pixy-20211130

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


x			QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended November 30, 2021


o			TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from _______ to _______

SEC File No. 001-37954


			SHIFTPIXY, INC.
			(Exact name of registrant as specified in its charter)


Wyoming						47-4211438
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

501 Brickell Key Drive, Suite 300, Miami, FL						33131
(Address of principal executive offices)						(Zip Code)

Registrant’s telephone number: (888) 798-9100

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

Common Stock, par value $0.0001 per share

PIXY

The Nasdaq Stock Market LLC

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. Yes x No o

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). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “non-accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	x	Smaller reporting company	x
Emerging growth company	x

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 o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

The number of shares of the registrant’s only class of common stock issued and outstanding as of January 14, 2022, was 28,713,099.

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TABLE OF CONTENTS


PART I — FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (unaudited)	2
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosure about Market Risk	41
Item 4.	Controls and Procedures	41
PART II — OTHER INFORMATION
Item 1.	Legal Proceedings and Risk Factors	43
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43
Item 3.	Defaults Upon Senior Securities	43
Item 4.	Mine Safety Disclosures	43
Item 5.	Other Information	43
Item 6.	Exhibits	43

Signatures		49

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PART I — FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

ShiftPixy, Inc.

Condensed Consolidated Balance Sheets


	November 30, 2021		August 31, 2021
	(Unaudited)
ASSETS
Current assets
Cash	$	1,718,000	$	1,199,000
Accounts receivable	400,000		498,000
Unbilled accounts receivable	2,700,000		2,741,000
Deposit – workers’ compensation	95,000		155,000
Prepaid expenses	971,000		605,000
Other current assets	199,000		126,000
Current assets of discontinued operations	243,000		356,000
Total current assets	6,326,000		5,680,000

Cash and marketable securities held in Trust Account (See Note 2 and 5)	116,725,000		—
Fixed assets, net	3,010,000		2,784,000
Note receivable, net	4,004,000		4,004,000
Deposits – workers’ compensation	246,000		386,000
Deposits and other assets	944,000		944,000
Deferred offering costs – SPACs (See Note 5)	38,493,000		48,261,000
Non-current assets of discontinued operations	627,000		883,000
Total assets	$	170,375,000	$	62,942,000

LIABILITIES AND EQUITY (DEFICIT)

Current liabilities
Accounts payable and other accrued liabilities	$	7,669,000	$	6,553,000
Payroll related liabilities	8,619,000		7,876,000
Accrued workers’ compensation costs	604,000		663,000
Current liabilities of discontinued operations	1,414,000		1,516,000
Total current liabilities	18,306,000		16,608,000
Non-current liabilities
Accrued workers’ compensation costs	1,321,000		1,646,000
Non-current liabilities of discontinued operations	3,631,000		3,765,000
Total liabilities	23,258,000		22,019,000
Commitments and contingencies
Class A common shares subject to possible redemption 11,500,000 and no shares at $10.00 per share redemption value as of November 30, 2021 and August 31, 2021 (See note 2 and 5)	$116,725,000		—
Stockholders’ equity (deficit)
Preferred stock, 50,000,000 authorized shares; $0.0001 par value	—		—
Common stock, 750,000,000 authorized shares; $0.0001 par value; 28,713,099 and 25,863,099 shares issued as of November 30, 2021 and August 31, 2021	3,000		3,000
Additional paid-in capital	140,968,000		142,786,000
Accumulated deficit	(158,051,000)		(149,338,000)
Total ShiftPixy, Inc Stockholders' deficit	(17,080,000)		(6,549,000)
Non-controlling interest in consolidated subsidiaries (See note 5)	$	47,472,000	$	47,472,000
Total Equity (Deficit)	$	30,392,000	$	40,923,000
Total liabilities and equity deficit	$	170,375,000	$	62,942,000

See accompanying notes to the unaudited interim condensed consolidated financial statements.

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ShiftPixy Inc.

Condensed Consolidated Statements of Operations

(Unaudited)


	For the Three Months Ended
	November 30, 2021		November 30, 2020
Revenues (gross billings of $21.2 million less worksite employee payroll cost of $12.3 million and gross billings of $19.8 million less worksite employees payroll cost of $17.3 million, for the three months ended November 30, 2021 and 2020, respectively)	$	8,940,000	$	2,503,000
Cost of revenue	8,245,000		1,990,000
Gross profit (loss)	695,000		513,000

Operating expenses:
Salaries, wages, and payroll taxes	3,890,000		2,193,000
Stock-based compensation – general and administrative	408,000		496,000
Commissions	27,000		38,000
Professional fees	1,737,000		707,000
Software development	1,161,000		877,000
Depreciation and amortization	123,000		62,000
General and administrative	1,932,000		1,759,000
Total operating expenses	9,278,000		6,132,000

Operating Loss	(8,583,000)		(5,619,000)

Other (expense) income:
Interest expense	(1,000)		(3,000)
Other income	5,000		—
Total other expense	4,000		(3,000)
Loss from continuing operations	(8,579,000)		(5,622,000)

Total (loss) income from discontinued operations, net of tax	(134,000)		(1,314,000)

Net loss	$	(8,713,000)	$	(6,936,000)

Net loss per share, Basic and diluted
Continuing operations	$	(0.24)	$	(0.18)
Discontinued operations	—		(0.04)
Net loss per common share – Basic and diluted	$	(0.24)	$	(0.22)

Weighted average common shares outstanding – Basic and diluted	35,945,160		30,808,150

See accompanying notes to the unaudited interim condensed consolidated financial statements.

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ShiftPixy Inc.

Condensed Consolidated Statements of Equity (Deficit)

For the Three Months Ended November 30, 2021

(Unaudited)


	Preferred Stock Issued			Common Stock Issued			Additional Paid-In Capital		Accumulated Deficit		Total Stockholders’ Deficit ShiftPixy, Inc		Noncontrolling interest		Total Equity (Deficit)
	Shares	Amount		Shares	Amount
Balance, September 1, 2021	—	$	—	25,863,099	$	3,000	$	142,786,000	$	(149,338,000)	$	(6,549,000)	$	47,472,000	$	40,923,000
Common stock issued for private placement, net of offering cost	—	—		2,850,000	—		4,183,000		—		4,183,000		—		$	4,183,000
Prefunded warrants from private placement, net of offering costs	—	—		—	—		6,861,000		—		6,861,000		—		$	6,861,000
Stock-based compensation expense	—	—		—	—		408,000		—		408,000		—		$	408,000
Remeasurement of IHC temporary equity	—	—		—	—		(13,270,000)		—		(13,270,000)		—		$	(13,270,000)
Net Loss	—	—		—	—		—		(8,713,000)		(8,713,000)				$	(8,713,000)
Balance, November 30, 2021	—	$	—	28,713,099	$	3,000	$	140,968,000	$	(158,051,000)	$	(17,080,000)	$	47,472,000	$	30,392,000

ShiftPixy Inc.

Condensed Consolidated Statements of Equity (Deficit)

For the Three Months Ended November 30, 2020

(Unaudited)


	Preferred Stock Issued			Common Stock Issued			Additional Paid-In Capital		Accumulated Deficit		Total Stockholders’ Equity (Deficit)
	Shares	Amount		Shares	Amount
Balance, September 1, 2020	—	$	—	16,902,142	$	2,000	$	119,430,000	$	(119,462,000)	$	(30,000)
Common stock issued for private placement, net of offering costs	—	—		4,000,000	—		10,701,000		—		10,701,000
Stock-based compensation expense	—	—		—	—		421,000		—		421,000
Net Loss	—	—		—	—		—		(6,936,000)		(6,936,000)
Balance, November 30, 2020	—	$	—	20,902,142	$	2,000	$	130,552,000	$	(126,398,000)	$	4,156,000

See accompanying notes to the unaudited interim condensed consolidated financial statements.

