UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT |
For the transition period from _______ to _______
SEC File No.
(Exact name of registrant as specified in its charter) |
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(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
| (Zip Code) |
Registrant’s telephone number: (
N/A
(Former name, former address and former three months, if changed since last report)
Securities registered under Section 12(b) of the Act:
Title of each class |
| Trading Symbol(s) |
| Name of each exchange on which registered |
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| The |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☒ | Smaller reporting company | ||
Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
The number of shares of the registrant’s only class of common stock issued and outstanding as of April 15, 2024, was
TABLE OF CONTENTS
2 |
Table of Contents |
PART I — FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Unaudited Consolidated Balance Sheets
(Amounts in thousands, except share amounts)
|
| February 29, 2024 |
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| August 31, 2023 |
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ASSETS |
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Current assets |
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Cash |
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Accounts receivable, net |
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Unbilled accounts receivable |
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Prepaid expenses |
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Other current assets |
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Total current assets |
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Fixed assets, net |
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Right-of-use asset, net |
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Deposits and other assets |
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Total assets |
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LIABILITIES AND STOCKHOLDERS’ DEFICIT |
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Current liabilities |
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Accounts payable and other accrued liabilities |
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Payroll tax related liabilities |
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Payroll related liabilities |
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Accrued workers’ compensation costs discontinued operations |
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Total current liabilities |
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Non-current liabilities |
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Operating lease liability, non-current |
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Total liabilities |
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Commitments and contingencies (See Notes 10 and 11) |
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Stockholders’ deficit |
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Convertible preferred stock series A, |
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Common stock, |
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Additional paid-in capital |
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Accumulated deficit |
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Total stockholders’ deficit |
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Total liabilities and stockholders’ deficit |
| $ |
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| $ |
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The accompanying notes are an integral part of these condensed unaudited consolidated financial statements.
3 |
Table of Contents |
ShiftPixy, Inc.
Condensed Unaudited Consolidated Statements of Operations
(Amounts in thousands, except share and per share amounts)
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| For the Three Months Ended |
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| For the Six Months Ended |
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| February 29, 2024 |
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| February 28, 2023 |
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| February 29, 2024 |
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| February 28, 2023 |
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Revenues (See Note 2) |
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Cost of revenues |
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Gross profit |
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Operating expenses: |
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Salaries, taxes and benefits |
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Professional fees |
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Software development |
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Depreciation and amortization |
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General and administrative |
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Total operating expenses |
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Operating loss |
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Other (expense) income: |
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Gain from legal settlement |
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Other income (expense) |
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Total other income |
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Net loss attributable to ShiftPixy, Inc |
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Loss from discontinued operations, net of tax |
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Non-controlling interest |
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Net Loss |
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Preferred stock preferential dividend |
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Net loss attributable to Shiftpixy’s shareholders |
| $ | ( | ) |
| $ | ( | ) ) |
| $ | ( | ) |
| $ | ( | ) |
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Net loss per share attributable to ShiftPixy shareholders, basic and diluted |
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Continuing operations – basic and diluted |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
Discontinued operations – basic and diluted |
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Net loss per common share – basic and diluted |
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Weighted average common shares outstanding – basic and diluted |
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The accompanying notes are an integral part of these condensed unaudited consolidated financial statements.
4 |
Table of Contents |
ShiftPixy, Inc.
Condensed Unaudited Consolidated Statements of Stockholders' Deficit
For the Three and Six Months Ended February 29, 2024
(Amounts in thousands, except shares)
|
| Preferred Stock Issued |
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| Common Stock Issued |
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| Additional Paid-In Capital |
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| Accumulated Deficit |
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| Total Stockholders’ Deficit |
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| Shares |
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| Amount |
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| Shares |
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| Amount |
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Balance, September 1, 2023 |
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
| $ | ( | ) | ||||
Fair Market value increase of preferred stock prior to reverse stock split |
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| — |
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| — |
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Preferential dividend of preferred stock |
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| — |
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Additional shares issued due to reverse stock split |
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Common stock issued for private placement, including the exercise of prefunded warrants, net of offering costs |
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Stock-based compensation expense |
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| — |
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Preferred stock Series A issued upon the exercise of preferred stock option |
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| — |
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Common stock issued on conversion of preferred stocks into common stock |
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Net loss |
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| — |
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| — |
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Balance, February 29, 2024 |
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| — |
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
| $ | ( | ) |
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| Preferred Stock Issued |
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| Common Stock Issued |
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| Additional Paid-In |
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| Accumulated |
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| Total Stockholders’ |
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| Shares |
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| Amount |
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| Shares |
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| Amount |
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| Capital | Deficit | Deficit |
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Balance, December 1, 2023 |
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
| $ | ( | ) | ||||
Stock-based compensation expense |
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| — |
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| — |
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Net loss |
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| — |
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| — |
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Balance, February 29, 2024 |
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| — |
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
| $ | ( | ) |
The accompanying notes are an integral part of these condensed unaudited consolidated financial statements.
5 |
Table of Contents |
ShiftPixy, Inc.
Condensed Unaudited Consolidated Statements of Stockholders' Deficit
For the Three and Six Months Ended February 28, 2023
(Amounts in thousands, except shares)
|
| Preferred Stock Issued |
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| Common Stock Issued |
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| Additional Paid-In |
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| Accumulated |
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| Total Stockholders’ Deficit |
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| Noncontrolling |
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| Total Stockholders' |
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| Shares |
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| Amount |
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| Shares |
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| Amount |
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| Capital |
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| Deficit |
|
| ShiftPixy, Inc. |
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| interest |
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| Deficit |
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Balance, September 1, 2022 |
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
| $ | ( | ) |
| $ |
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| $ | ( | ) | ||||||
Fair Market value increase of preferred stock prior to reverse stock split |
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| — |
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Preferential dividend of preferred stock |
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| — |
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| — |
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Common stock issued on exercised prefunded warrants |
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Common stock issued for private placement, net of offering costs |
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Common stock issued on conversion of preferred stock into common stock |
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Stock-based compensation expense |
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Warrant modification expense |
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Additional shares issued due to reverse stock split |
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Net proceeds of ATM, net of offering expenses |
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Deconsolidation of VIE |
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| ( | ) |
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Net loss |
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| — |
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| — |
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Balance, February 28, 2023 |
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| — |
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
| $ | ( | ) |
| $ |
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| $ | ( | ) |
|
| Preferred Stock Issued |
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| Common Stock Issued |
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| Additional Paid-In |
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| Accumulated |
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| Total Stockholders’ Deficit |
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| Noncontrolling |
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| Total Shareholders' |
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| Shares |
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| Amount |
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| Shares |
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| Amount |
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| Capital |
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| Deficit |
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| ShiftPixy, Inc. |
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| interest |
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| Deficit |
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Balance, December 1, 2022 |
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| — |
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
| $ | ( | ) |
| $ |
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| $ | ( | ) | |||||
Proceeds of ATM, net of offering expenses |
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| — |
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| $ |
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Stock-based compensation expense |
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| — |
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Deconsolidation of VIE |
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| — |
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| — |
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| $ | ( | ) |
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Net loss |
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| — |
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| — |
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| ( | ) |
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| ( | ) |
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| ( | ) | ||||
Balance, February 28, 2023 |
|
| — |
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| $ |
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| $ |
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| $ |
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| $ | ( | ) |
| $ | ( | ) |
| $ |
|
| $ | ( | ) |
The accompanying notes are an integral part of these condensed unaudited consolidated financial statements.
6 |
Table of Contents |
ShiftPixy, Inc.
Condensed Unaudited Consolidated Statements of Cash Flows
(Amounts in thousands)
|
| For the Six Months Ended |
| |||||
|
| February 29, 2024 |
|
| February 28, 2023 |
| ||
OPERATING ACTIVITIES |
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Net loss |
| $ | ( | ) |
| $ | ( | ) |
Loss from discontinued operations |
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| ( | ) | |
Non-controlling interest |
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| ( | ) | |
Net loss from continuing operations |
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| ( | ) |
Adjustments to reconcile net loss from continuing operations to net cash used in continuing operating activities: |
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Depreciation and amortization |
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Stock-based compensation |
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Warrant modification expense |
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Amortization of operating lease |
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Fair value of shares for services to be issued to directors |
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Allowance for credit losses |
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Loss from sale of fixed assets |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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| ( | ) |
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| ( | ) |
Unbilled accounts receivable |
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| ( | ) | |
Prepaid expenses and other current assets |
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Other long-term assets |
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| ( | ) | |
Accounts payable and other accrued liabilities |
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| ( | ) | |
Payroll tax liabilities |
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Payroll related liabilities |
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Net cash used in continuing operating activities |
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| ( | ) |
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INVESTING ACTIVITIES |
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Purchase of fixed assets |
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| ( | ) | |
Redemption of Trust Account |
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Proceeds from the sale of fixed assts |
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| ||
Net cash provided by investing activities |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
Proceeds from prefunded warrant exercises |
|
|
|
|
|
| ||
Payment to IHC shareholders |
|
|
|
|
| ( | ) | |
Proceeds from At the Market Offering, net of offering costs |
|
|
|
|
|
| ||
Proceeds from private placement, net of offering costs |
|
|
|
|
|
| ||
Net cash provided by (used in) financing activities |
|
|
|
|
| ( | ) | |
Net (decrease) increase in cash |
|
| ( | ) |
|
|
| |
Cash - Beginning of Period |
|
|
|
|
|
| ||
Cash - End of Period |
| $ |
|
| $ |
| ||
Supplemental Disclosure of Cash Flows Information: |
|
|
|
|
|
|
|
|
Cash paid for interest |
| $ |
|
| $ |
| ||
Cash paid for income taxes |
| $ |
|
| $ |
| ||
Non-cash Investing and Financing Activities: |
|
|
|
|
|
|
|
|
Deconsolidation of VIE |
| $ |
|
| $ |
| ||
Increase in marketable securities in trust account and Class A mandatory redeemable common shares |
| $ |
|
| $ |
| ||
Transfer of preferred shares to common shares |
| $ |
|
| $ |
|
The accompanying notes are an integral part of these condensed unaudited consolidated financial statements.
7 |
Table of Contents |
ShiftPixy, Inc.
Notes to the Condensed Consolidated Financial Statements
February 29, 2024
Note 1: Nature of Operations
ShiftPixy, Inc. (the “Company”) was incorporated on June 3, 2015, in the State of Wyoming. The Company is a specialized human capital service provider that provides solutions for large, contingent, part-time workforce demands, primarily in the light industrial, restaurant and hospitality service trades. The Company’s historic focus has been on the quick service restaurant (“QSR”) industry in Southern California, but the Company has expanded into other geographic areas and industries that employ temporary or part-time labor sources, including the healthcare industry.
The Company functions as an employment administrative services (“EAS”) provider primarily through its wholly owned subsidiary, ReThink Human Capital Management, Inc. (“HCM”), as well as a staffing provider through another of its wholly owned subsidiaries, ShiftPixy Staffing, Inc. (“Staffing”). These subsidiaries provide a variety of services typically as a co-employer through HCM and a direct employer through Staffing, including the following functions: administrative services, payroll processing, human resources consulting, and workers’ compensation administration and coverage (as permitted and/or required by state law). The Company has built a human resources information systems (“HRIS”) platform to assist in client acquisition that simplifies the onboarding of new clients into the Company’s closed proprietary operating and processing information system (the “ShiftPixy Ecosystem”).
