June Notes [Member] | ||||||||||||
Convertible notes, Principal | $ 8,534,000 | |||||||||||
Exchange Agreement [Member] | December 2018 Notes [Member] | ||||||||||||
Principal outstanding | 222,000 | |||||||||||
Principal outstanding, Revised | 244,000 | |||||||||||
Exchange Agreement [Member] | March 2019 Notes [Member] | ||||||||||||
Principal outstanding | 2,445,000 | |||||||||||
Principal outstanding, Revised | $ 2,890,000 | |||||||||||
Exchange Agreement [Member] | March 2019 Convertible Notes [Member] | ||||||||||||
Conversion price | $ 40 | |||||||||||
Exchanged note amount | $ 222,000 | |||||||||||
Common stock, shares issued | 21,750 | |||||||||||
Extended term description | Extended the term of the March 2019 notes to March 1, 2022, provided for a revised quarterly amortization schedule beginning April 1, 2020, and removed certain anti-dilution terms of the related March 2019 warrants. | |||||||||||
Additional consideration | $ 200,000 | $ 200,000 | ||||||||||
Percentage of principal increased | 10.00% |
Stockholders' Equity (Details)
Stockholders' Equity (Details) | 3 Months Ended |
Nov. 30, 2019USD ($)$ / shares | |
Warrants outstanding | $ | $ 107,416 |
Weighted average life of outstanding warrants in years | 4 years |
Exercise price | $ / shares | |
March 2019 Notes Warrants [Member] | |
Warrants outstanding | $ | $ 74,390 |
Weighted average life of outstanding warrants in years | 4 years 3 months 19 days |
Exercise price | $ / shares | $ 70 |
June 2018 Notes Warrants [Member] | |
Warrants outstanding | $ | $ 30,526 |
Weighted average life of outstanding warrants in years | 3 years 6 months |
Exercise price | $ / shares | $ 70 |
2017 PIPE Warrants [Member] | |
Warrants outstanding | $ | $ 2,500 |
Weighted average life of outstanding warrants in years | 2 years 7 months 6 days |
Exercise price | $ / shares | $ 276 |
Stockholders' Equity (Details N
Stockholders' Equity (Details Narrative) | 3 Months Ended |
Nov. 30, 2019 | |
Warrant [Member] | |
Reverse split description | All warrants outstanding and exercise prices have been adjusted to reflect the 1:40 reverse split. |
Share based compensation (Detai
Share based compensation (Details) | 3 Months Ended |
Nov. 30, 2019$ / sharesshares | |
Number of Options | |
Options outstanding, beginning balance | shares | 50,749 |
Granted | shares | |
Exercised | shares | |
Forfeited | shares | (5,286) |
Options outstanding, ending balance | shares | 45,463 |
Weighted Average Remaining Contractual Life (In years) | |
Weighted Average Remaining Contractual Life In Years, beginning balance | 8 years 11 months 12 days |
Weighted Average Remaining Contractual Life In Years, Granted | |
Weighted Average Remaining Contractual Life In Years, Forfeited | 8 years 5 months 9 days |
Weighted Average Remaining Contractual Life In Years, Ending balance | 8 years 8 months 2 days |
Weighted Average Exercise Price | |
Weighted Average Exercise Price Beginning | $ / shares | $ 95.20 |
Granted | $ / shares | |
Exercised | $ / shares | |
Forfeited | $ / shares | 69.01 |
Weighted Average Exercise Price Ending | $ / shares | $ 98.30 |
Share based compensation (Det_2
Share based compensation (Details 1) | 3 Months Ended |
Nov. 30, 2019$ / sharesshares | |
Number of Option | |
Options Vested, Beginning balance | shares | 10,291 |
Vested | shares | 2,232 |
Exercised | shares | |
Forfeited | shares | (488) |
Options Vested, Ending balance | shares | 12,035 |
Weighted Average Remaining Contractual Life (In years) | |
Weighted Average Remaining Contractual Life In Years, beginning balance | 8 years 15 days |
Weighted Average Remaining Contractual Life In Years, Vested | 8 years 5 months 9 days |
Weighted Average Remaining Contractual Life In Years, Forfeited | 29 days |
Weighted Average Remaining Contractual Life In Years, Ending balance | 7 years 10 months 14 days |
Weighted Average Exercise Price | |
Weighted Average Exercise Price Beginning | $ / shares | $ 152.80 |