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ShiftPixy, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	For the Three Months Ended
	November 30, 2021		November 30, 2020
OPERATING ACTIVITIES
Net loss	$	(8,713,000)	$	(6,936,000)
Loss from discontinued operations	(134,000)		(1,314,000)
Net loss from continuing operations	(8,579,000)		(5,622,000)
Adjustments to reconcile net loss from continuing operations to net cash used in continuing operating activities:
Depreciation and amortization	123,000		62,000

Stock-based compensation	408,000		421,000
Changes in operating assets and liabilities
Accounts receivable	98,000		150,000
Unbilled accounts receivable	41,000		(157,000)
Prepaid expenses	(366,000)		138,000
Other current assets	(73,000)		(46,000)
Deposits – workers’ compensation	200,000		11,000
Deposits and other assets	—		(35,000)
Accounts payable and other accrued liabilities	1,116,000		(432,000)
Payroll related liabilities	743,000		1,012,000
Accrued workers’ compensation costs	(384,000)		127,000

Total Adjustments	1,906,000		1,251,000
Net cash used in continuing operating activities	(6,673,000)		(4,371,000)
Net cash used in discontinued operating activities	(1,000)		(981,000)
Net cash used in operating activities	(6,674,000)		(5,352,000)

INVESTING ACTIVITIES

Investment of IHC IPO proceeds into Trust Account	(116,725,000)		—
Purchase of fixed assets	(349,000)		(572,000)

Net cash (used in) provided by investing activities	(117,074,000)		(572,000)

FINANCING ACTIVITIES
SPAC related offering costs paid	(3,502,000)		—
Proceeds from initial public offering of IHC	116,725,000		—
Proceeds from underwritten public offering, net of offering costs	—		10,701,000
Proceeds from private placement, net of offering costs	4,183,000		—
Proceeds from private placement prefunded warrants, net of offering costs	6,861,000		—
Net cash provided by financing activities	124,267,000		10,701,000
Net increase in cash	519,000		4,777,000
Cash - Beginning of Period	1,199,000		4,303,000
Cash -End of Period	$	1,718,000	$	9,080,000
Supplemental Disclosure of Cash Flows Information:
Cash paid for interest	$	1,000	$	3,000
Cash paid for income taxes	—		—
Non-cash Investing and Financing Activities:
Deferred offering costs SPACs	$	9,464,000	$	—

See accompanying notes to the unaudited interim condensed consolidated financial statements.

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ShiftPixy, Inc.

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

Note 1: Nature of Operations

ShiftPixy, Inc. was incorporated on June 3, 2015, in the State of Wyoming. The Company is a specialized Human Capital service provider that provides solutions for large contingent part-time workforce demands, primarily in the restaurant and hospitality service trades. The Company’s historic focus has been on the quick service restaurant industry in Southern California, but has begun to expand into other geographic areas and industries employing temporary or part-time labor sources.

The Company functions as an employment administrative services (“EAS”) provider primarily through its wholly-owned subsidiary, ReThink Human Capital Management, Inc. (“HCM”), as well as a staffing provider through another of its wholly-owned subsidiaries, ShiftPixy Staffing, Inc (“Staffing”). These subsidiaries provide a variety of services to our clients, (as a co-employer through HCM and a direct employer through Staffing), including the following: administrative services, payroll processing, human resources consulting, and workers’ compensation administration and coverage (as permitted and/or required by state law). The Company has built a human resources information systems (“HRIS”) platform to assist in customer acquisition that simplifies the onboarding of new clients into the Company’s closed proprietary operating and processing information system (the “ShiftPixy Ecosystem”). This HRIS platform is expected to facilitate additional value-added services in future reporting periods.

In January 2020, the Company sold the assets of Shift Human Capital Management Inc. (“SHCM”), a wholly-owned subsidiary of the Company, pursuant to which it assigned the majority of the Company’s billable clients at the time of the sale to a third party for cash. The continuing impact of this transaction on the Company’s financial statements is described below in Note 3, Discontinued Operations.

On March 31, 2021, shareholders representing a majority of the Company’s outstanding shares of capital stock approved an amendment to the Company’s Amended and Restated Articles of Incorporation (the “Amendment”) making the federal district courts of the United States the exclusive forum for the resolution of any complaint asserting a cause of action against the Company arising under the Securities Act of 1933, as amended. On May 13, 2021, the Company filed the Amendment with the Wyoming Secretary of State.

Note 2: Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules of the Securities and Exchange Commission (“SEC”) applicable to interim reports of companies filing as a small reporting company. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation have been included. The results of operations for the three months ended November 30, 2021 are not necessarily indicative of the results that may be expected for the full year ending August 31, 2022.

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, 2021 (“Fiscal 2021”), filed with the SEC on December 3, 2021.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of ShiftPixy Inc, and its wholly-owned subsidiaries. The condensed consolidated financial statements also include the accounts of (a) Industrial Human Capital, Inc. ("IHC"), which is a special purpose acquisition company, or "SPAC", for which we serve as the financial sponsor (as described below), and which is deemed to be controlled by us as a result of our 15% equity ownership stake, the overlap of three of our executive officers as executive officers of IHC, and significant influence that we currently exercise over the funding and acquisition of new operations for an initial business combination ("IBC"). (see Note 2, Variable Interest Entity). All intercompany balances have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the

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financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include:

•Liability for legal contingencies;

•Useful lives of property and equipment;

•Deferred income taxes and related valuation allowance;

•Valuation of illiquid noncontrolling interest in SPAC shares transferred;

•Valuation of long-lived assets including long term notes receivable prior to January 1, 2021; and

•Projected development of workers’ compensation claims.

Revenue and Direct Cost Recognition

For the year ended August 31, 2021 ("Fiscal 2021"), we adopted Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606), using the modified retrospective approach. Under this method, the guidance is applied only to the most current period presented in the financial statements. ASU No. 2014-09 outlines a single comprehensive revenue recognition model for revenue arising from contracts with customers and superseded most of the previous revenue recognition guidance, including industry-specific guidance. Under ASU No. 2014-09, an entity recognizes revenue for the transfer of promised goods or services to customers in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services. Our revenue recognition policies remained substantially unchanged as a result of the adoption of ASU No. 2014-09 and we did not have any significant changes in our business processes or systems.

The Company’s revenues are primarily disaggregated into fees for providing staffing solutions and EAS/HCM services. The Company enters into contracts with its clients for Staffing or EAS based on a stated rate and price in the contract. Contracts generally have a term of 12 months but are cancellable at any time by either party with 30 days’ written notice. The performance obligations in the agreements are generally combined into one performance obligation, as they are considered a series of distinct services, and are satisfied over time because the client simultaneously receives and consumes the benefits provided as the Company performs the services. Payments for the Company’s services are typically made in advance of, or at the time that the services are provided. The Company does not have significant financing components or significant payment terms for its customers and consequently has no material credit losses. The Company uses the output method based on a stated rate and price over the payroll processed to recognize revenue, as the value to the client of the goods or services transferred to date appropriately depicts our performance towards complete satisfaction of the performance obligation.

Staffing Solutions

The Company records gross billings as revenues for its staffing solutions clients. The Company is primarily responsible for fulfilling the staffing solutions services and has discretion in establishing price. The Company includes the payroll costs in revenues with a corresponding increase to cost of revenues for payroll costs associated with these services. As a result, we are the principal in this arrangement for revenue recognition purposes. For three months ended November 30, 2020, the Company recognized no revenues that should have been evaluated under a staffing solutions model.

EAS Solutions

EAS solutions revenue is primarily derived from the Company’s gross billings, which are based on (i) the payroll cost of the Company’s worksite employees (“WSEs”) and (ii) a mark-up computed as a percentage of payroll costs for payroll taxes and workers’ compensation premiums.