In January 2020, the Company sold the assets of Shift Human Capital Management Inc. (“SHCM”), a wholly owned subsidiary of the Company, pursuant to which the Company assigned the majority of the Company’s billable clients at the time of the sale to a third party for cash. The continuing impact of this transaction on the Company’s condensed consolidated financial statements is described in Note 2.
Effective October 14, 2023, the Company filed articles of amendment to the Company’s articles of incorporation to effect a one-for-twenty-four (1:24) reverse split of the Company’s issued and outstanding shares of common stock. The reverse split became effective on Nasdaq October 16, 2023. All references to common stock, warrants and options except for the conditional preferred stock option granted in August 2023, to purchase common stock, including per share data and related information contained in the condensed consolidated financial statements have been retroactively adjusted to reflect the effect of the reverse stock split for all periods presented.
Note 2: Summary of Significant Accounting Policies
Basis of Presentation
The accompanying condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). These consolidated condensed financial statements are presented in United States dollars. The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with the instructions to Form 10-Q. All adjustments which are, in the opinion of management, necessary for a fair presentation of the results of operations for the interim periods have been made and are of a recurring nature unless otherwise disclosed herein.
The results of condensed operations for the three and six months ending February 29, 2024, are not necessarily indicative of the results that may be expected for the full year ending August 31, 2024. 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 fiscal year ended August 31, 2023 (“Fiscal 2023”), filed with the SEC on December 14, 2023.
8 |
Table of Contents |
Principles of Consolidation
The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries listed below. All intercompany transactions and balances have been eliminated.
The Company’s consolidated subsidiaries are as follows:
Name of Consolidated Subsidiaries or Entities |
| State or Other Jurisdiction of Incorporation or Organization |
| Attributable Interest |
| |
Shiftpixy Corporate Services, Inc. |
|
|
| % | ||
Shiftpixy Staffing, Inc. |
| |
|
| % | |
Shiftpixy Contracting Services, Inc. |
|
|
| % | ||
Shiftpixy Productions, Inc. |
|
|
| % | ||
Shiftpixy Investments, Inc. |
|
|
| % | ||
Shiftpixy Labs, Inc. |
|
|
| % | ||
Industrial Human Capital, Inc (until February 7, 2023) |
|
|
|
|
|
|
The condensed consolidated financial statements previously included the accounts of Industrial Human Capital, Inc. (“IHC”), which was a special purpose acquisition company, or “SPAC,” for which our wholly owned subsidiary, ShiftPixy Investments, Inc., served as the financial sponsor, and which SPAC was deemed to be controlled by the Company as a result of the Company’s
As of February 7, 2023, IHC was not a part of the Company’s operations, and consolidation. IHC was dissolved on November 14, 2022, and the Trustee released all the redemption funds from the Trust Account to the IHC shareholders on December 1, 2022, effectively liquidating the Trust. On February 7, 2023, three creditors of IHC filed an involuntary petition for liquidation under Chapter 7 against IHC in the US Bankruptcy Court for the Southern District of Florida. Pursuant to ASC 810-10-15, consolidation is precluded where control does not rest for a non-controlling interest in legal reorganization or bankruptcy. In addition, IHC did not meet the criteria of a variable interest entity. See Note 11 for disclosure related to the litigation with IHC.
Use of Estimates
The preparation of the condensed consolidated 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:
| · | Continuation as a going concern; management assumes that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets and liquidation of all liabilities in the normal course of business, |
| · | Liability for legal contingencies, |
| · | Payroll tax and associated penalties and interest, and |
| · | Impairment of long-lived assets. |
These significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties to these estimates or assumptions that are difficult to measure of value.
9 |
Table of Contents |
Management regularly reviews the key factors and assumptions to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience, and reasonable assumptions. After such a valuation, if deemed appropriate, those estimates are adjusted accordingly.
Liquidity, Capital Resources and Going Concern
As of February 29, 2024, the Company had cash of less than $
As of February 29, 2024, the Company is delinquent with respect to remitting payroll tax payments to the IRS, States, and local jurisdictions for an aggregate amount of $
The Company has received delinquent notices and notices relating to liens from the IRS claiming it owes approximately $
| ■ | In October of 2023, the IRS issued to ShiftPixy a Letter 1058, Final Notice, Notice of Intent to Levy and Notice of Your Right to a Hearing, with respect to ShiftPixy's Form 941 and Form 940 for specific years. In November of 2023, ShiftPixy timely filed a Form 12153, Request for a Collection Due Process or Equivalent Hearing, with respect to ShiftPixy's Liability That Are Subject to Enforced Collection. That Form 12153 requested, among other things, an abatement of additions to tax and related interest for the failure to make required deposits and the failure to timely pay required tax that are included within ShiftPixy’s Liability That Are Subject to Enforced Collection. |
|
|
|
| ■ | On December 12, 2023, the Company received a lien from the IRS. The IRS can levy the Company’s bank accounts. As a result of the appeal filed with the US Tax Court of Appeals, the tax lien is on stay. |
|
|
|
| ■ | In January of 2024, ShiftPixy filed Form 12153, Request for a Collection Due Process or Equivalent Hearing, with respect to ShiftPixy's Liability That Are Subject to Enforced Collection |
|
|
|
| ■ | The Company had a collection due process hearing with the IRS Independent Office of Appeals in October 2023. In October and November of 2023, the Company requested that the IRS Independent Office of Appeals (“Appeals”), among other things, abate additions to tax and related interest for the failure to make required deposits and the failure to timely pay required tax. |
|
|
|
| ■ | In February 2024, the Company received a Notice of Determination from the IRS on our administrative claims wherein the IRS denied, entirely, our appeal for relief. |
|
|
|
| ■ | The Company appealed to the US Tax Court of Appeals on March 25, 2024. |
The IRS can, with limited notice, levy the Company’s bank accounts and subject it to enforced collection if the Company cannot obtain a resolution of the payroll tax issues. There is no assurance that the US Tax Court of Appeals will abate penalties and interest currently assessed against the Company by the IRS. If the Company is not successful in getting the outstanding penalties, and/or interest abated, including working out a payment plan with the IRS, it may cause the Company to file for bankruptcy protection in the near future.
The Company has retained tax counsel and has been in near constant communication with the IRS regarding processing its Employee Retention Tax Credits (“ERTCs”). As of September 14, 2023, the IRS has a moratorium on processing new ERTC claims and many of the Company’s clients are seeking refunds. Recently, the Company has filed ERTC claims for its clients and has not received any acceptance from the IRS. Some clients have filed suits against the Company, demanding that the Company takes action to file for additional ERTCs for certain tax periods.
10 |
Table of Contents |
The Company has taken aggressive steps to reduce its overhead expenses. The Company has plans and expectations for the next twelve months include raising additional capital which may help fund the Company’s operations and strengthening the Company’s sales force strategy by focusing on staffing services as the key driver towards its success. In addition, the Company is planning on acquisitions funded by stock and debt to attempt to generate future cash flows. There is no assurance that the Company can execute on obtaining additional equity or debt on the terms that the Company is seeking. In addition, there is no assurance that the Company can execute its contemplated acquisitions and on terms that are deemed appropriate to the Company. These condensed consolidated financial statements do not include any adjustments for these uncertainties. In addition, the Company needs to take additional steps to pay down its payroll taxes with the IRS, states and local tax authorities. If not, penalties and interest will continue to increase. There is a likelihood that the Company may file for bankruptcy in the near future.
Revenue and Direct Cost Recognition
The Company determines revenue recognition pursuant to Accounting Standards Codification (“ASC 606”) Revenue from contracts with customers, through the following steps:
| ■ | Identification of the contract, or contracts, with a customer. |
| ■ | Identification of the performance obligation(s) in the contract. |
| ■ | Determination of the transaction price. |
| ■ | Allocation of the transaction price to the performance obligation(s) in the contract. |
| ■ | Recognition of revenue when, or as the Company satisfies a performance obligation. |
The Company’s revenues are primarily disaggregated into fees for providing staffing solutions and EAS/HCM services. The Company enters into contracts with its clients for Staffing based on a stated rate and price in the contract. Contracts generally have a term of 12 months, are cancellable at any time by either party with 30 days’ written notice.
The performance obligations in the agreements are generally combined into one performance obligation, as they are considered a series of distinct services, and are satisfied over time because the client simultaneously receives and consumes the benefits provided as the Company performs the services. The Company does not have significant financing components or significant payment terms for its clients and consequently has no material credit losses. The Company uses the output method based on a stated rate and price over the payroll processed to recognize revenue, as the value to the client of the goods or services transferred to date appropriately depicts the Company’s performance towards complete satisfaction of the performance obligation.
Staffing Solutions
The Company records gross billings as revenues for its staffing solutions clients. The Company is primarily responsible for fulfilling the staffing solutions services and has discretion in establishing price. The Company includes payroll costs in revenues with a corresponding increase to cost of revenues for payroll costs associated with these services. As a result, the Company is the principal in this arrangement for revenue recognition purposes.
EAS Solutions / HCM
Employment administrative service or EAS solutions “EAS” and Human Capital Management “HCM” revenues are primarily derived from the Company’s gross billings, which are based on (i) the payroll cost of the Company’s worksite employees (“WSEs”) and (ii) an administrative fee and (iii) if eligible, WSE can elect certain pass-through benefits.
Gross billings are invoiced to each EAS and HCM client, concurrently with each periodic payroll. Revenues are offset by payroll cost component and pass-through costs which are presented on a net basis for revenue recognition. WSEs perform their services at the client's worksite. The Company assumes responsibility for processing and remitting payroll to the WSE and payroll related obligations, it does not assume employment-related responsibilities such as determining the amount of the payroll and related payroll obligations.
11 |
Table of Contents |
Revenues that have been recognized but not invoiced are included in unbilled accounts receivable on the Company’s condensed consolidated balance sheets were $
Payments received by clients in advance of the due date of an invoice are recorded as liability. As of February 29, 2024, and August 31, 2023. the Company recorded a liability for advance payments of $
Disaggregation of Revenue
The Company’s primary revenue streams include HCM/EAS and staffing services. The Company’s disaggregated revenues for the three and six months ended February 29, 2024, and February 28, 2023, were as follows, in millions:
|
| For the Three Months Ended |
|
| For the Six Months Ended |
| ||||||||||
Revenue: |
| February 29, 2024 |
|
| February 28, 2023 |
|
| February 29, 2024 |
|
| February 28, 2023 |
| ||||
EAS/HCM |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Staffing |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
EAS/HCM revenue is presented net, $
For the three and six months ended February 29, 2024, and February 28, 2023, the following geographical States represented more than 10% of total revenues:
|
| For the Three Months Ended |
|
| For the Six Months Ended |
| ||||||||||
Region: |
| February 29, 2024 |
|
| February 28, 2023 |
|
| February 29, 2024 |
|
| February 28, 2023 |
| ||||
California |
|
| % |
|
| % |
|
| % |
|
| % | ||||
Washington |
|
| % |
|
| % |
|
| % |
|
| % | ||||
New York |
|
| % |
|
| % |
|
| % |
|
| % | ||||
New Mexico |
|
| % |
|
| % |
|
| % |
|
| % |
Incremental Cost of Obtaining a Contract
Pursuant to the “practical expedients” provided under Accounting Standards Update “ASC” No 2014-09, the Company expenses sales commissions when incurred because the terms of its contracts are cancellable by either party upon 30-day notice. These costs are recorded in commissions in the Company’s unaudited condensed Consolidated Statements of Operations.