Vested | $ / shares | 146.82 |
Forfeited | $ / shares | |
Exercised | $ / shares | 116.32 |
Weighted Average Exercise Price Ending | $ / shares | $ 153.19 |
Share based compensation (Det_3
Share based compensation (Details 2) | 3 Months Ended |
Nov. 30, 2018$ / sharesshares | |
Exercise Prices Five [Member] | Maximum [Member] | |
Exercise Prices | $ 391.60 |
Exercise Prices Five [Member] | Minimum [Member] | |
Exercise Prices | 160.01 |
Exercise Prices Four [Member] | Maximum [Member] | |
Exercise Prices | 160 |
Exercise Prices Four [Member] | Minimum [Member] | |
Exercise Prices | 120.01 |
Exercise Prices Three [Member] | Maximum [Member] | |
Exercise Prices | 120 |
Exercise Prices Three [Member] | Minimum [Member] | |
Exercise Prices | 80.01 |
Exercise Prices One [Member] | Maximum [Member] | |
Exercise Prices | 40 |
Exercise Prices One [Member] | Minimum [Member] | |
Exercise Prices | 18.80 |
Exercise Prices Two [Member] | Maximum [Member] | |
Exercise Prices | 80 |
Exercise Prices Two [Member] | Minimum [Member] | |
Exercise Prices | $ 40.01 |
Options Vested Five [Member] | |
Number of options | shares | 791 |
Weighted Average Remaining Contractual Life In Years | 7 years 7 months 17 days |
Weighted Average Exercise Price | $ 391.60 |
Options Vested Four [Member] | |
Number of options | shares | 6,890 |
Weighted Average Remaining Contractual Life In Years | 7 years 6 months 21 days |
Weighted Average Exercise Price | $ 157.41 |
Options Vested Three [Member] | |
Number of options | shares | 4,384 |
Weighted Average Remaining Contractual Life In Years | 8 years 4 months 28 days |
Weighted Average Exercise Price | $ 103.53 |
Options Vested Two [Member] | |
Number of options | shares | |
Weighted Average Remaining Contractual Life In Years | |
Weighted Average Exercise Price | |
Options Vested One [Member] | |
Number of options | shares | |
Weighted Average Remaining Contractual Life In Years | |
Weighted Average Exercise Price | |
Options Vested [Member] | |
Number of options | shares | 12,035 |
Weighted Average Remaining Contractual Life In Years | 7 years 10 months 14 days |
Weighted Average Exercise Price | $ 153.19 |
Options Outstanding and Exercisable Five [Member] | |
Number of options | shares | 1,260 |
Weighted Average Remaining Contractual Life In Years | 7 years 7 months 17 days |
Weighted Average Exercise Price | $ 391.60 |
Options Outstanding and Exercisable Two [Member] | |
Number of options | shares | 13,729 |
Weighted Average Remaining Contractual Life In Years | 9 years 4 months 2 days |
Weighted Average Exercise Price | $ 51.21 |
Options Outstanding and Exercisable [Member] | |
Number of options | shares | 45,463 |
Weighted Average Remaining Contractual Life In Years | 8 years 8 months 2 days |
Weighted Average Exercise Price | $ 98.30 |
Options Outstanding and Exercisable Four [Member] | |
Number of options | shares | 12,625 |
Weighted Average Remaining Contractual Life In Years | 7 years 9 months 14 days |
Weighted Average Exercise Price | $ 157.71 |
Options Outstanding and Exercisable Three [Member] | |
Number of options | shares | 11,224 |
Weighted Average Remaining Contractual Life In Years | 8 years 5 months 12 days |
Weighted Average Exercise Price | $ 103.15 |
Options Outstanding and Exercisable One [Member] | |
Number of options | shares | 6,625 |
Weighted Average Remaining Contractual Life In Years | 9 years 6 months 7 days |
Weighted Average Exercise Price | $ 23.31 |
Share based compensation (Det_4
Share based compensation (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended | ||
Nov. 30, 2019 | Nov. 30, 2018 | Aug. 31, 2019 | Aug. 31, 2018 | |
Common shares issued | ||||
Deferred share base compensation | $ 114,000 | $ 190,000 | ||
Share Based Compensation [Member] | ||||
Common shares issued | 250,000 | |||
Option forfeited | 38,000 | |||
Option returned | 38,000 | |||
Common share issuable | 200,000 | |||
Common shares issueds | $ 167,000 | |||
Common shares issued to grant | 200,000 | |||