Gross billings are invoiced to each EAS client concurrently with each periodic payroll of the Company’s WSEs, which coincides with the services provided and which is typically a fixed percentage of the payroll processed. Revenues, which exclude the payroll cost component of gross billings and therefore consist solely of markup, are recognized ratably over the payroll period as WSEs perform their services at the client worksite. Although the Company assumes responsibility for processing and remitting payroll and payroll related obligations, it does not assume employment-related responsibilities such as determining the amount of the payroll and related payroll obligations. As a result, the Company records revenue on a “net” basis in this arrangement for revenue recognition purposes. Revenues that have been recognized but not invoiced for EAS

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clients are included in unbilled accounts receivable on the Company’s consolidated balance sheets, and were $2,700,000 and $2,741,000, as of November 30, 2021 and August 31, 2021, respectively.

Consistent with the Company’s revenue recognition policy for EAS clients, direct costs do not include the payroll cost of its WSEs. The cost of revenue associated with the Company’s revenue generating activities is primarily comprised of all other costs related to its WSEs, such as the employer portion of payroll-related taxes, employee benefit plan premiums and workers’ compensation insurance costs.

The fees collected from the worksite employers for benefits (i.e. zero-margin benefits pass-through), workers’ compensation and state unemployment taxes are presented in revenues and the associated costs of benefits, workers’ compensation and state unemployment taxes are included in operating expenses for EAS clients, as the Company does retain risk and acts as a principal with respect to this aspect of the arrangement. With respect to these fees, the Company is primarily responsible for fulfilling the service and has discretion in establishing price.

Disaggregation of Revenue

The Company’s primary revenue streams include HCM and staffing services. The Company’s disaggregated revenues for the three months ended November 30, 2021 and November 30, 2020 were as follows:


	For the three months ended
Revenue (in millions):	November 30, 2021		November 30, 2020
HCM1	$	1.8	$	2.5
Staffing	7.1		—
	$	8.9	$	2.5

1 HCM revenue is presented net, $14.1 million gross less WSE payroll cost of $12.3 million for the three months ended November 30, 2021 and $19.8 million gross less WSE payroll cost of $17.3 million for the three months ended November 30, 2020.

During Fiscal 2021 the Company announced the launch of ShiftPixy Labs and expects to generate revenue from this initiative in Fiscal 2022. We generated no revenue from this initiative during the three months ended November 30, 2021.

For the three months ended November 30, 2021 and November 30, 2020, the following geographical regions represented more than 10% of total revenues:


Region:	November 30, 2021		November 30, 2020
California	53.7	%	78.2	%
Washington	13.3	%	11.6	%

Incremental Cost of Obtaining a Contract

Pursuant to the “practical expedients” provided under ASU No 2014-09, the Company expenses sales commissions when incurred because the terms of its contracts are cancellable by either party upon 30 days' notice. These costs are recorded in commissions in the Company’s Consolidated Statements of Operations.

Segment Reporting

Prior to Fiscal 2021, the Company operated as one reportable segment under ASC 280, Segment Reporting. The chief operating decision maker regularly reviews the financial information of the Company at a consolidated level in deciding how to allocate resources and in assessing performance. During Fiscal 2021, the Company entered into new business lines and geographic areas that, to date, are not material. However, with the migration to Staffing during the fiscal quarter ending May 31, 2021, the

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Company is beginning to manage the business on a segmented basis and therefore intends to report such information once systems and processes are updated accordingly. Reporting and monitoring activities on a segment basis will allow the chief operating decision maker to evaluate operating performance more effectively. See also Disaggregation of Revenue, above.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less when purchased as cash equivalents. The Company had no such investments as of November 30, 2021 or August 31, 2021.

Marketable Securities Held in Trust Account

At November 30, 2021, substantially all of the assets held in the Trust Account were invested in U.S. Treasury securities with maturities of 180 days or less. These funds are restricted for use and may only be used for purposes of completing an IBC or redemption of the public common shares of the SPACs.

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 November 30, 2021, there was $1,266,000 of cash on deposit in excess of the amounts insured by the FDIC.

No individual clients represented more than 10% of revenues for the three months ended November 30, 2021. However, three clients represented 98% of total accounts receivable as of November 30, 2021.

Fixed Assets

Fixed assets are recorded at cost, less accumulated depreciation and amortization. Expenditures for major additions and improvements are capitalized and minor replacements, maintenance, and repairs are charged to expense as incurred. When fixed assets are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective period. Leasehold improvements are amortized over the shorter of the useful life or the initial lease term.

Fixed assets are recorded at cost and are depreciated over the estimated useful lives of the related assets using the straight-line method. The estimated useful lives of property and equipment for purposes of computing depreciation are as follows:


Equipment:			5 years
Furnitures & Fixtures:			5 - 7 years
Leasehold improvements			Shorter of useful life or the remaining lease term, typically 5 years

The amortization of these assets is included in depreciation expense on the condensed consolidated statements of operations.

Internal Use Software

Software development costs relate primarily to software coding, systems interfaces and testing of the Company’s proprietary employer information systems and are accounted for in accordance with ASC 350-40, Internal Use Software.

Internal software development costs are capitalized from the time the internal use software is considered probable of completion until the software is ready for use. Business analysis, system evaluation and software maintenance costs are expensed as incurred. The capitalized computer software development costs are reported under the section fixed assets, net in the condensed consolidated balance sheets.

The Company determined that there were no material capitalized internal software development costs for the three months ended November 30, 2021 or as of August 31, 2021. All capitalized software recorded was purchased from third party vendors. Capitalized software development costs are amortized using the straight-line method over the estimated useful life of the software, generally three to five years from when the asset is placed in service.

During the three months ended November 30, 2021 and November 30, 2020, the Company incurred research and development costs of approximately $2.2 million and $1.4 million, respectively. All costs were related to internally developed or externally contracted software and related technology for the Company’s HRIS platform and related mobile application. In addition, no software costs were capitalized for the three months ended November 30, 2021 and November 30, 2020, respectively.

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Impairment and Disposal of Long-Lived Assets

The Company periodically evaluates its long-lived assets for impairment in accordance with ASC 360-10, Property, Plant, and Equipment. ASC 360-10 requires that an impairment loss be recognized for assets to be disposed of or held-for-use when the carrying amount of an asset is deemed not to be recoverable. If events or circumstances were to indicate that any of our long-lived assets might be impaired, the Company would assess recoverability based on the estimated undiscounted future cash flows to be generated from the applicable asset. In addition, the Company may record an impairment loss to the extent that the carrying value of the asset exceeds the fair value of the asset. Fair value is generally determined using an estimate of discounted future net cash flows from operating activities or upon disposal of the asset. There were no indicators noted of impairments during the periods ended November 30, 2021 or November 30, 2020.

Workers’ Compensation

Everest Program

Until July 2018, a portion of the Company’s workers’ compensation risk was covered by a retrospective rated policy, which calculates the final policy premium based on the Company’s loss experience during the term of the policy and the stipulated formula set forth in the policy. The Company funds the policy premium based on standard premium rates on a monthly basis and based on the gross payroll applicable to workers covered by the policy. During the policy term and thereafter, periodic adjustments may involve either a return of previously paid premiums or a payment of additional premiums by the Company or a combination of both. If the Company’s losses exceed the expected losses under that policy, then the Company could receive a demand for additional premium payments. The Company is currently engaged in litigation regarding such a demand for additional premium payments, which we believe to be without merit, as discussed at Note 11, Contingencies, Everest Litigation, below.

Sunz Program

From July 2018 through February 28, 2021, the Company’s workers’ compensation program for its WSEs was provided primarily through an arrangement with United Wisconsin Insurance Company and administered by Sunz Insurance Solutions, LLC (“Sunz”). Under this program, the Company has financial responsibility for the first $0.5 million of claims per occurrence. The Company provides and maintains a loss fund that is earmarked to pay claims and claims related expenses. The workers’ compensation insurance carrier establishes monthly funding requirements comprised of premium costs and funds to be set aside for payment of future claims (“claim loss funds”). The level of claim loss funds is primarily based upon anticipated WSE payroll levels and expected workers’ compensation loss rates, as determined by the insurance carrier. Monies funded into the program for incurred claims expected to be paid within one year are recorded as Deposit - workers’ compensation, a short-term asset, while the remainder of claim funds are included in Deposit- workers’ compensation, a long-term asset in its consolidated balance sheets. The Company is currently engaged in litigation regarding demands by Sunz for additional claims loss funds, which we believe to be without merit, as discussed at Note 11, Contingencies, Sunz Litigation, below.