12 |
Table of Contents |
Discontinued Operations and Workers’ Compensation
On January 3, 2020, the Company entered into an asset purchase agreement with Shiftable HR Acquisition, LLC, a wholly owned subsidiary of Vensure, pursuant to which the Company assigned client contracts which were deemed significant to its revenues, including
Prior to Fiscal Year 2023, the Company determined that it was probable that all contractually required payments would not be collected and recorded a full reserve on the amount of the note receivable. Up until November 15, 2023, the company was in litigation with Vensure regarding payment of the aforementioned note receivable.
The Company had retained workers’ compensation reserves and workers’ compensation related liabilities, which arose from former WSEs of clients that were transferred to Shiftable HR Acquisition LLC in connection with the Vensure Asset Sale. The workers’ compensation obligations related to the programs in place with Everest and Sunz Insurance Solutions, LLC (“Sunz”). The programs calculated 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 Vensure Asset Sale had previously met the criteria of discontinued operations set forth in ASC 205 and as such the retained workers’ compensation asset and liabilities were presented as a discontinued operation. Subsequent to the Vensure Asset sale, the Company entered into litigation with both Everest and Sunz, see Note 11 Contingencies. As of February 29, 2024, the Company has now executed settlement agreements with both programs (Everest and Sunz). The Company recognized approximately $
Segment Reporting
The Company operates as one reportable segment under Accounting Standards Codification “ASC” 280, Segment Reporting. The chief operating decision maker regularly reviews the financial information of the Company at a consolidated level in deciding how to allocate resources and in assessing performance.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less when purchased as cash equivalents. The Company had no cash equivalent as of February 29, 2024, and August 31, 2023.
Concentration of Credit Risk
The Company maintains cash with a commercial bank, which is insured by the Federal Deposit Insurance Corporation (“FDIC”). At various times, the Company has deposits in this financial institution in excess of the amount insured by the FDIC. The Company has not experienced any losses related to these balances and believes its credit risk to be minimal. As of February 29, 2024, the Company’s balances exceeded federally insured limits by the FIDC by approximately $
13 |
Table of Contents |
The following represents clients who have ten percent of total accounts receivable as of February 29, 2024, and August 31, 2023, respectively.
|
| As of |
| |||||
|
| February 29, 2024 |
|
| August 31, 2023 |
| ||
Client 1 |
|
| % |
|
| % | ||
Client 2 |
|
| % |
|
| % |
The following represents clients who have ten percent of gross revenues for the six months ended February 29, 2024, and February 28, 2023:
|
| February 29, 2024 |
|
| February 28, 2023 |
| ||
Client 1 |
|
| % |
|
| % | ||
Client 2 |
|
| % |
|
| % |
The following represents clients who have ten percent of gross revenues for the three months ended February 29, 2024, and February 28, 2023:
|
| February 29, 2024 |
|
| February 28, 2023 |
| ||
Client 1 |
|
| % |
|
| % | ||
Client 2 |
|
| % |
|
| % |
Fair Value of Financial Instruments
The Company adopted the provisions of FASB Accounting Standards Codification (“ASC”) 820 (the “Fair Value Topic”) which defines fair value, establishes a framework for measuring fair value under U.S. GAAP, and expands disclosures about fair value measurements.
The Company measures fair value under a framework that utilizes a hierarchy prioritizing the inputs to relevant valuation techniques. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of inputs used in measuring fair value are:
| ■ | Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company as the ability to access. |
| ■ | Level 2: Inputs to the valuation methodology include: |
| o | Quoted prices for similar assets or liabilities in active markets. |
| o | Quoted prices for identical or similar assets or liabilities in inactive markets. |
| o | Inputs other than quoted prices that are observable for the asset or liability. |
| o | Inputs that are derived principally from or corroborated by observable market data by correlation or other means; and |
| o | If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability. |
| ■ | Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement. |
When the Company changes its valuation inputs for measuring financial assets and liabilities at fair value, either due to changes in current market conditions or other factors, it could be required to transfer those assets or liabilities to another level in the hierarchy based on the new inputs used. The Company recognizes these transfers at the end of the reporting period that the transfers occur. The development and determination of the unobservable inputs for Level 3 fair value measurements and the fair value calculations are the responsibility of the Company’s chief financial officer and are approved by the chief executive officer. There were no transfers out of Level 3 for the three and six months ended February 29, 2024.
14 |
Table of Contents |
As of February 29, 2024, and August 31, 2023, the carrying value of certain financial instruments (cash, accounts receivable, unbilled accounts receivable, and accounts payable and other accrued liabilities) approximated fair value due to the short-term nature of the instruments.
Level 1 assets consisted of cash as of February 29, 2024, and August 31, 2023. The Company did not have any Level 2 or 3 assets or liabilities as of February 29,2024, and August 31, 2023.
Advertising Costs
The Company expenses all advertising as incurred. The Company incurred advertising costs totaling $
Income Taxes
The Company accounts for income taxes pursuant to ASC 740, Income Taxes. Under ASC 740, deferred income taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The provision for income taxes represents the tax expense for the period, if any, and the change during the period in deferred tax assets and liabilities. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. ASC 740 also provides criteria for the recognition, measurement, presentation, and disclosure of uncertain tax positions. Under ASC 740, the impact of an uncertain tax position on the income tax return may only be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. A full valuation allowance was recorded as of February 29, 2024, and August 31, 2023.
Stock-Based Compensation
The Company has one stock-based compensation plan under which the Company may issue awards, as described in Note 8, Stock Based Compensation, below. The Company accounts for the Plan under the recognition and measurement principles of ASC 718, Compensation-Stock Compensation, which requires all stock-based payments to employees, including grants of employee stock options, to be recognized in the condensed consolidated statements of operations at their fair values.
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 on an accelerated basis over the employee’s requisite service period, which is generally the vesting period of the equity grant.
The Company’s option pricing model requires the input of highly subjective assumptions, including the expected stock price volatility and expected term. The expected volatility is based on the historical volatility of the Company’s common stock since the Company’s initial public offering. Any changes in these highly subjective assumptions significantly impact stock-based compensation expense.
The Company elects 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.
15 |
Table of Contents |
Fixed Assets, net
Fixed assets are recorded at cost, less accumulated depreciation and amortization. Expenditures for major additions and improvements are capitalized and minor replacements, maintenance, and repairs are charged to expense as incurred. When fixed assets are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective period.
Fixed assets are depreciated over the estimated useful lives of the related assets using the straight-line method. The estimated useful lives of property and equipment are as follows:
Equipment: | |
Furniture & Fixtures: | |
Leasehold improvements |
Net Loss Per Share
The Company computes basic and diluted earnings (loss) per share amounts pursuant to Section 260-10-45 of FASB ASC. Basic net loss per common share is computed by dividing net loss attributable to common shareholders by the weighted-average number of shares of common stock outstanding during the period, excluding the effects of potentially dilutive securities.
Diluted net loss per share is computed similar to basic loss per share except that the denominator is increased to include additional common stock equivalents available upon exercise of stock options, warrants, shares of common stock to be issued to directors for services provided.
Dilutive common stock equivalents include the dilutive effect of in-the-money stock equivalents, which are calculated based on the average share price for each period using the treasury stock method, excluding any common stock equivalents if their effect would be anti-dilutive. In periods in which a net loss has been incurred, all potentially dilutive common stock shares are considered anti-dilutive and thus are excluded from the calculation.
The following potentially dilutive securities were not included in the calculation of diluted net loss per share attributable to common shareholders of the Company because their effect would be antidilutive for the periods presented:
For the Three and Six Months Ended |
| February 29, 2024 |
|
| February 28, 2023 |
|
| February 29, 2024 |
|
| February 28, 2023 |
| ||||
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| ||||
Options |
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| ||||
Warrants |
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| ||||
Shares of common stock to be issued to the directors for services provided, (See Note 7) |
|
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|
| ||||
Preferred Option |
|
| - |
|
|
|
|
|
| - |
|
|
|
| ||
Total potentially dilutive shares |
|
|
|
|
|
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|
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|
Reclassification
The Company reclassified certain expenses to conform to the current year's presentation, specifically for interest expense that are included with the payroll penalties under general and administrative expenses which was previously included in interest expense in the other income (expenses). Accrued workers’ compensation has been reclassified to accounts payable and other accrued liabilities. The resulting changes from the condensed balance sheets impacted the presentation of such items in the condensed consolidated statements of cash flows for the three and six months ended February 28, 2023.
Recent Accounting Guidance
New accounting rules and disclosure requirements can significantly affect our reported results and the comparability of our financial statements. We believe the following new accounting guidance is relevant to the readers of our condensed financial statements.
16 |
Table of Contents |
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments included in ASU 2016-13 require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Although the new standard, known as the current expected credit loss (“CECL”) model, has a greater impact on financial institutions, most other organizations with financial instruments or other assets (trade receivables, contract assets, lease receivables, financial guarantees, loans and loan commitments, and held-to-maturity (HTM) debt securities) are subject to the CECL model and will need to use forward-looking information to better evaluate their credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. In addition, the ASU amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. ASU 2016-13 was originally effective for public companies for fiscal years beginning after December 15, 2019. In November of 2019, the FASB issued ASU 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates, which delayed the implementation of ASU 2016-13 to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years for smaller reporting companies. The Company adopted ASU 2016-13 on September 1, 2023, which did not have a material impact on the Company's financial position, results of operations and liquidity.
New Accounting Pronouncements Not Yet Adopted
In November 2023, the Financial Account Standard Board “FASB” issued Accounting Standards Update “ASU” 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which modifies the disclosure and presentation requirements of reportable segments. The amendments in the update require the disclosure of significant segment expenses that are regularly provided to the chief operating decision maker “CODM” and included within each reported measure of segment profit and loss. The amendments also require disclosure of all other segment items by reportable segment and a description of its composition. Additionally, the amendments require disclosure of the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. This update is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, Early adoption is permitted. The Company is currently evaluating the impact that this guidance will have on the presentation of its consolidated financial statements and accompanying notes.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which expands disclosures in an entity’s income tax rate reconciliation table and disclosures regarding cash taxes paid both in the U.S. and foreign jurisdictions. The update will be effective for annual periods beginning after December 15, 2025. The Company is currently evaluating the impact that this guidance will have on the presentation of its consolidated financial statements and accompanying notes.