Aggregate intrinsic value | $ 0 | |||
Deferred share base compensation | $ 1,400,000 | |||
Remaining weighted average vesting periods | 2 years 1 month 6 days | |||
Reverse split description | The number of options and exercise prices have been presented retroactively for the 1 for 40 December 17, 2019 reverse split. | |||
Employee stock option compensation expense | $ 114,000 | $ 77,000 | ||
Board of Directors [Member] | ||||
Options shares | 83,000 | |||
Designated shares | 7,000 |
Related Parties (Details Narrat
Related Parties (Details Narrative) - USD ($) | 3 Months Ended | |
Nov. 30, 2019 | Nov. 30, 2018 | |
Professional fees | $ 840,000 | $ 624,000 |
J. Steven Holmes [Member] | ||
Professional fees | $ 180,000 | $ 180,000 |
Contingencies (Details Narrativ
Contingencies (Details Narrative) - USD ($) | 1 Months Ended | 3 Months Ended | ||||||||
Jan. 17, 2020 | Apr. 30, 2019 | Nov. 30, 2019 | Jan. 16, 2020 | Aug. 31, 2019 | Aug. 27, 2019 | Jun. 20, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Jun. 30, 2018 | |
Common stock shares issued | 907,047 | 907,047 | ||||||||
Kadima Ventures [Member] | Software Development [Member] | ||||||||||
Software development cost | $ 8,500,000 | |||||||||
Software modules cost | $ 11,000,000 | |||||||||
Due date | Jan. 31, 2020 | |||||||||
Additional cost | $ 10,000,000 | |||||||||
Alpha Capital v. ShiftPixy, Inc. [Member] | ||||||||||
Convertible notes | $ 310,000 | |||||||||
Convertible notes outstanding | $ 1,700,000 | 1,200,000 | 200,000 | 300,000 | ||||||
Common stock shares issued | 25,000 | |||||||||
Proceeds from Notes Payable | $ 310,000 | |||||||||
Damages incurred | 190,000 | |||||||||
Total award money received | 500,000 | |||||||||
Convertible notes per share | $ 12.20 | |||||||||
Dominion Capital LLC v. ShiftPixy [Member] | ||||||||||
Convertible notes outstanding | 1,500,000 | 600,000 | 200,000 | 700,000 | ||||||
MEF I, LP v. ShiftPixy, Inc. [Member] | ||||||||||
Convertible notes | $ 2,100,000 | |||||||||
Convertible notes outstanding | $ 700,000 | $ 200,000 | $ 500,000 | |||||||
Accrued interest and accrued damages cash payment | $ 725,000 | |||||||||
accrued interest and accrued damages shares issued | 20,000 | |||||||||
Proceeds from issuance of common stock | $ 969,000 |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - USD ($) | Dec. 05, 2019 | Dec. 17, 2019 | Nov. 30, 2019 | Dec. 23, 2019 | Dec. 11, 2019 | Aug. 31, 2019 |
Reverse stock split | The Company effected a 1 for 40 reverse stock split. | |||||
Convertible notes, net | $ 778,000 | |||||
Long term liabilities | $ 1,245,000 | |||||
Common stock shares issued | 907,047 | 907,047 | ||||
Common stock, shares value | ||||||
White [Member] | ||||||
Common stock shares issued | 428 | |||||
Messrs. Higgins and White [Member] | ||||||
Common stock shares issued | 856 | |||||
Common stock, shares value | $ 7,000 | |||||
Messrs. Higgins [Member] | ||||||
Common stock shares issued | 428 | |||||
Subsequent Event [Member] | Holder [Member] | ||||||
Consideration value | $ 200,000 | |||||
Common stock shares issued | 21,750 | |||||
Common stock, shares value | $ 200,000 | |||||
December 2018 Notes [Member] | Subsequent Event [Member] | Holder [Member] | ||||||
Description for consideration exchange | 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 $2,890,000. | |||||
March 2019 Convertible Notes [Member] | Subsequent Event [Member] | Holder [Member] | ||||||
Description for extended term | March 2019 notes to March 1, 2022 | |||||
Conversion price | $ 40 | |||||
Asset Purchase Agreement [Member] | On January 6, 2020 [Member] | ||||||
Disposal of business, consideration received or receivable | 19,200,000 | |||||
Disposal of business, consideration received | $ 9,700,000 | |||||
Frequency of consideration receivables | Per year | |||||
Percentage of recurring business sold | 60.00% | |||||
Disposal of business, consideration receivables periodicaly | $ 2,400,000 |