Current Program

Effective March 1, 2021, the Company migrated its clients to a guaranteed cost program. Under this program, the Company’s financial responsibility is limited to the cost of the workers’ compensation premium. The Company funds the workers’ compensation premium based on standard premium rates on a monthly basis and based on the gross payroll applicable to workers covered by the policy. Any final adjustments to the premiums are based on the final audited exposure multiplied by the applicable rates, classifications, experience modifications and any other associated rating criteria.

Under the Everest and Sunz programs, the Company utilized a third party to estimate its loss development rate, which was based primarily upon the nature of WSEs’ job responsibilities, the location of WSEs, the historical frequency and severity of workers’ compensation claims, and an estimate of future cost trends. Each reporting period, changes in the assumptions resulting from changes in actual claims experience and other trends are incorporated into its workers’ compensation claims cost estimates.

As of November 30, 2021 and August 31, 2021, the Company had $95,000 and $155,000, in Deposit – workers’ compensation classified as a short-term asset and $246,000 and $386,000, classified as a long-term asset, respectively.

The Company’s estimate of incurred claim costs expected to be paid within one year is included in short-term liabilities, while its estimate of incurred claim costs expected to be paid beyond one year is included in long-term liabilities on its consolidated balance sheets. As of November 30, 2021 and August 31, 2021, the Company had short term accrued workers’ compensation

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costs of $0.6 million and $663,000, and long term accrued workers’ compensation costs of $1.3 million and $1,646,000, respectively.

The Company retained workers’ compensation asset reserves and workers’ compensation related liabilities for former WSEs of clients transferred to Shiftable HR Acquisition, LLC, a wholly-owned subsidiary of Vensure Employer Services, Inc. (“Vensure”), in connection with the Vensure Asset Sale described in Note 3, Discontinued Operations, below. As of November 30, 2021, the retained workers’ compensation assets and liabilities are presented as a discontinued operation net asset or liability. As of November 30, 2021, the Company had $0.2 million in short term assets and $1.4 million of short term liabilities, and had $0.6 million of long term assets and $3.6 million of long term liabilities.

Because the Company bears the financial responsibility for claims up to the level noted above, such claims, which are the primary component of its workers’ compensation costs, are recorded in the period incurred. Workers’ compensation insurance includes ongoing health care and indemnity coverage whereby claims are paid over numerous years following the date of injury. Accordingly, the accrual of related incurred costs in each reporting period includes estimates, which take into account the ongoing development of claims and therefore requires a significant level of judgment. In estimating ultimate loss rates, the Company utilizes historical loss experience, exposure data, and actuarial judgment, together with a range of inputs that are primarily based upon the WSE’s job responsibilities, their location, the historical frequency and severity of workers’ compensation claims, and an estimate of future cost trends. For each reporting period, changes in the actuarial assumptions resulting from changes in actual claims experience and other trends are incorporated into the Company’s workers’ compensation claims cost estimates. The estimated incurred claims are based upon: (i) the level of claims processed during each quarter; (ii) estimated completion rates based upon recent claim development patterns under the plan; and (iii) the number of participants in the plan.

The Company has had very limited and immaterial COVID-19 related claims between March 2020 through the date of this Quarterly Report, although there is a possibility of additional workers’ compensation claims being made by furloughed WSEs as a result of the employment downturn caused by the pandemic. On May 4, 2020, the State of California indicated that workers who become ill with COVID-19 would have a potential claim against workers’ compensation insurance for their illnesses. There is a possibility that additional workers’ compensation claims could be made by employees required to work by their employers during the COVID-19 pandemic, which could have a material impact on our workers’ compensation liability estimates. While the Company has not seen significant additional expenses as a result of any such potential claims to date, which would include claims for reporting periods after November 30, 2021, we continue to monitor closely all workers’ compensation claims made as the COVID-19 pandemic continues.

Fair Value of Financial Instruments

ASC 820, Fair Value Measurement, requires entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized on the balance sheet, for which it is practical to estimate fair value. ASC 820 defines fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. At November 30, 2021 and August 31, 2021, the carrying value of certain financial instruments (cash, accounts receivable and payable) approximated fair value due to the short-term nature of the instruments. Notes Receivable is valued at estimated fair value as described below.

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 has the ability to access.

•Level 2: Inputs to the valuation methodology include:

◦Quoted prices for similar assets or liabilities in active markets;

◦Quoted prices for identical or similar assets or liabilities in inactive markets;

◦Inputs other than quoted prices that are observable for the asset or liability;

◦Inputs that are derived principally from or corroborated by observable market data by correlation or other means; and

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◦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.

Funds held in trust represent U.S. treasury bills that were purchased with funds raised through the initial public offering of IHC. The funds raised from SPACs are held in trust accounts that are restricted for use and may only be used for purposes of completing an IBC or redemption of the public shares of common stock of the SPACs as set forth in their respective trust agreements. The funds held in trust are included within Level 1 of the fair value hierarchy and included in Cash and marketable securities held in Trust Account in the accompanying condensed consolidated balance sheets.

The Company did not have other Level 1 or Level 2 assets or liabilities at November 30, 2021 or August 31, 2021. We recorded the fair value of the SPAC founder shares that the Company transferred to the underwriters using non-recurring Level 3 assumptions, including quoted asset prices for SPAC shares and warrants and estimates of the likelihood of the IPOs and IBCs of our sponsored SPACs being consummated. See also Note 5, Deferred Offering Costs – SPACS, below.

The valuation of the Note Receivable from the Vensure Asset Sale (as defined below), is a Level 3 fair value measurement as of August 31, 2020 and through December 31, 2020 (end of the earn-out period as defined under the terms of the Note Receivable).

The Note Receivable, as described in Note 3, Discontinued Operations, below, was estimated using a discounted cash flow technique based on expected contingent payments identified in the Vensure Asset Sale contract and with significant inputs that are not observable in the market and thus represents a Level 3 fair value measurement as defined in ASC 820. The Company valued the Note Receivable on the January 1, 2020 transaction date using a 10% discount rate, and on August 31, 2020 and through December 31, 2020 using a 15% discount rate, which contemplates the risk and probability assessments of the expected future cash flows. The significant inputs in the Level 3 measurement not supported by market activity include the probability assessments of expected future cash flows related to the Vensure Asset Sale, appropriately discounted considering the

uncertainties associated with the obligation, and as calculated in accordance with the terms of the Vensure Asset Sale agreement. For Fiscal 2020, the expected cash payments from the Note Receivable were based on estimated gross wages billed for the clients transferred to Vensure pursuant to the Vensure Asset Sale as of the measurement date.

The Company used the following assumptions to value the Note Receivable as of August 31, 2020:

•Discount rate of 15%

•Actual monthly wages billed to the extent available to the Company

For interim reporting periods after December 31, 2020, including as of November 30, 2021 and August 31, 2021, the Company valued the Note Receivable as discussed in Note 3, Discontinued Operations, below.

The development and determination of the unobservable inputs for Level 3 fair value measurements and the fair value calculations are the responsibility of the Company’s chief financial officer and are approved by the chief executive officer. There were no transfers out of Level 3 for the three months ended November 30, 2021 and November 30, 2020.

Advertising Costs

The Company expenses all advertising as incurred. The Company incurred advertising costs totaling $401,000 and $202,000 for the three months ended November 30, 2021 and November 30, 2020, respectively.

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

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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.