Note 3: Accounts Receivable, Unbilled Receivable and Advanced Payments
The Company’s accounts receivable represents outstanding gross billings to clients, net of an allowance for estimated credit losses. The Company in some instances may require its clients to prefund payroll and related liabilities before payroll is processed or due for payment. If a client fails to fund payroll or misses the funding cut-off, at our sole discretion, the Company may pay the payroll and the resulting amounts due to us are recognized as accounts receivable. When client payment is received in advance of the Company’s performance under the contract, such amount is recorded as client deposits in the liability section of the condensed consolidated balance sheet. The Company establishes an allowance for credit losses based on the credit quality of clients, current economic conditions, the age of the accounts receivable balances, historical experience, and other factors that may affect clients’ ability to pay, and charge-off amounts against the allowance when they are deemed uncollectible. The allowance for credit losses was $
The Company recognizes unbilled revenue when work site employee payroll and payroll tax liabilities in the period in which the WSEs perform work. When clients’ pay periods cross reporting periods, the Company accrues the portion of the unpaid WSE payroll where the Company assumes, under state regulations, the obligation for the payment of wages and the corresponding payroll tax liabilities associated with the work performed prior to period-end. These estimated payroll and payroll tax liabilities are recorded in accrued wages. The associated receivables, including estimated revenues, offset by advance collections from clients and an allowance for credit losses, are recorded as unbilled revenue. As of February 29, 2024, and August 31, 2023, advance collections included in unbilled revenue were $
Payments received by clients in advance of the due date of an invoice are recorded as liability. As of February 29, 2024, and August 31, 2023. the Company recorded a liability for advance payments of $
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Note 4: Fixed Assets, net
Fixed assets consisted of the following as of February 29, 2024, and August 31, 2023, in thousands:
|
| February 29, 2024 |
|
| August 31, 2023 |
| ||
Equipment |
| $ |
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| $ |
| ||
Furniture and fixtures |
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Leasehold improvements |
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| ||
Accumulated depreciation and amortization |
|
| ( | ) |
|
| ( | ) |
Fixed assets, net |
| $ |
|
| $ |
|
Depreciation and amortization expense was $
Note 5: Accounts Payable and Other Accrued Liabilities
Accounts payable and other accrued liabilities consisted of the following as of February 29, 2024, and August 31, 2023, in thousands:
|
| February 29, 2024 |
|
| August 31, 2023 |
| ||
Accounts payable (1) |
| $ |
|
| $ |
| ||
Contingent lease liability |
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|
| ||
Operating lease liability |
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Legal settlement |
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Shares owed to directors for services |
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Workers’ compensation |
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ERTC owed to clients |
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Due to IHC |
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Financed insurance policies |
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| ||
Business tax |
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Other |
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| ||
Total |
| $ |
|
| $ |
|
(1) | Includes the $ |
18 |
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Note 6: Payroll tax and related liabilities
Payroll tax related liabilities consisted of the following as of February 29, 2024, and August 31, 2023, in thousands:
|
| February 29, 2024 |
|
| August 31, 2023 |
| ||
Payroll taxes liabilities |
| $ |
|
| $ |
| ||
Payroll related liabilities |
|
|
|
|
|
| ||
Accrued penalties and interest |
|
|
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|
| ||
Total |
| $ |
|
| $ |
|
Payroll tax liabilities and payroll related liabilities are associated with the Company’s WSEs as well as its corporate employees. The Company has recorded approximately $
In addition, the Company has received notices from the IRS for unpaid tax liabilities including penalties and interest. The IRS can levy the Company’s bank accounts and is subject to enforcement collections. The Company has requested a collection due process or equivalent hearing, that are subject to enforced collection. The Company has also filed for an abatement of additions to tax and related interest for the failure to make required deposits and the failure to timely pay required tax that are subject to enforced collection. On February 28, 2024, the Company received a Notice of Determination from the IRS on the Company’s administrative claims wherein the IRS denied entirely our appeal for relief. The Company appealed to the US Tax Court on March 25, 2024.
In January 2024, the Company was informed by the IRS it was being audited for its August 31, 2022, corporate tax return. If there are any adjustments resulting from the audit, the net operating loss will be adjusted.
Note 7: Stockholders’ Deficit
On October 11, 2023, the Company filed its articles of correction to the Company’s articles of incorporation to effect a one-for-twenty-four reverse stock split (1:24) of the Company’s issued and outstanding shares of common stock. All share and per share related numbers in these condensed consolidated financial statements give effect to the reverse stock split, which was effective on October 15, 2023.
Preferred Stock Series A
For the three and six months ended February 29, 2024
On August 21, 2023, a majority of the shareholders approved the following: (i) a
For the three and six months ended February 28, 2023
On September 1, 2022, the Chief Executive Officer converted
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There are no preferred stock series A issued and outstanding as well as no options to issue Series A preferred stock as of February 29, 2024.
Common Stock and Warrants
Activity for the six months ended February 29, 2024
On October 5, 2023, the Company entered into a securities purchase agreement with an institutional investor, pursuant to which the Company issued and sold to the investor in a registered direct offering
The October 2023 warrants are exercisable for a period of five-year years commencing six months from issuance. On October 16, 2023, the Company entered into an amendment to common stock purchase with the holder of the October 2023 Warrants. Pursuant to the amendment, the exercise price of the October 2023 warrants was increased from $26.40 to $30.504, resulting from a NASDAQ notice of failure to satisfy a continued listing rule. The Company reviewed the accounting for the modification and determined that no adjustment was needed for the three and six months ended February 29, 2024. The net proceeds of this offering were $
Subsequent to February 29, 2024, the Company executed an amendment to the October 2023 warrants concurrently with a registered offering, pursuant to which the exercise price was further reduced to $
Activity for the six months ended February 28, 2023
On September 20, 2022, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with a large institutional investor (the “Purchaser”) pursuant to which the Company sold to the Purchaser an aggregate of
In connection with the Purchase Agreement, the Company and the purchaser entered into Amendment No. 1 to Warrants (the “Warrant Amendment”). Pursuant to the Warrant Amendment, the exercise price of (i)
Pursuant to the Placement Agent Agreement, the Company paid the Placement Agent a fee equal to
On January 31, 2023, the Company entered into an ATM Issuance Sales Agreement and filed a registration statement on Form S-3 and prospectus supplement for an at the market offering of up to $
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During the six months ended February 28, 2023, the Company issued
Warrants
The following table summarizes the changes in the Company’s warrants from August 31, 2023, to February 29, 2024:
|
| Number of shares |
|
| Weighted average remaining life (years) |
|
| Weighted average exercise price |
| |||
Warrants outstanding, August 31, 2023 |
|
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| $ |
| |||
Issued |
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Forfeited |
|
| ( | ) |
|
| — |
|
|
| — |
|
Warrants outstanding, February 29, 2024 |
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|
| $ |
| |||
Warrants exercisable, February 29, 2024 |
|
|
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|
|
| $ |
|
The following tables summarize the Company’s issued and outstanding warrants outstanding as of February 29, 2024:
|
| Warrants Outstanding |
|
| Weighted Average Life of Outstanding Warrants (In years) |
|
| Exercise Price |
| |||
October 2023 Common Warrants |
|
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|
| $ |
| |||
July 2023 Common Warrants |
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October 2023 Common Warrants |
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September 2022 Underwriter Warrants |
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July 2022 Common Warrants |
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September 2021Underwriter Warrants |
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May 2021Underwriter Warrants |
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October 2020 Common Warrants |
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October 2020 Underwriter Warrants |
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May 2020 Common Warrants |
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May 2020 Underwriter Warrants |
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March 2020 Common Warrant |
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March 2020 Exchange Warrants |
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Amended March 2019 Warrants |
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| 0.0 |
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March 2019 Services Warrants |
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| 0.0 |
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Total warrants issued and outstanding |
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| $ |
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Total warrants exercisable |
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| $ |
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Note 8: Stock Based Compensation
Employee Stock Option Plan
In March 2017, the Company adopted its 2017 Stock Option/Stock Issuance Plan (the “Plan”). The Plan provides incentives to eligible employees, officers, directors and consultants in the form of incentive stock options (“ISOs”), non-qualified stock options (“NQSOs”), each of which is exercisable into shares of common stock (collectively, “Options”).
On March 6, 2023, the shareholders approved an increase in the number of shares of common stock issuable under the Plan from
Stock grants are issued at fair value, considered to be the market price on the grant date. The fair value of option awards is estimated on the grant date using the Black-Scholes stock option pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the stock options and future dividends. The Company elected to account for forfeitures under the Plan as they occur. Any compensation cost previously recognized for an unvested award that is forfeited because of a failure to satisfy a service condition is reversed in the period of the forfeiture. As of February 29, 2024, there are
The Company did not issue any stock options during the three and six months ended February 29, 2024, and 2023.
The Company recognized approximately $
The Company compensates its board members through grants of common stock for services performed. These services have been accrued within accounts payable and other accrued liabilities in the condensed consolidated balance sheets. The Company has incurred $
The following table summarizes the Company’s option activity from August 31, 2023, through February 29, 2024:
|
| Options Outstanding and Exercisable |
| |||||||||
|
| Number of Options |
|
| Weighted Average Remaining Contractual Life |
|
| Weighted Average Exercise Price |
| |||
|
|
|
| (In years) |
|
|
| |||||
Options Outstanding as of August 31, 2023 |
|
|
|
|
|
|
| $ |
| |||
Granted |
|
| - |
|
|
| - |
|
|
| - |
|
Exercised |
|
| - |
|
|
| - |
|
|
| - |
|
Forfeited - Cancelled |
|
| ( | ) |
|
| - |
|
|
| - |
|
Options Outstanding as of February 29, 2024 |
|
|
|
|
|
|
| $ |
| |||
Options Exercisable as of February 29, 2024 |
|
|
|
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|
|
| $ |
|
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As of February 29, 2024, the total unrecognized deferred share-based compensation of $
The following table summarizes information about stock options outstanding and vested as of February 29, 2024:
|
| Options Outstanding |
|
| Options Vested |
| ||||||||||||||||||||||
Exercise Prices |
| Number of Options Outstanding |
|
| Number of Options Exercisable |
|
| Weighted Average Remaining Contractual Life |
|
| Weighted Average Exercise Price $ |
|
| Number of Options |
|
| Weighted Remaining Contractual Life |
|
| Weighted Average Exercise Price $ |
| |||||||
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| (In years) |
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| (In years) |
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$ |
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$ |
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$ |
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Note 9: Related Parties
Management and Directors Compensation
Scott Absher – Chief Executive Officer and Chairman of the Board
The Company paid an aggregate amount of $
The Company has accrued unpaid compensation for an aggregate amount of $
During the fiscal year 2023, the Company granted its Chief Executive Officer a conditional right to receive
Amanda Murphy - Former Chief Operating Officer and a former Director
The Company paid an aggregate amount of $
23 |
Table of Contents |
Other Directors
Pursuant to executed agreements, each director is entitled to a monthly cash retainer and $
The Company accrued directors’ fees related to shares of common stock to be issued for services provided to three of the Company’s directors. The Company incurred $
No shares of common stock have been issued as of February 29, 2024, and August 31, 2023, respectively. As of February 29, 2024, and August 31, 2023, there are
Related Persons to Scott Absher
Mark Absher, the brother of Scott Absher, was hired by the Company as Deputy General Counsel – Special Projects, but Mark Absher resigned from his position with the Company on October 5, 2023. Mark Absher’s salary for the three and six months ended February 29, 2024, was $
David May, a member of our business development team, is the son-in-law of Mr. Absher. Mr. May’s salary was for the three and six months ended February 29, 2024, $
Phil Eastvold, the Executive Producer of ShiftPixy Productions, Inc., is the son-in-law of Mr. Absher. Mr. Eastvold salary for the three and six months ended February 29, 2024, was $
Jason Absher, a member of the Company’s business development team, is the nephew of Scott Absher and the son of Mark Absher. Mr. Absher’s salary was for the three and six months ended February 29, 2024, $
Connie Absher, (the spouse of Scott Absher), Elizabeth Eastvold, (the daughter of Scott and Connie Absher and spouse of Mr. Eastvold), and Hannah Woods, (the daughter of Scott and Connie Absher), are also employed by the Company. These individuals, as a group, salaries were for the three and six months ended February 29, 2024, $
Quelliv, Inc (Scott Absher is the co-founder, acting Chief Financial Officer)
Scott Absher, the Company’s Chief Executive Officer, is a founding shareholder and Chief Financial Officer in Quelliv, Inc. (“Quelliv”). Quelliv seeks to provide a non-invasive, alternative approach to wellness using laser biomodulation / LLLT, activating the body’s restorative and regenerative processes.
The Company functions as a payroll administrative service only (“ASO”) service provider providing payroll and related employment tax processing, human resources and employment compliance, employment related insurance and employment administrative services. The Company earns a three percent (3%) administrative fee for processing the payroll on behalf of Quelliv.
24 |
Table of Contents |
The Company billed an aggregate amount of approximately $
Note 10: Commitments
Operating Leases
Effective August 13, 2020, the Company entered into a non-cancelable seven-year lease for office space located in Miami, Florida, to house its principal executive offices commencing October 2020, and continuing through September 2027. The lease contains escalation clauses relating to increases in real property taxes as well as certain maintenance costs. The monthly rent expense under this lease is approximately $
On October 1, 2020, the Company entered into a non-cancelable sixty-four-month lease for industrial space located in Miami, Florida, to house ghost kitchens, production facilities, and certain marketing and technical functions, including those associated with ShiftPixy Labs. The lease contained escalation clauses relating to increases in real property taxes as well as certain maintenance costs. The monthly rent expense under this lease is approximately $
On June 7, 2021, the Company entered into a non-cancelable sublease agreement with Verifone, Inc. to sublease premises consisting of approximately
On June 21, 2021, the Company entered into a non-cancelable seventy-seven-month lease for premises for office space located in Sunrise, Florida, that the Company anticipates using primarily to house its operations personnel and other elements of its workforce. The Company took possession of the lease on August 1, 2022. The base rent is paid monthly and escalates annually pursuant to a schedule set forth in the lease. The monthly rent expense under this lease is approximately $
On May 2, 2022, the Company entered into a non-cancelable sixty-month operating lease, as constituted in an amendment to a prior lease, commencing on July 1, 2022, for office space in Irvine, California, which the Company anticipates using primarily for its IT, operations personnel, and other elements of its workforce. The base rent is paid monthly and escalates annually according to a schedule outlined in the lease. The monthly rent expense under this lease is approximately $
25 |
Table of Contents |
On August 31, 2022, the Company decided to formally abandon the leases for its offices in the Courvoisier Center, including a sublease on the second floor with Verifone. The determination was based on its inability to utilize the premises as they were under extensive construction renovation by the landlord, resulting in a significant negative impact on the Company’s ability to conduct business and the health and well-being of the Company’s employees and guests. The Company formally notified the landlord of its intention to vacate the premises and has not been legally released from the Company's primary obligations under the leases. The Company received a formal complaint from the landlord, and the matter is in litigation. The Company intends to vigorously defend the lawsuit and counterclaim for relocation costs, see Note 11, Contingencies. As a result of the abandonment, the Company evaluated the right of-use asset for impairment, and recorded an impairment charge of $
The components of lease expense are as follows, in thousands:
|
| Three Months Ended February 29, 2024 |
|
| Six Months Ended February 29, 2024 |
| ||
Operating lease cost |
| $ |
|
| $ |
|
Future minimum lease under non-cancelable operating leases as of February 29, 2024, are as follows, in thousands:
|
| Minimum lease commitments |
| |
2024 |
| $ |
| |
2025 |
|
|
| |
2026 |
|
|
| |
2027 |
|
|
| |
2028 |
|
|
| |
Thereafter |
|
|
| |
Total minimum payments |
|
|
| |
Less: present value discount |
|
|
| |
Lease liability |
| $ |
| |
|
|
|
|
|
Weighted-average remaining lease term - operating leases (years) |
|
|
| |
Weighted-average discount rate |
|
| % |
The current portion of the operating lease liability is included within our accounts payable and other accrued liabilities in the accompanying condensed consolidated balance sheets.
In connection with the abandonment of the leases, the Company applied part of its security deposits to it the amount owed to its landlords.
Note 11: Contingencies
Certain conditions may exist as of the date the condensed 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 assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment.
26 |
Table of Contents |
Legal
The Company is currently a party to legal actions other than those described below arising from the normal course of business, none of which are expected to have a material adverse effect on our business, results of operations, or financial condition.
Everest Litigation
On or about June 28, 2023, the Company entered into a confidential settlement agreement with Everest National Insurance Company and Gallagher Bassett, resolving the litigation amongst the parties. The Company has made the required payments pursuant to the settlement agreement up to the report’s release date. The liability owed is $
Sunz Litigation
On March 19, 2021, the Company was served with a Complaint filed in the Circuit Court for the 11th Judicial Circuit, Manatee County, Florida, by its former workers’ compensation insurance carrier, Sunz Insurance Solutions, LLC. The Complaint asserts claims for breach of contract, alleging that the Company owes payments for loss reserve funds totaling approximately $
The liability owed to Sunz was $
Vensure Litigation
On September 7, 2021, Shiftable HR Acquisition, LLC, a wholly owned subsidiary of Vensure, filed a complaint against the Company in the Court of Chancery of the State of Delaware asserting claims arising from the Asset Purchase Agreement (the “APA”) governing the Vensure Asset Sale described above. The APA provided for Vensure to purchase, through its wholly owned subsidiary, certain of the Company’s assets for total consideration of $
In early September 2021, Vensure filed suit against the Company in Delaware Chancery Court for breach of contract and declaratory judgment, seeking unspecified damages. The Company vigorously disputed and denied each of Vensure’s claims. The case is now settled for $
27 |
Table of Contents |
Courvoisier Centre Litigation
On August 24, 2022, the landlord of our former headquarters offices, Courvoisier Centre, LLC, filed a complaint against the Company in the Eleventh Judicial Circuit Court (Miami-Dade County, Florida) alleging breach of the lease. The Company vacated the offices and ceased payments under the lease in July of 2022, after repeatedly complaining to the landlord regarding the impact of its extensive renovations of the campus and building in which the Company's offices were situated, citing substantial impairments to the Company's ability to conduct business as well as concerns regarding the health and well-being of the Company’s employees and guests, and the landlord’s inability and refusal to provide any adequate relief. On or about October 10, 2022, the Company filed our answer to the complaint and the Company's counterclaim. The Company intends to vigorously defend the lawsuit and seek recovery for its costs of relocation. The parties attended a mediation on January 31, 2024. The Company has accrued approximately $
Certified Tire Litigation
On June 29, 2020, the Company was served with a complaint filed by its former client, Certified Tire, in the Superior Court of the State of California, Orange County, naming the Company, two of its officers, and one of its former subsidiaries as defendants. The Complaint asserts multiple causes of action, all of which stem from the former client’s claim that the Company is obligated to reimburse it for sums it paid in settlement of a separate lawsuit brought by one of its employees pursuant to Private Attorney General Act or PAGA. This underlying lawsuit alleged the Company's former client was responsible for multiple violations of the California Labor Code. The Company and the officers named as defendants deny the former client’s allegations, and the Company is defending the lawsuit vigorously based primarily on the Company's belief that the alleged violations that gave rise to the underlying lawsuit were the responsibility of Certified Tire and not the Company. Substantial discovery has taken place; trial was initially set for September 5, 2023, but was postponed to a later date not yet defined. The Company’s dispositive motion for summary judgment was denied by the court because of its determination that factual disputes exist.
In Re John Stephen Holmes Bankruptcy Litigation
On November 8, 2022, the Chapter 7 trustee of the bankruptcy estate of John Stephen Holmes filed an action against the Company, asserting that the cancellation by the Company of Mr. Holmes'
28 |
Table of Contents |
Employee Retention Tax Credit (“ERTCs”) Claims
The Company has filed various ERTCs claims with the IRS on behalf of its clients that have otherwise failed to obtain the related benefits afforded to them pursuant to the filing of Form 7200—the time for the filing of which has expired. To date, the Company has received ERTCs amounting to $
Apizza, LLC v. Rethink Human Capital Management, Inc. D/B/A “Shiftpixy,” et al., Orange County Superior Court.
On March 8, 2024, a complaint was filed in the Superior Court of the State of California, Orange County No. 30-2024-01385218-CU-BT-CJC by its former client Apizza, LLC, against the Company, certain of its subsidiaries and affiliates and current and former officers. In Plaintiff’s complaint, Plaintiff alleges damages “in excess of $2,287,269.15” arising from the Company’s alleged failure to assist Plaintiff in obtaining Employee Retention Credits. All defendants have been served the complaint except Scott W. Absher. Pursuant to stipulation between the parties, the served defendants’ (i.e., all defendants except Mr. Absher) response to the complaint is due May 9, 2023. At this point, it is too early to assess whether an unfavorable outcome for the Company is probable or remote.
Capistrano Catering, Inc. v. ShiftPixy, Inc.
On June 13, 2022, a Complaint was filed in the Superior Court of the State of California, Orange County, Case No. 30-2022-01264583, by its former client, Capistrano Catering, Inc., asserting claims for specific performance, breach of contract, and breach of the covenant of good faith. Plaintiff’s complaint alleges that we violated our client services agreement by not applying for an employee retention tax credit (“ERTC”) on behalf of Capistrano Catering pursuant to Section 3134 of the Internal Revenue Code and seeks damages of “at least $
Foundry ASVRF Sawgrass, LLC v. ShiftPixy, Inc.
On or around October 16, 2023, the company received a variety of legal proceedings documents as filed in the County Court of the 17th Judicial Circuit in and for Broward County, Florida, as case No. COWE-23-003124, arising out of the Company’s abandonment of a lease of premises at Suite 650, 13450 W. Sunrise Blvd., Sunrise, Florida 33323. Most of the Company’s $
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Table of Contents |
Golden West Wings LLC v. ShiftPixy, Inc.
On September 21, 2022, another of ShiftPixy’s clients, including a number of affiliates, filed suit in U.S. District Court, Southern District of California (San Diego), Case No. 822CV1834ADS, asserting claims for specific performance, breach of contract, and breach of the covenant of good faith. Plaintiff’s complaint alleges that the Company violated its client services agreement by not applying for an employee retention tax credit ERTC on behalf of client pursuant to Section 3134 of the Internal Revenue Code and seeks damages of at least $
Olen Commercial Realty Corp. v. ShiftPixy, Inc.
In late August of 2023, the Company abandoned its leased premises at 1 Venture, Suite 150, Irvine, CA 92618. The monthly rent is approximately $
The Company has accrued the lease liability in the aggregate amount of $
Robert Angueira, as US Chapter 7 Trustee v. Shiftpixy, Inc, Shiftpixy Investments,
On December 14, 2023,
The Company was owed a substantial sum of money related to IHC SPAC’s sponsorship and transferred $
In relation to the recent filing by the Chapter 7 Trustee, the Trustee asserts, amongst other things, that some Officers and Directors of ShiftPixy acted inappropriately in transferring those funds back to the investors in IHC and subsequent to the filing of the involuntary bankruptcy. These claims forced the Company to put ShiftPixy’s director and officer carrier on notice and the Company is waiting for their decision on the matter(s).
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Table of Contents |
The Chapter 7 Trustee claims to be entitled to the $
Other Matters
Amanda Murphy v. Shiftpixy, Inc., Scott Absher and Connie Absher
On April 6, 2024, Amanda Murphy (“Murphy”), the Company’s former Chief Operating Officer and a former Director, filed a complaint of employment discrimination before the State of California Civil Rights Department (“CRD”) under the provisions of the California Fair Employment and Housing Act (“FEHA”), alleging several violations and discriminations. Given the early stage of the proceedings, it is too early to assess whether an unfavorable outcome is either probable or remote. The Company recorded $
Washington Dept of Rev v. ShiftPixy Staffing, Inc.