Earnings (Loss) Per Share

The Company utilizes ASC 260, Earnings per Share. Basic Net Income (Net Loss) per common share is computed by dividing Net Income (Net Loss) attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the reporting period. Common stock outstanding for purposes of Net Income (Net Loss) per share calculations include unexercised Preferred Options and unexercised prefunded warrants, as described in Note 7, Stockholders' Equity, below. Diluted earnings (loss) per share is computed similar to basic earnings (loss) per share except that the denominator is increased to include additional common stock equivalents available upon exercise of stock options and warrants using the treasury stock method. Dilutive common stock equivalents include the dilutive effect of in-the-money 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. Securities that are excluded from the calculation of weighted average dilutive common stock, because their inclusion would have been antidilutive, are:


	Three months ended November 30, 2021	Three Months Ended November 30, 2020
Options	402,258	1,517,189
Warrants (Note 7)	17,491,772	4,396,209
Total potentially dilutive shares	17,894,030	5,913,398

For the table above, “Options” represent all options granted under the Company’s 2017 Stock Option/Stock Issuance Plan (the "Plan"), as described in Note 8, below.

Stock-Based Compensation

At November 30, 2021, the Company had 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 (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 our 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.

The methods and assumptions used in the determination of the fair value of stock-based awards are consistent with those described in the Company's Annual Report on Form 10-K for Fiscal 2021, filed with the SEC on December 3, 2021, which includes a detailed description of the Company's stock-based compensation awards, including information related to vesting terms, service and performance conditions, payout percentages, and process for estimating the fair value of stock options granted.

Recent Accounting Standards

In February 2016, the FASB issued ASU 2016-2, Leases. The new standard requires that a lessee recognize assets and liabilities on the balance sheet for leases with terms longer than 12 months. The recognition, measurement and presentation of lease expenses and cash flows by a lessee will depend on its classification of the lease as a finance or operating lease. The guidance

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also includes new disclosure requirements providing information on the amounts recorded in the financial statements. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases. For entities that early adopted Topic 842, the amendments are effective upon issuance of ASU 2018-10, and the transition requirements are the same as those in Topic 842. For entities that have not adopted Topic 842, the effective date and transition requirements will be the same

as the effective date and transition requirements in Topic 842. The updated effective date will be for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. The Company is evaluating the effect of adopting this new accounting guidance and is currently finalizing its analysis of the financial impact of the adoption. The Company expects to adopt the guidance using the modified retrospective method.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). This standard requires an impairment model (known as the current expected credit loss (“CECL”) model) that is based on expected losses rather than incurred losses. Under the new guidance, each reporting entity should estimate an allowance for expected credit losses, which is intended to result in more timely recognition of losses. This model replaces multiple existing impairment models in current U.S. GAAP, which generally requires a loss to be incurred before it is recognized. The new standard applies to trade receivables arising from revenue transactions such as contract assets and accounts receivable. Under ASC 606, revenue is recognized when, among other criteria, it is probable that an entity will collect the consideration it is entitled to when goods or services are transferred to a customer. When trade receivables are recorded, they become subject to the CECL model and estimates of expected credit losses on trade receivables over their contractual life will be required to be recorded at inception based on historical information, current conditions, and reasonable and supportable forecasts. This guidance is effective for smaller reporting companies for annual periods beginning after December 15, 2022, including the interim periods in the year. Early adoption is permitted. The Company will adopt the guidance when it becomes effective.

On December 31, 2019, the FASB issued ASC 2019-12 “Income Taxes: Simplifying the Accounting for Income Taxes” (“Topic 740”). The amendments in this update simplify the accounting for income taxes by removing certain exceptions. For public business entities, the amendments in this update are effective for fiscal years, and interim periods

within those fiscal years, beginning after December 15, 2020. Early adoption of the amendments is permitted, including adoption in any interim period for (1) public business entities for periods for which financial statements have not yet been issued and (2) all other entities for periods for which financial statements have not yet been made available for issuance. An entity that elects to early adopt the amendments in an interim period should reflect any adjustments as of the beginning of the annual period that includes that interim period. Additionally, an entity that elects early adoption must adopt all the amendments in the same period. The Company will adopt the guidance when it becomes effective.

In May 2021, the FASB issued ASU 2021-4 Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (a consensus of the FASB Emerging Issues Task Force). The amendments in this update are effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. The Company is evaluating the effect of adopting this new accounting guidance and is currently finalizing its analysis of the financial impact of the adoption.

Variable Interest Entity

The Company is involved in the formation of various entities considered to be Variable Interest Entities (“VIEs”). The Company evaluates the consolidation of these entities as required pursuant to ASC Topic 810 relating to the consolidation of VIEs. These VIEs are primarily formed to sponsor the related SPACs.

The Company’s determination of whether it is the primary beneficiary of VIE is based in part on an assessment of whether or not the Company and its related parties are exposed to the majority of the risks and rewards of the entity. Typically, the Company is entitled to substantially all or portion of the economics of these VIEs. The Company is the primary beneficiary of the VIE entities.

During the three months ended November 30, 2021, our sponsored SPAC, IHC, completed its IPO, selling 11,500,000 units pursuant to a registration statement and prospectus, as described below. The IPO closed on October 22, 2021, raising gross proceeds of $115 million. These proceeds were deposited in a trust account established for the benefit of the IHC public shareholders and, along with an additional $1.675 million deposited in trust by the Company for interest payments for future possible redemptions by IHC stockholders, are included in Cash and marketable securities held in Trust Account in the accompanying condensed consolidated balance sheet at November 30, 2021. These proceeds are invested only in U.S. treasury securities in accordance with the governing documents of IHC.

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Each unit had an offering price of $10.00 and consisted of one share of IHC common stock and one redeemable warrant. Each warrant entitles the holder thereof to purchase one share of IHC common stock at a price of $11.50 per share. The IHC public stockholders have a right to redeem all or a portion of their shares of IHC common stock upon the completion of its IBC, subject to certain limitations. Under the terms of the registration statement and prospectus, IHC is required to consummate its IBC within 12 months of the completion of the IPO. If IHC is unable to meet this deadline, and no extension is granted, then IHC will redeem 100% of the public shares of common stock outstanding for cash, subject to applicable law and certain conditions.

In connection with the IPO, we purchased, through investments, 4,639,102 private placement warrants ("Placement Warrants") at a price of $1.00 per warrant, for an aggregate purchase price of $4,639,102, and currently own 2,175,000 Founder Shares of IHC common stock, representing approximately 15% of the issued and outstanding common stock of IHC. Each Placement Warrant is identical to the warrants sold in the IPO, except as described in the IPO registration statement and prospectus. Following the completion of the IHC IPO, we determined that IHC is a Variable Interest Entity ("VIE") in which we have a variable interest because IHC does not have enough equity at risk to finance its activities without additional subordinated financial support. We have also determined that IHC's public stockholders do not have substantive rights, and their equity interest constitutes temporary equity, outside of permanent equity, in accordance with ASC 480-10-S99-3A. As such, we have concluded that we are currently the primary beneficiary of IHC as a VIE, as we have the right to receive benefits or the obligation to absorb losses of the entity, as well as the power to direct a majority of the activities that significantly impact IHC's economic performance and IHC does not have enough equity at risk to finance its activities without additional subordinated financial support. Since we are the primary beneficiary, IHC is consolidated into our condensed consolidated financial statements.

Shares Subject to Possible Redemption

The Company accounts for its stockholdings in its sponsored SPACs, (which are consolidated in our condensed consolidated financial statements), that are subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Shares of common stock subject to mandatory redemption are classified as a liability instrument and are measured at fair value. Conditionally redeemable shares of common stock (including shares of common stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, shares of common stock are classified as shareholders’ equity. Each sponsored SPAC's shares of common stock feature certain redemption rights that are considered to be outside of the SPAC's control and subject to occurrence of uncertain future events. Accordingly, as of November 30, 2021, shares of common stock subject to possible redemption are presented as temporary equity, outside of the shareholders’ equity section of the Company’s balance sheets.