On or about April 25, 2023,
NASDAQ
On August 2, 2023, ShiftPixy received a letter (the “August 2023 NASDAQ Letter”) from the staff of the Listing Qualifications Department of NASDAQ, which notifies the Company that, in view of the recent resignation of an independent director who was a member of the Company’s audit committee, the Company does not presently comply with NASDAQ’s Listing Rule 5605, which requires that a majority of the Company’s board of directors be comprised of independent directors, and that the Company has an audit committee comprised of at least three independent directors, one of which “has past employment experience in finance or accounting, requisite professional certification in accounting, or any other comparable experience or background which results in the individual’s financial sophistication, including being or having been a chief executive officer, chief financial officer or other senior officer with financial oversight responsibilities. On January 16, 2024, the Company added an independent director to the audit committee and board of directors and as a result regained compliance with the above rule.
On September 15, 2023, the Company received a letter (the “September 2023 NASDAQ Letter”) from the staff of the Listing Qualifications Department of Nasdaq, which notifies the Company that, for the previous 30 consecutive business days, the bid price for the Company’s common stock had closed below the minimum $1.00 per share requirement for continued listing on The Nasdaq Capital Market under Nasdaq’s Listing Rule 5550(a)(2). On October 11, 2023, the Company filed articles of amendment to the Company’s articles of incorporation to effect a one-for-twenty four (1:24) reverse split of the Company’s issued and outstanding shares of common stock, which became effective on October 14, 2023. The reverse stock split was effective on Nasdaq on October 16, 2023. On October 30, 2023, the Company received a letter from the Staff notifying the Company that for the last 10 consecutive business days, from October 16 to October 27, 2023, the closing bid price of the Company’s common stock has been at $1.00 per share or greater and accordingly, the Company has regained compliance with Listing Rule 5550(a)(2).
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On October 18, 2023, the Company received a letter (the “October 2023 NASDAQ Letter”) from the staff of the Listing Qualifications Department of Nasdaq, which notified the Company that, in connection with the Company’s private placement that closed on October 10, 2023, the Company failed to comply with Nasdaq’s shareholder approval requirements set forth in Listing Rule 5635(d)1, which requires prior shareholder approval for transactions, other than public offerings, involving the issuance of 20% or more of the pre-transaction shares outstanding at less than the Minimum Price. The Company executed an amendment to the common stock purchase warrant agreement, pursuant to which the strike price of the warrants was increased to a price higher than the minimum price. As a result of this amendment, the Company regained compliance with the above rule.
On February 26, 2024, the Company received a letter from the Staff of the Listing Qualifications Department of Nasdaq, which notifies the Company that it does not comply with Nasdaq’s Listing Rule 5550(b)(2), which requires that
On March 28, 2024, the Company received a letter (the “March 2024 NASDAQ Letter”) from the Staff of the Listing Qualifications Department of Nasdaq, which notifies the Company that it failed to comply with NASDAQ shareholder approval requirements set forth in Listing Rule 5635(d), which requires prior shareholder approval for transactions, other than public offerings, involving the issuance of 20% or more of the pre-transaction shares outstanding at less than the minimum price. The deficiency letter relates to the July 2023 financing. Under Nasdaq Rules, the Company has 45 calendar days to submit a plan to regain compliance and if accepted, Nasdaq can grant an extension of up to 180 calendar days to evidence compliance. The Company retained legal counsel to draft a plan to regain compliance, which has not yet been finalized at the filing date.
Note 12: Subsequent Events
The Company has evaluated events that have occurred after the date of these condensed consolidated financial statements though the date that the condensed consolidated financial statements were issued, and has determined that, other than those listed below, no such reportable subsequent events exist through the date the condensed consolidated financial statements were issued in accordance with FASB ASC Topic 855, “Subsequent Events.”
On March 6, 2024, the Company terminated the employment of the Company’s Chief Financial Officer and Chief Operating Officer. On March 7, 2024, the Company executed an offer of employment to the Company’s New Chief Financial Officer.
On March 19, 2024, the former Chief Operating Officer resigned from her position as director of the board of directors.
On March 19, 2024, the Company entered into a securities purchase agreement for a private placement with an institutional investor, The transaction closed on March 21, 2024 and the Company issued and sold to the investor
On March 22, 2024, the Company entered into an Asset Purchase Agreement with the owners of Neozene, Inc. (the “Principals”) and affiliated seller entities (collectively the “sellers”), pursuant to which the Company will be acquiring substantially all of the assets but not limited to the intellectual property rights, client contracts, leasehold interest, trade names, business and other licenses, operational data, marketing information, contractual rights, customer information and certain tangible assets which are owned in whole or in part by the Sellers. The aggregate consideration to be paid for the assets will be $
On March 28, 2024, the Company issued
On March 29, 2024, the Company entered into a non-binding asset purchase agreement pursuant to which the Company is to acquire substantially all of the assets of an undisclosed staffing company (“Seller”), including but not limited to all of the intellectual property and property rights, client contracts, leasehold interests, trade names, business and other licenses, operational data, marketing information, customer information, contractual rights and all other tangible and intangible assets, which are beneficially owned, in whole or in part by the Seller. Though the identity of the Seller must remain confidential due to contractual terms, the scope of the contemplated transaction was deemed significant. The seller is a regional leader in providing staffing and recruiting solutions across the Western United States. The aggregate consideration to be paid for the assets will be $
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PART I — FINANCIAL INFORMATION
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes, and other financial information included in this Quarterly Report, as well as the information contained in our Annual Report on Form 10-K for the fiscal year ended August 31, 2023 (“Fiscal 2023”), filed with the SEC on December 14, 2023,
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS AND INFORMATION
This Quarterly Report, the other reports, statements, and information that we have previously filed or that we may subsequently file with the SEC, and public announcements that we have previously made or may subsequently make, contain “forward-looking statements” within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act of 1995, which statements involve substantial risks and uncertainties. Unless the context is otherwise, the forward-looking statements included or incorporated by reference in this Quarterly Report and those reports, statements, information and announcements address activities, events or developments that we expect or anticipate will or may occur in the future. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “might,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. Forward-looking statements contained in this Quarterly Report include, but are not limited to, statements about:
| ■ | Our future financial performance, including our revenue, cost of revenue and operating expenses; |
| ■ | Our ability to achieve and grow profitability; |
| ■ | The sufficiency or our cash, cash equivalents and investments to meet our liquidity needs; |
| ■ | Our predictions about industry and market trends; |
| ■ | Our ability to expand successfully internationally; |
| ■ | Our ability to manage effectively our growth and future expenses; |
| ■ | Our estimated total addressable market; |
| ■ | Our ability to maintain, protect and enhance our intellectual property; |
| ■ | Our ability to comply with modified or new laws and regulations applying to our business; |
| ■ | The attraction and retention of qualified employees and key personnel; |
| ■ | Our ability to be successful in defending litigation brought against us; |
| ■ | Our ability to pay the outstanding delinquent payroll taxes, including penalties and interest. If the IRS or states and local jurisdictions pursues collection efforts beyond what the Company can afford to pay, the IRS can freeze our bank accounts and the Company may be forced to file for bankruptcy, and |
| ■ | Our ability to continue to meet the listing requirements of Nasdaq. |
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We have based the forward-looking statements contained in this Quarterly Report primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section entitled “Risk Factors” in our Annual Report on Form 10-K for Fiscal 2023, filed with the SEC on December 14, 2023, which is expressly incorporated herein by reference, and elsewhere in this Quarterly Report. Moreover, the Company operates in a very competitive and challenging environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.
The forward-looking statements made in this Quarterly Report relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made herein to reflect events or circumstances after the date of this Quarterly Report or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, other strategic transactions or investments we may make or enter into.
The risks and uncertainties the Company currently face are not the only ones we will face. New factors emerge from time to time, and it is not possible for us to predict which will arise. There may be additional risks not presently known to us or that that the Company currently believe are immaterial to our business. In addition, the Company cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Our business, operating results, liquidity, and financial condition could be materially affected in an adverse manner as a result of these risks.
The industry and market data contained in this Quarterly Report are based either on our management’s own estimates or, where indicated, independent industry publications, reports by governmental agencies or market research firms or other published independent sources and, in each case, are believed by our management to be reasonable estimates. However, industry and market data are subject to change and cannot always be verified with complete certainty due to limits on the availability and reliability of raw data, the voluntary nature of the data gathering process and other limitations and uncertainties inherent in any statistical survey of market shares. The Company has not independently verified market and industry data from third-party sources. In addition, consumption patterns and customer preferences can and do change. As a result, you should be aware that market share, ranking and other similar data set forth herein, and estimates and beliefs based on such data, may not be verifiable or reliable.
The ShiftPixy logo and other trademarks or service marks of ShiftPixy, Inc. appearing in this Quarterly Report on Form 10-Q are the property of ShiftPixy, Inc. This Form 10-Q also includes trademarks, trade names and service marks that are the property of other organizations. Solely for convenience, trademarks and trade names referred to in this Form 10-Q appear without the ® and ™ symbols, but those references are not intended to indicate, in any way, that the Company will not assert, to the fullest extent under applicable law, our rights, or that the applicable owner will not assert its rights, to these trademarks and trade names.
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Overview
Business Overview
ShiftPixy is dedicated to providing a comprehensive Human Capital Management “HCM” and Engagement platform that addresses the complete spectrum of employment needs. Our services encompass recruitment, staffing, payroll and related employment tax processing, human resources, employment compliance, employment-related insurance, and administrative solutions. We cater to various business clients, primarily focusing on sectors characterized by high employee turnover and dynamic staffing requirements. Connecting both workers and those that manage them through an elegant AI-powered, cloud based, mobile architecture that navigates and moves all stakeholders through the daily duties of hourly labor.
Initially, our core business targeted the restaurant and hospitality sectors, industries known for their high turnover rates and part-time, flexible employment structures. However, recognizing the evolving market demands and opportunities, we have strategically shifted towards light industrial staffing solutions. This pivot aligns with our goal to broaden our market reach and address the substantial needs of warehouses, manufacturing units, logistics, and similar sectors experiencing rapid growth and increasing reliance on flexible staffing solutions. This shift also brings our business into better margin engagements with large national clients.
We earn our income through the administrative or processing fees we receive as a percentage of a client's gross payroll. These fees vary depending on the level and complexity of services provided, ranging from essential payroll processing to an extensive suite of HRIS technology and staffing solutions. Our commitment is to provide adaptable, scalable, and cost-effective human capital solutions that align with the unique needs and goals of our clients.
Technology Updates
In Fiscal 2023 and the first half of Fiscal 2024, the Company has made substantial strides in advancing our technological capabilities, further cementing our leadership in the staffing and human capital management industry. These developments are a testament to our unwavering commitment to innovation and excellence in meeting the dynamic needs of the labor market.
| · | Instant Interview – In July 2023, the Company announced the "Instant Interview" feature - a transformative addition to our application suite. This technology facilitates a rapid interviewing process by capturing video responses from candidates to predetermined questions. This enables recruiters and client managers to expedite the hiring process, allowing for a more agile and responsive assessment of potential candidates. |
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| · | AI Recruiting Technology: In March 2023, the Company introduced its "AI Recruiting" technology. Leveraging Open AI's open API, this platform is designed to bridge the gap in opportunity matching and enhance recruitment efficiency. "AI Recruiting" utilizes AI-driven candidate outreach in natural language conversations and matching algorithms to connect the right candidates with the right opportunities, streamlining the talent acquisition process and providing “Fast-Fill” staffing capabilities. |
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| · | Robust HRIS Platform: Our cloud-based HRIS platform captures, holds, and processes HR and payroll information through a secure and user-friendly interface. This technology not only reduces the administrative burden on our clients but also provides valuable business intelligence that can inform strategic decision-making. |
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The deployment of "Instant Interview" and "AI Recruiting" technologies exemplifies ShiftPixy's dedication to technological innovation that elevates stakeholder engagement. These tools not only facilitate a more efficient job placement process but also significantly broaden access to the labor market for our clients. By optimizing the connection between job seekers and employers in today’s market, aligning with our ambitious national sales expansion plan, ShiftPixy is leading the way in transforming the world of work, making it more accessible, flexible, and responsive to the needs of today's fast-paced economy.
ShiftPixy remains committed to leveraging these technological advancements to unlock new levels of efficiency during the integration of staffing acquisitions and to drive our effectiveness within the staffing services sector, ensuring that our clients can navigate the contingent labor market with unparalleled ease and success.
Corporate Development: Technology-driven Acquisition Strategy
After unwinding the SPAC sponsorship of AXH in November 2022, our corporate development strategy pivoted to a direct acquisition model with acquisition activities re-focused on human capital consolidation opportunities. To capitalize on robust market relationships with staffing operators, our acquisition team began executing a roll-up of staffing companies with the end goal of creating a national footprint that could leverage our best-in-class technology as a consolidation point and value creator. This technology-driven acquisition strategy will equip strategic acquisition targets with proprietary systems and a best-in-market staffing service delivery platform to deliver high revenue growth, margin improvement, and lower SG&A (“Selling General & Administrative”) costs. By delivering real-time human capital business intelligence to staffing buyers and creating real-time connections between flex workers and un-filled jobs, this strategy will solve our clients’ contingent workforce challenges and create valuable opportunities for our shareholders.
After curating several potential acquisition targets across various staffing verticals, the field was narrowed to a prospective initial business combination of firms with common traits: have developed well-entrenched leading market positions over a substantive operating history, are currently servicing the fastest growing markets and sectors with minimal overlap, have built a diversified client base via direct sales with negligible concentration issues, have draft unaudited financials showing performance and high growth, and bring to the table a meaningful volume of clients served and worksite employees on active assignment. Acquisition targets currently under exclusive letters of intent represent exponential growth in our current recurring revenue, significant gross profit improvement, margin expansion opportunities, a blue-chip client base, cyclical tailwinds, and a tenured sales and operational staff excited and ready to execute our rapid growth plan for 2024 onwards. Execution of this acquisition strategy forges a national footprint with worksite employees or WSEs and clients in all 50 states serviced from 80 offices nationwide.
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Results of Operations
The following table summarizes the unaudited condensed consolidated results of our operations for the three months ended February 29, 2024, and February 28, 2023:
(In Thousands) |
| For the Three Months Ended |
| |||||
|
| February 29, 2024 |
|
| February 28, 2023 |
| ||
Revenues |
| $ | 3,813 |
|
| $ | 4,579 |
|
Cost of revenues |
|
| 3,591 |
|
|
| 4,095 |
|
Gross profit |
|
| 222 |
|
|
| 484 |
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
Salaries, taxes and benefits |
|
| 1,303 |
|
|
| 2,599 |
|
Professional fees |
|
| 465 |
|
|
| 870 |
|
Software development |
|
| 1 |
|
|
| 119 |
|
Depreciation and amortization |
|
| 140 |
|
|
| 150 |
|
General and administrative |
|
| 3,017 |
|
|
| 2,010 |
|
Total operating expenses |
|
| 4,926 |
|
|
| 5,748 |
|
|
|
|
|
|
|
|
|
|
Operating loss |
|
| (4,704 | ) |
|
| (5,264 | ) |
|
|
|
|
|
|
|
|
|
Other income: |
|
|
|
|
|
|
|
|
Other income |
|
| - |
|
|
| 642642 |
|
Total other income |
|
| - |
|
|
| 642 |
|
Net loss attributable to ShiftPixy, Inc |
|
| (4,704 | ) |
|
| (4,622 | ) |
|
|
|
|
|
|
|
|
|
Loss from discontinued operations, net of tax |
|
| - |
|
|
| (607 | ) |
|
|
|
|
|
|
|
|
|
Non-controlling interest |
|
| - |
|
|
| (540 | ) |
|
|
|
|
|
|
|
|
|
Net Loss |
| $ | (4,704 | ) |
| $ | (5,769 | ) |
Revenue decreased $0.8 million or 16.7%, from $ 4.6 million for the three months ended February 28, 2023, to $ 3.8 million for the three months ended February 29, 2024. The decrease primarily relates to increased competition, increased attrition rate and resulting decrease in billable WSE’s. The Company’s plan is to be very active in Mergers & Acquisitions (“M&A”) in the coming fiscal quarters by acquiring large regional and national staffing companies to implement its roll-up of staffing companies, with the end goal of creating a national footprint that could leverage our best-in-class technology as a consolidation point and value creator.
Gross Profit for the three months ended February 29, 2024, was 5.8% compared to 10.6% for the three months February 28, 2023. The decrease in gross profit mainly relates to decrease in administrative fees charged to the Company’s clients based on gross wages and decrease in profit from the Company’s workers’ compensation program.
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Operating expenses decreased by $0.8 million or 14.3% from $5.7 million for the three months February 28, 2023, to $4.9 million for the three months ended February 29, 2024. The components of operating expenses for such periods are as follows:
Salaries, taxes and benefits decreased by $1.3 million or 49.9% from $2.6 million for the three months ended February 28, 2023, to $1.3 million for the three months ended February 29, 2024. The Company has significantly reduced its workforce in order to preserve cash and adapt the staffing level to the current required level of operations.
Professional fees primarily consist of legal, accounting, consulting and board fees. Professional fees decreased by $0.4 million or 46.6%, from $0.9 million for the three months ended February 28, 2023, to $0.5 million for the three months ended February 29, 2024. The decrease is primarily related to a decrease of approximately $0.3 million related to accounting and auditors’ fees and approximately $0.1 million in legal fees.
General and administrative expenses consist of office rent and related overhead, software licenses, insurance, stock- based compensation, insurance. marketing, travel and entertainment, penalty and interest on payroll and other general business expenses. The Company presents the penalties and interest on its balance of unpaid payroll tax liability in general and administrative. Penalties and interest expenses are calculated based upon the outstanding obligations to the Internal Revenue Services, States and local authorities.
General and administrative expenses increased by $1 million or 50.1% from $2 million for the three months ended February 28, 2023, to $3 million for the three months ended February 29, 2024.
The increase primarily relates to an increase in penalty and interest on payroll for approximately $1.3 million as a direct result of the increased balance in payroll tax liability, offset by a decrease in rent by approximately $0.2 million as the Company vacated previously leased locations, decrease of approximately $0.2 million in marketing.
Other income decreased by $0.6 million or 100% from $0.6 million for the three months ended February 28, 2023, to $0 for the three months ended February 29, 2024. Other income consisted of the net liability of IHC at the time of deconsolidation on February 7, 2023.
Loss from discontinued operations represents the reassessment of the workers' compensation claims reserve associated with our former clients that the Company transferred to Vensure as part of the Vensure Asset Sale. Discontinued operations were not recorded for the three months ended February 29, 2024, due to the Everest litigation settlement in June 2023 and Sunz’s settlement in January 2024.
Non-controlling interest represented the 85% of IHC (previous SPAC) that the Company did not own. IHC was dissolved on November 14, 2022, and the Trustee released all the redemption funds from the Trust Account to IHC shareholders on December 1, 2022, effectively liquidating the Trust.
Net loss for the three months ended February 29, 2024, was $4.7 million as compared to $5.8 million for the three months ended February 28, 2023, a decrease of $1.1 million based upon the above factors.
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The following table summarizes the unaudited condensed consolidated results of our operations for the six months ended February 29, 2024, and February 28, 2023:
(In Thousands) |
| For the Six Months Ended |
| |||||
|
| February 29, 2024 |
|
| February 28, 2023 |
| ||
Revenues |
| $ | 7,587 |
|
| $ | 9,844 |
|
Cost of revenues |
|
| 6,915 |
|
|
| 8,941 |
|
Gross profit |
|
| 672 |
|
|
| 903 |
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
Salaries, taxes and benefits |
|
| 2,664 |
|
|
| 4,856 |
|
Professional fees |
|
| 1,279 |
|
|
| 2,065 |
|
Software development |
|
| 1 |
|
|
| 179 |
|
Depreciation and amortization |
|
| 281 |
|
|
| 299 |
|
General and administrative |
|
| 9,181 |
|
|
| 3,991 |
|
Total operating expenses |
|
| 13,406 |
|
|
| 11,390 |
|
|
|
|
|
|
|
|
|
|
Operating loss |
|
| (12,734 | ) |
|
| (10,487 | ) |
|
|
|
|
|
|
|
|
|
Other (expense) income: |
|
|
|
|
|
|
|
|
Gain from legal settlement |
|
| 2,500 |
|
|
| - |
|
Other income (expense) |
|
| (18 | ) |
|
| 642 |
|
Total other income |
|
| 2,482 |
|
|
| 642 |
|
Net loss attributable to ShiftPixy, Inc |
| $ | (10,252 | ) |
| $ | (9,845 | ) |
|
|
|
|
|
|
|
|
|
Loss from discontinued operations, net of tax |
|
| - |
|
|
| (807 | ) |
|
|
|
|
|
|
|
|
|
Non-controlling interest |
|
| - |
|
|
| (540 | ) |
|
|
|
|
|
|
|
|
|
Net Loss |
| $ | (10,252 | ) |
| $ | (11,192 | ) |
Revenue decreased by $2.2 million or 22.9%, from $9.8 million for the six months ended February 28, 2023, to $7.6 million for the six months ended February 29, 2024. The decrease primarily relates to increased competition and the resulting decrease in billable WSE. The Company’s plan is to be very active in M&A in the coming fiscal quarters by acquiring large regional and national staffing companies to implement its roll-up of staffing companies, with the end goal of creating a national footprint that could leverage our best-in-class technology as a consolidation point and value creator.
Gross Profit for the six months ended February 29, 2024, was 8.9% compared to 9.2% for the six months February 28, 2023. The slight decrease in gross profit mainly relates to a decrease in WSE and the resulting administrative fees earned, along with a decrease in the gross profit on workers’ compensation.
Operating expenses increased by $2.0 million or 17.7% from $11.4 million for the six months February 28, 2023, to $13.4 million for the six months ended February 29, 2024. The components of operating expenses change for such periods are as follows:
Salaries, taxes and benefits decreased by $2.2 million or 45.1% from $4.9 million for the six months ended February 28, 2023, to $2.7 million for the six months ended February 29, 2024. The Company has significantly reduced its workforce in order to preserve cash and adapt the staffing level to the current level of operations.
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Professional fees primarily consist of legal, accounting, board fees, and consulting fees. Professional fees decreased by $0.8 million or 38.1%, from $2.1 million for the six months ended February 28, 2023, to $1.3 million for the six months ended February 29, 2024. The decrease is primarily related to a $0.4 million decrease in ongoing legal costs litigation, and a decrease of $0.2 million related to consulting fees and a decrease of $0.2 million related to accounting and auditors’ fees.
General and administrative expenses consist of office rent and related overhead, software licenses, insurance, stock- based compensation, insurance. marketing, travel and entertainment, penalties and interests on payroll, and other general business expenses.
General and administrative expenses increased by $5.2 million or 130% from $4.0 million for the six months ended February 28, 2023, to $9.2 million for the six months ended February 29, 2024.