The Company recognizes changes in redemption value of these shares immediately as they occur and adjusts the carrying value of redeemable shares of common stock to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of the redeemable common stock are affected by charges against additional paid in capital and accumulated deficit. As of November 30, 2021 the carrying amount of the sponsored SPAC shares of common stock subject to redemption was recorded at their redemption value of $116,725,000. The remeasurement of the redemption value of the redeemable shares of common stock is recorded in equity. The remeasurement in equity comprised of offering cost incurred in connection with the sale of public shares of the SPACs was $13 million, consisting of approximately $9.5 million of offering costs related to the founder shares transferred to the SPACs’ underwriter representative as described in Note 5, Deferred Offering Costs, and $3.5 million in other offering costs related to the IPO paid at closing in cash.

Note 3: Discontinued Operations

On January 3, 2020, the Company executed an asset purchase agreement assigning client contracts comprising approximately 88% of its quarterly revenue through the date of the transaction, including 100% of its existing professional employer organization (“PEO”) business effective as of December 31, 2019, and transferring $1.5 million of working capital assets, including cash balances and certain operating assets associated with the assigned client contracts included in the agreement, to a wholly owned subsidiary of Vensure (the “Vensure Asset Sale”). Gross proceeds from the Vensure Asset Sale were $19.2 million, of which $9.7 million was received at closing and $9.5 million was scheduled to be paid out in equal monthly payments over the four years following the closing of the transaction (the “Note Receivable”), subject to adjustments for working capital and customer retention, (as measured by a gross wage guarantee included in the governing agreement), over the twelve month period following the Vensure Asset Sale.

For Fiscal 2020, the Company estimated the value of the Note Receivable at fair value as discussed in Note 2, Summary of Significant Accounting Policies, above. For the three months ended November 30, 2021, the Company recorded the Note Receivable based on our estimate of expected collections which, in turn, was based on additional information obtained through

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discussions with Vensure and evaluation of our records. On March 12, 2021, the Company received correspondence from Vensure proposing approximately $10.7 million of working capital adjustments under the terms of the Vensure Asset Sale agreement which, if accepted, would have had the impact of eliminating any sums owed to the Company under the Note Receivable. As indicated in the reconciliation table below, the Company has recorded $2.6 million of working capital adjustments, subject to final review and acceptance, and has provided for an additional reserve of $2.9 million for potential claims. By letter dated April 6, 2021, the Company disputed Vensure’s proposed adjustments.The disputes between the Company and Vensure regarding working capital adjustments under the Vensure Asset Sale agreement are currently the subject of litigation pending in the Delaware Chancery Court, as discussed at Note 11, Contingencies, Vensure Litigation, below.

The following is a reconciliation of the gross proceeds to the net proceeds from the Vensure Asset Sale as presented in the balance sheet for the period ended November 30, 2021.


Gross proceeds	$	19,166,000
Cash received at closing – asset sale	(9,500,000)
Cash received at closing – working capital	(166,000)
Gross note receivable	$	9,500,000

Less: Transaction reconciliation – estimated working capital adjustments	(2,604,000)
Adjusted Note Receivable	6,896,000
Reserve for estimated potential claims	(2,892,000)
Long-term note receivable, estimated net realizable value	$	4,004,000

The entire Note Receivable is recorded as a long term note receivable as of November 30, 2021. Any adjustments to the Note Receivable are applied against payments in the order they are due to be paid. As such, the estimates of the working capital and reserves for estimated potential claims would not result in any cash payments due to the Company until later in Fiscal 2022.

The Vensure Asset Sale generated a gain of $15.6 million for Fiscal 2020. The Company expected a minimal tax impact from the Vensure Asset Sale as it utilized its net operating losses accumulated since inception to offset the gain resulting from discontinued operations tax provision with a corresponding offset to the valuation allowance.

The Vensure Asset Sale met the criteria of discontinued operations set forth in ASC 205 and as such the Company has reclassified its discontinued operations for all periods presented and has excluded the results of its discontinued operations from continuing operations for all periods presented.

The terms of the Vensure Asset Sale call for adjustments to the Note Receivable either for: (i) working capital adjustments or (ii) in the event that the gross wages of the business transferred is less than the required amount.

(i) Working capital adjustments: Through November 30, 2021, the Company has identified $2.6 million of likely working capital adjustments, including $88,000 related to lower net assets transferred at closing, and $2.5 million of cash remitted to the Company’s bank accounts, net of cash remitted to Vensure’s bank accounts. Under the terms of the Vensure Asset Sale, a reconciliation of the working capital was to have been completed by April 15, 2020. Due to operational difficulties and quarantined staff caused by the outbreak of COVID-19, Vensure requested a postponement of the working capital reconciliation that was due in Fiscal 2020. Although Vensure provided the Company with its working capital reconciliation on March 12, 2021, it failed to provide adequate documentation to support its calculations. Accordingly, the working capital adjustment recorded as of November 30, 2021, represents the Company’s estimate of the reconciliation adjustment by using Vensure’s claims and the limited supporting information Vensure provided as a starting point, and then making adjustments for amounts in dispute based upon our internal records and best estimates. There is no assurance that the working capital change identified as of November 30, 2021 represents the final working capital adjustment.

(ii) Gross billings adjustment: Under the terms of the Vensure Asset Sale, the proceeds of the transaction are reduced if the actual gross wages of customers transferred for Calendar 2020 are less than 90% of those customers’ Calendar 2019 gross wages. The Company has prepared an estimate of the Calendar 2020 gross wages based on a combination of factors including reports of actual transferred client billings in early Calendar 2020, actual gross wages of continuing customers of the Company, publicly available unemployment reports for the Southern California markets and the relevant COVID-19 impacts on employment levels, and other information. Based on the information available, the Company estimated that it would receive additional consideration below the required threshold and reduced the

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contingent consideration by $1.4 million. Vensure has not identified any such adjustments to date. Based on the information available, the Company reclassified the previously recorded gross wages claim to a general potential claims reserve during Fiscal 2021. No additional adjustment was made during the three months ended November 30, 2021.

The carrying amounts of the classes of assets and liabilities from the Vensure Asset Sale included in discontinued operations are as follows:


	November 30, 2021		August 31, 2021
Cash	$	—	$	—
Accounts receivable and unbilled account receivable	—		—
Prepaid expenses and other current assets	—		—
Deposits – workers’ compensation	243,000		356,000
Total current assets	243,000		356,000
Fixed assets, net	—		—
Deposits – workers’ compensation	627,000		883,000
Total assets	$	870,000	$	1,239,000

Accounts payable and other current liabilities	$	—	$	—
Payroll related liabilities	—		—
Accrued workers’ compensation cost	1,414,000		1,516,000
Total current liabilities	1,414,000		1,516,000
Accrued workers’ compensation cost	3,631,000		3,765,000
Total liabilities	5,045,000		5,281,000

Net liability	$	(4,175,000)	$	(4,042,000)

Reported results for the discontinued operations by period were as follows:


	For the Quarter Ended
	November 30, 2021		November 30, 2020
Revenues	$	—	$	—
Cost of revenue	133,000		1,314,000
Gross profit	(133,000)		(1,314,000)

Operating expenses:
Salaries, wages and payroll taxes	—		—
Commissions	—		—
Total operating expenses	—		—

(Loss) income from discontinued operations	$	(133,000)	$	(1,314,000)

Note 4: Special Purpose Acquisition Company ("SPAC") Sponsorship

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On April 29, 2021, we announced our sponsorship, through our wholly-owned subsidiary, ShiftPixy Investments, Inc. ("Investments"), of four SPACs. Each SPAC that has not yet commenced its IPO is currently seeking to raise approximately $150 million in capital investment, through an IPO, to acquire companies in the healthcare and technology segments of the staffing industry, as well as one or more insurance entities, while IHC has completed its IPO and is seeking to acquire companies in the light industrial segment of the staffing industry, as described below. We anticipate that, through our wholly-owned subsidiary, we will own approximately 15% of the issued and outstanding stock in each entity upon their IPOs being consummated, and that each will operate as a separately managed, publicly traded entity following the completion of their respective IBCs. We anticipate entering into service agreements with each of the staffing entities that will allow them to participate in our HRIS platform. We also expect to facilitate the procurement of workers’ compensation, personal liability, and other similar insurance products for these staffing entities through our anticipated relationship with the insurance SPAC after it completes its IBC. For the period ended November 30, 2021, the sponsorship operations for all of these entities, with the exception of IHC, are consolidated in the accompanying financial statements as they were being conducted under a wholly-owned subsidiary. The operations of IHC have been consolidated in the accompanying financial statements for the reasons set forth above.

The registration statement and prospectus covering the IPO of IHC was declared effective by the SEC on October 19, 2021, and IHC units (the “IHC Units”), consisting of one share of common stock and an accompanying warrant to purchase one share of IHC common stock, began trading on the New York Stock Exchange (“NYSE”) on October 20, 2021. The IHC IPO closed on October 22, 2021, raising gross proceeds for IHC of $115 million. In connection with the IHC IPO, we purchased, through our wholly-owned subsidiary, 4,639,102 placement warrants at a price of $1.00 per warrant, for an aggregate purchase price of $4,639,102.

Following the closing of the IPO, the sum of $116,725,000 was placed in a trust account (the “Trust Account”), and has been invested in U.S. government securities within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the "ICA"), with a maturity of 185 days or less, or in any open-ended investment company that holds itself out as a money market fund investing solely in U.S. Treasuries and meeting certain conditions under Rule 2a-7 of the ICA, as determined by the Company, until the earlier of: (i) the completion of the IBC and (ii) the distribution of the funds in the Trust Account to the Company’s shareholders, as described below. The $116,725,000 consisted of the $115,000,000 of gross proceeds from the sale of the Units in the IPO and $1,725,000 funded by the Company as Sponsor representing guaranteed interest for future redemptions and calculated as one year's interest at 1.5%. With the completion of the IPO, the Company recorded approximately $9.5 million of deferred costs into APIC as of November 30, 2021, and $274,000 of offering costs paid on behalf of IHC. During the quarter ended November 30, 2021 IHC incurred approximately $3.5 million in offering costs. No other offering costs has been incurred during the period for the other SPACs.

Note 5: Deferred Offering Costs - SPACs

During Fiscal 2021, the Company incurred professional fees related to the filing of registration statements for the IPOs of four SPACs. The Company also transferred certain Founder Shares of those SPACs to a third party which created a non-controlling interest in those entities. These Founder Shares of common stock were transferred to the SPACs’ underwriter representative (the “Representative”) at below fair market value, resulting in compensation and therefore deferred offering costs for the SPACs, and the creation of a minority interest. The non-controlling interest is recorded as a minority interest on the Balance Sheet and the Statement of Equity. There were no similar transactions for Fiscal 2020.

As of August 31, 2021, Deferred offering costs - SPACs totaled $48,261,000, consisting of $789,000 of legal and accounting fees related to the SPACs’ IPOs and $47,472,000 related to the non-controlling interest in consolidated subsidiaries.

The non-controlling interest – deferred offering costs represents the estimated value of the portion of our Founder Shares in each of the following SPACs that we received as a result of our sponsorship, and which we transferred to the Representative on April 22, 2021, at a price below the fair market value of the shares, as follows: (i) 2,000,000 shares of IHC common stock; (ii) 2,000,000 shares of TechStackery, Inc. ("TechStackery") common stock; (iii) 2,000,000 shares of Vital Human Capital, Inc. ("Vital") common stock; and (iv) 4,000,000 shares of Firemark Global Capital, Inc. ("Firemark") common stock. We estimate the total value of the 10,000,000 shares transferred, which represents deferred compensation to the Representative, to be $47,472,000, or $4.7472 per share. We arrived at this valuation by reference to similar SPAC IPO transactions, as set forth below:

1.Consistent with most SPAC IPOs, the market price of units (consisting of some combination of common stock and warrants) sold to the public in a SPAC IPO is $10 per unit.

2.We have valued the warrant portion of each Unit at $0.75. Deducting this value from the Unit yields a value of $9.25 per share of common stock at the time of the IPO, which we have applied to the value of each of the Founder Shares that we issued to the Representative.

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3.We have applied a further discount of 48.8%, which is a blended discount designed to reflect the following contingencies and uncertainties: (a) 20% probability that the SPAC IPOs are never consummated; (b) 20% probability that none of our sponsored SPACs successfully complete their IBC; and (c) 21% additional discounts to account for future sponsor and Representative concessions, as well as the possibility of decrease in the value of the common stock of each SPAC.

One of the Company's sponsored SPACs, IHC, completed its IPO on October 22, 2021, resulting in the recognition of approximately $13 million of offering costs including $9.8 million that had been deferred as of August 31, 2021. No offering costs were incurred for TechStackery, Vital, or Firemark during the quarter ended November 30, 2021. A reconciliation of the deferred offering costs recorded by the Company as of November 30, 2021 is set forth below:


SPAC	Shares	Value	Offering Cost as of August 31, 20211	Offering cost paid by sponsor	Total Offering costs as of August 31, 2021	Recorded to APIC	Balance as of November 30, 2021
IHC	2,000,000	4.7472	9,494,000	274,000	9,768,000	(9,768,000)	—
TechStackery	2,000,000	4.7472	9,494,000	147,000	9,641,000	—	9,641,000
Vital	2,000,000	4.7472	9,494,000	147,000	9,641,000	—	9,641,000
Firemark	4,000,000	4.7472	18,990,000	221,000	19,211,000	—	19,211,000
			$47,472,000	$789,000	$48,261,000	$(9,768,000)	$38,493,000

1 Offering Costs represent that portion of our Founder Shares in each of the following SPACs that we received as a result of our sponsorship, and which we transferred to the Representative during fiscal 2021.

Note 6: Going Concern

The accompanying financial statements have been prepared in conformity with GAAP, which contemplate continuation of the Company as a going concern. Historically, the Company has funded itself either through cash flow from operations or the raising of capital through equity sales. If the Company is unable to obtain additional capital, it may not be able to make payments in a timely manner or otherwise fund its operations. The COVID-19 pandemic continued to negatively impact worldwide economic activity through most of Fiscal 2021, including within the United States where our operations are based. While these negative impacts began to ameliorate during Fiscal 2021, prolonged workforce disruptions still negatively impacted sales for the majority of the three month period ended November 30, 2021, as well as the Company’s overall liquidity.

As of the end of the three months ended November 30, 2021, the Company had cash of $2.1 million and a working capital deficit of $11.9 million. During this same period, the Company used approximately $6.67 million of cash from its continuing operations and incurred recurring losses, resulting in an accumulated deficit of $158.1 million as of November 30, 2021.

The recurring losses, negative working capital and cash used in the Company’s operations are indicators of substantial doubt as to the Company’s ability to continue as going concern for at least one year from issuance of these financial statements. The Company’s plans to alleviate this substantial doubt are discussed below. These plans include raising additional capital to fund expansion of its operations, including the continued development and support of its HRIS platform, its SPAC sponsorship activities, and its ShiftPixy Labs growth initiative.

The Company believes that IHC has the potential to generate revenues during Fiscal 2022, provided that IHC successfully completes its IBC and the Company is able to enter into one or more client services agreements with IHC on favorable terms. Similarly, the Company believes that its future relationship with Vital and TechStackery will provide us with the potential to generate revenues, provided that each of these SPACs is able to launch its IPO and complete its IBC successfully, and the Company is able to enter into one or more client services agreements with each of these SPACs on favorable terms. The Company also believes that Firemark has the potential to generate additional payroll billings through contractual arrangements by which the Company is able to provide low-cost insurance product offerings to its clients, provided that Firemark is able to launch its IPO and complete its IBC successfully, and the Company is able to enter into a contractual relationship with Firemark on favorable terms.