The increase primarily relates to an increase in penalties and interest on payroll due to the IRS, State and local authorities for approximately $2.1 million as a direct result of the increased balance in payroll tax liability. Further, the Company also experienced an increase in legal settlement fees of approximately $2.1 million, most of which is attributable to the Sunz settlement. Indeed, the Sunz litigation was settled for $3.5 million with an upfront payment of $0.4 million and monthly payments of $0.1 million until the balance is fully paid. Finally, there was an increase of $0.2 million in bad debt related to a related party receivable, and an increase of $0.7 million in insurance expenses.
Other income increased by $1.8 million or 286.6% from $0.6 million for the six months ended February 28, 2023, to $2.5 million for the six months ended February 29, 2024. The Company recognized $2.5 million in other income from a legal settlement with Vensure in the six months ended February 29, 2024.
Loss from discontinued operations represents the reassessment of the workers' compensation claims reserve associated with our former clients that the Company transferred to Vensure as part of the Vensure Asset Sale. Discontinued operations were not recorded for the six months ended February 29, 2024, due to the Everest litigation settlement in June 2023 and Sunz settlement in January 2024.
Net loss for the six months ended February 29, 2024, was $10.3 million as compared to $11.2 million for the six months ended February 28, 2023, a decrease of $0.9 million based upon the above factors.
LIQUIDITY, CAPITAL RESOURCES AND GOING CONCERN
As of February 29, 2024, the Company had cash of less than $0.1 million and a working capital deficit of $58.9 million. During the six months ended February 29, 2024, the Company used approximately $2.1 million of cash in operations and incurred $10.3 million of losses, resulting in an accumulated deficit of $236.6 million.
As of February 29, 2024, the Company is delinquent with respect to remitting payroll tax payments to the IRS, States, and local jurisdictions for an aggregate amount of $34.4 million including penalties and interest. The Company does not have sufficient cash to meet its liquidity requirements for the following twelve months from the date of issuance of these consolidated condensed financial statements. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
The Company has received delinquent notices and notices relating to liens from the IRS claiming it owes approximately $21.1 million for unpaid payroll tax liabilities, including penalties and interest. The balances reported on such notices do not represent the full payroll tax liability of the Company as of February 29, 2024. The Company expects its payroll tax liabilities, penalties and interest to increase in the future. Moreover, the IRS has threatened to take enforced collection against the Company and its subsidiaries. The Company has taken steps to preserve so-called “collection due process rights:
| ■ | In October of 2023, the IRS issued to ShiftPixy a Letter 1058, Final Notice, Notice of Intent to Levy and Notice of Your Right to a Hearing, with respect to ShiftPixy's Form 941 and Form 940 for specific years. In November of 2023, ShiftPixy timely filed a Form 12153, Request for a Collection Due Process or Equivalent Hearing, with respect to ShiftPixy's Liability That Are Subject to Enforced Collection. That Form 12153 requested, among other things, an abatement of additions to tax and related interest for the failure to make required deposits and the failure to timely pay required tax that are included within ShiftPixy’s Liability That Are Subject to Enforced Collection. |
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| ■ | On December 12, 2023, the Company received a lien from the IRS. The IRS can levy the Company’s bank accounts. As a result of the appeal filed with the US Tax Court of Appeals, the tax lien is on stay. |
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| ■ | In January of 2024, ShiftPixy filed Form 12153, Request for a Collection Due Process or Equivalent Hearing, with respect to ShiftPixy's Liability That Are Subject to Enforced Collection |
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| ■ | The Company had a collection due process hearing with the IRS Independent Office of Appeals in October 2023. In October and November of 2023, the Company requested that the IRS Independent Office of Appeals (“Appeals”), among other things, abate additions to tax and related interest for the failure to make required deposits and the failure to timely pay required tax. |
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| ■ | In February 2024, the Company received a Notice of Determination from the IRS on our administrative claims wherein the IRS denied, entirely, our appeal for relief. |
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| ■ | The Company appealed to the US Tax Court of Appeals on March 25, 2024. |
The IRS can, with limited notice, levy the Company’s bank accounts and subject it to enforced collection if the Company cannot obtain a resolution of the payroll tax issues. There is no assurance that the US Tax Court of Appeals will abate penalties and interest currently assessed against the Company by the IRS. If the Company is not successful in getting the outstanding penalties, and/or interest abated, including working out a payment plan with the IRS, it may cause the Company to file for bankruptcy protection in the near future.
The Company has retained tax counsel and has been in near constant communication with the IRS regarding processing its Employee Retention Tax Credits (“ERTCs”). As of September 14, 2023, the IRS has a moratorium on processing new ERTC claims and many of the Company’s clients are seeking refunds. Recently, the Company has filed ERTC claims for its clients and has not received any acceptance from the IRS. Some clients have filed suits against the Company, demanding that the Company takes action to file for additional ERTCs for certain tax periods.
The Company has taken aggressive steps to reduce its overhead expenses. The Company has plans and expectations for the next twelve months include raising additional capital which may help fund the Company’s operations and strengthening the Company’s sales force strategy by focusing on staffing services as the key driver towards its success. In addition, the Company is planning on acquisitions funded by stock and debt to attempt to generate future cash flows. There is no assurance that the Company can execute on obtaining additional equity or debt on the terms that the Company is seeking. In addition, there is no assurance that the Company can execute its contemplated acquisitions and on terms that are deemed appropriate to the Company. These condensed consolidated financial statements do not include any adjustments for these uncertainties. In addition, the Company needs to take additional steps to pay down its payroll taxes with the IRS, states and local tax authorities. If not, penalties and interest will continue to increase. There is a likelihood that the Company may file for bankruptcy in the near future.
The following table sets forth a summary of changes in consolidated cash flows for the six months ended February 29, 2024, and February 28, 2023, in thousands:
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Net cash used in operating activities |
| $ | (2,075 | ) ) |
| $ | (5,323 | ) |
Net cash provided by investing activities |
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| 5 |
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| 117,275 |
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Net cash provided by (used in) financing activities |
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| 2,016 |
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| (111,752 | ) |
Increase (decrease) in cash |
| $ | (54 | ) |
| $ | 200 |
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Operating Activities
Cash used in operations for the six months ended February 29, 2024, was approximately $2.1 million, which resulted primarily from a net loss of $10.3 million, offset by stock-based compensation of $0.4 million, $0.2 million of provision for doubtful accounts, $0.2 million of amortization of right-of-use assets, $0.3 million of amortization and depreciation, $0.1 million of fair value of shares to be issued to the Company’s directors and $7.0 million of net change in operating assets and liabilities.
Net cash used in operations for the six months ended February 28, 2023 was $5.3 million, primarily consisting of a net loss from continuing operations of $10.4 million, a decrease in accounts payable and accrued expenses of $0.8 million, decrease in accounts receivable of $0.5 million, a decrease in workers compensation of $0.4 million offset by an increase in payroll related liabilities of $4.9 million, an increase of $0.4 million in prepaid and other liabilities, an increase in non-cash stock-based compensation expense of $0.6 million and an increase in depreciation and amortization expense of $0.3 million.
Investing Activities
Net cash provided by investing activities for the six months ended February 29, 2024, was de minimis, resulting from the cash proceeds from the sale of fixed assets.
Net cash provided by investing activities for the six months ended February 28, 2023, was $117.3 million from the redemption of IHC Trust Account of $117.6 million offset by the purchase of fixed asset of $0.3 million.
Financing Activities
Net cash provided by financing activities for the six months ended February 29, 2024, was $2.0 million resulting from the net proceeds of a private placement.
Net cash used in financing activities for the six months ended February 28, 2023, was $111.8 million which was from $117.6 million payment to IHC shareholders, offset by the net proceeds of $4.4 million related to a private placement, and $1.4 million from the net proceeds of an ATM offering.
Off-Balance Sheet Arrangements
None
Critical Accounting Estimates
There have been no material changes in our Critical Accounting Estimates from the information provided in the "Critical Accounting Estimates" section of "Item 7- Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Form 10-K.
Material Commitments
We do not have any contractual obligations for ongoing capital expenditures at this time. We do, however, purchase equipment and software necessary to conduct our operations on an as needed basis. The Company has several legal commitments pursuant to legal disputes and agreed upon settlements for an aggregate amount of approximately $10.9 million.
Contingencies
For a discussion of contingencies, see Note 11, Contingencies, to the Notes to the Condensed Consolidated Financial Statements in “Part I, Item 1. Condensed consolidated financial Statements” of this Quarterly Report.
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New and Recently Adopted Accounting Standards
For a listing of our new and recently adopted accounting standards, see Note 2, Summary of Significant Accounting Policies, to the Notes to the condensed consolidated financial statements in “Part I, Item 1. Condensed Consolidated Financial Statements” of this Quarterly Report.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not required for smaller reporting companies.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the Chief Executive Officer (Principal Executive Officer) and the Chief Financial Officer (Principal Financial Officer), to allow for timely decisions regarding required disclosure. In designing and evaluating disclosure controls and procedures, the Company recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
The Company carried out an evaluation under the supervision and with the participation of management, including the Principal Executive Officer and Principal Financial Officer, of the effectiveness of its disclosure controls and procedures as of February 29, 2024, as defined in Rule 13a -15(e) and Rule 15d -15(e) under the Exchange Act. This evaluation was carried out under supervision and with the participation of our Chief Executive Officer and Chief Financial Officer.
Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of February 29, 2024, our disclosure controls and procedures were not effective due to material weaknesses in internal control over financial reporting related to (i) the lack of segregation of duties, (ii) penalties and interest on payroll taxes, (iii) financial reporting and information technology as further discussed in our Annual Report on Form 10-K for the year ended August 31, 2023, and which the Company determined continued to exist as of February 29, 2024.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the three months ended February 29, 2024, that materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.
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PART II — OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is a party to various legal actions, in addition to the contingencies noted in item 11, above, arising in the ordinary course of business which, in the opinion of the Company, are not material in that management either expects that the Company will be successful on the merits of the pending cases or that any liabilities resulting from such cases will be immaterial or substantially covered by insurance. While it is impossible to estimate with certainty the ultimate legal and financial liability with respect to these actions, management believes that the aggregate amount of such liabilities will not be material to the results of operations, financial position, or cash flows of the Company.
There have been no material developments to the litigation disclosed in our Annual Report on Form 10-K and filed with the SEC on December 14, 2023, respectively, except as noted in Note 11 Contingencies to the accompanying condensed consolidated financial statements. The most significant development to the Company’s contingencies relates to the receipt of a notice of determination from the IRS, on February 28, 2024, on the Company’s administrative claims, wherein the IRS denied, entirely, the Company’s appeal for relief. The Company appealed to the US Tax Court of Appeals on March 25, 2024.
Item 1A. Risk Factors.
You should carefully review and consider the information regarding certain factors that could materially affect our business, financial condition or future results set forth under Part I, Item 1A, Risk Factors, contained in our Annual Report on Form 10-K for Fiscal 2023, as filed with the SEC on December 14, 2023. There have been no material changes from the risk factors disclosed in Part I, Item 1A – Risk Factors in our Annual Report on Form 10-K for the year ended August 31, 2023.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
Not applicable.
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Item 6. Exhibits.
(a) Exhibits.
Exhibit No. |
| Document Description |
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| CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002.* | |
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| Inline XBRL Document Set for the financial statements and accompanying notes in Part I, Item 1, of this Quarterly Report on Form 10-Q. ** |
* Filed herewith
** Furnished herewith
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| ShiftPixy, Inc., a Wyoming corporation |
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Date: April 19, 2024 | By: | /s/ Scott W. Absher |
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| Scott W. Absher |
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| Principal Executive Officer |
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Date: April 19, 2024 | By: | /s/ Patrice Launay |
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| Patrice Launay |
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| Principal Financial Officer |
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