The Company also expects its ShiftPixy Labs growth initiative to generate cash flow once launched, by functioning as an incubator of food service and restaurant concepts through collaboration and partnerships with local innovative chefs. If successful, the Company believes that this initiative will produce sound businesses that provide recurring revenue through direct sales, as well as through utilization of the ShiftPixy Ecosystem, HRIS platform, and other human capital services that the

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Company provides. To the extent that this business model is successful and can be replicated in other locations, the Company believes that it has the potential to contribute significant revenue to ShiftPixy in the future. The Company may also take equity stakes in various branded restaurants that it develops and operates with its partners through ShiftPixy Labs. Such ownership interests will be held to the extent that it is consistent with the Company’s continued existence as an operating company, and to the extent that the Company believes such ownership interests have the potential to create significant value for its shareholders.

Further, on March 27, 2020, Former President Trump signed into law the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carry-back periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, increased limitations on qualified charitable contributions, and technical corrections to tax depreciation methods for qualified improvement property. Pursuant to Section 2302 of the CARES Act, the Company is deferring payment of taxes totaling $318,000 until December 31, 2022. These deferrals will allow the Company to preserve capital for use in its growth initiatives which, in turn, are expected to generate substantial revenue and cash flow if successful.

Also, the Company closed a private placement transaction with a large institutional investor on September 3, 2021, (immediately following the close of Fiscal 2021), which yielded proceeds to the Company of approximately $11.9 million net of fees and expenses. The Company expects to engage in additional sales of its securities during Fiscal 2022, either through registered public offerings or private placements, the proceeds of which the Company intends to use to fund its operations and growth initiatives.

The Company’s management believes that its current cash position, (including the proceeds of the September 2021 private placement), along with its anticipated revenue growth and proceeds from future sales of its securities, when combined with prudent expense management, will be sufficient to alleviate substantial doubt about its ability to continue as a going concern and to fund its operations for at least one year from the date these financials are available (especially when considering the absence of any funded debt outstanding on its balance sheet). If these sources do not provide the capital necessary to fund the Company’s operations during the next twelve months, it may need to curtail certain aspects of its operations or expansion activities, consider the sale of additional assets, or consider other means of financing. The Company can give no assurance that it will be successful in implementing its business plan and obtaining financing on advantageous terms, or that any such additional financing will be available. These consolidated financial statements do not include any adjustments for this uncertainty.

Note 7: Stockholders’ Equity

Preferred Stock

As previously disclosed, in September 2016, the founding shareholders of the Company were granted options to acquire preferred stock of the Company (the “Preferred Options”). The number of Preferred Options granted was based upon the number of shares held at the time of the grant. These Preferred Options are nontransferable and forfeited upon the sale of the related founding shares of common stock held by the option holder. Upon the occurrence of certain specified events, such founding shareholders can exercise each Preferred Option to purchase one share of preferred stock of the Company at an exercise price of $0.0001 per share. The preferred stock underlying the Preferred Options does not include any rights to dividends or preference upon liquidation of the Company and is convertible into shares of the Company’s common stock on a one-for-one basis. Upon consummation of the Vensure Asset Sale in January 2020, a total of 24,634,560 Preferred Options became exercisable and exchangeable into an equal number of shares of our common stock.

On June 4, 2020, Scott W. Absher, the Company’s Chief Executive Officer, exercised 12,500,000 Preferred Options to purchase 12,500,000 shares of our preferred stock for an aggregate purchase price of $1,250. Immediately following the exercise of the Preferred Options described above, Mr. Absher elected to convert the 12,500,000 shares of preferred stock into 12,500,000 shares of common stock, which are subject to a 24-month lock-up period during which such shares may not be traded. Between July 20, 2020 and November 30, 2020, an additional 294,490 Preferred Options were exercised and converted into 294,490 shares of common stock, which were subject to a six-month lock up period at the time they were issued, during which such shares could not be traded on the open market. As of November 30, 2021, the restrictions on all of these shares have been lifted, rendering them freely tradeable.

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On October 22, 2021, the Company’s board of directors canceled 11,790,000 of these Preferred Options previously issued to its co-founder, J. Stephen Holmes. Accordingly, these Preferred Options are no longer exercisable. A total of 37,570 Preferred Options issued pursuant to the September 2016 grant and triggered by the Vensure Asset Sale remain unexercised.

The amount of Preferred Options, and the number of shares of preferred stock issuable upon exercise of such options, is based upon the number of shares of common stock held by the option holders at the time the Preferred Options were issued in September 2016. Accordingly, in order to confirm the original intent of the granting of up to 25,000,000 Preferred Options to Mr. Absher, it has always been the Company’s intent to adopt a second grant of an additional 12,500,000 Preferred Options to Mr. Absher, whereby each option permits the holder to acquire one share of the Company’s preferred stock for $0.0001 per share. On August 13, 2021, consistent with this intent, the Company granted 12,500,000 Preferred Options to Mr. Absher to purchase shares of Preferred Stock, par value $0.0001 per share, for consideration of $0.0001 per share. Each Preferred Option is exercisable for a period of twenty-four months upon (i) the acquisition of a Controlling Interest (as defined below) in the Company by any single shareholder or group of shareholders acting in concert, (other than Mr. Absher), or (ii) the announcement of (x) any proposed merger, consolidation, or business combination in which the Company’s Common Stock is changed or exchanged, or (y) any sale or distribution of at least 50% of the Company’s assets or earning power, other than through a reincorporation. Each share of Preferred Stock is convertible into Common Stock on a one-for-one basis. “Controlling Interest” means the ownership or control of outstanding voting shares of the Company sufficient to enable the acquiring person, directly or indirectly and individually or in concert with others, to exercise one-fifth or more of all the voting power of the Company in the election of directors or any other business matter on which shareholders have the right to vote under the Wyoming Business Corporation Act. As of November 30, 2021, no events have occurred that would trigger the exercise of the Preferred Options issued to Mr. Absher in August 2021.

Common Stock and Warrants

During the three months ended November 30, 2021, the Company closed a $12 million private placement transaction, inclusive of $0.9 million of placement agent fees and costs, with a large institutional investor pursuant to which the Company sold to the investor an aggregate of (i) 2,850,000 shares of Common Stock, together with warrants (the “September 2021 Common Warrants”) to purchase up to 2,850,000 shares of Common Stock, with each September 2021 Common Warrant exercisable for one share of Common Stock at a price per share of $1.595, and (ii) 4,673,511 prefunded warrants (the “September 2021 Prefunded Warrants”), together with the September 2021 Common Warrants to purchase up to 4,673,511 shares of Common Stock, with each September 2021 Prefunded Warrant exercisable for one share of Common Stock at a price per share of $0.0001. Each share of Common Stock and accompanying September 2021 Common Warrant were sold together at a combined offering price of $1.595 and each September 2021 Prefunded Warrant and accompanying September 2021 Common Warrant were sold together at a combined offering price of $1.5949.

The September 2021 Prefunded Warrants are immediately exercisable, at a nominal exercise price of $0.0001, and may be exercised at any time until all of the September 2021 Prefunded Warrants are exercised in full. The September 2021 Common Warrants have an exercise price of $1.595 per share, are immediately exercisable, and will expire five years from the date that the registration statement covering the resale of the shares underlying the September 2021 Common Warrants is declared effective (which has not yet occurred). The private placement generated gross proceeds of approximately $12.0 million, prior to deducting $0.9 million of costs consisting of Placement Agent commissions and offering expenses payable by the Company. In addition to the seven percent (7%) of the aggregate gross proceeds cash fee, the Company issued to the Placement Agent 376,176 warrants to purchase an aggregate of up to five percent (5%) of the aggregate number of shares of Common Stock issuable upon exercise of the September 2021 Prefunded Warrants sold in the offering (the “September Placement Agent Warrants”). The September Placement Agent Warrants are exercisable for a period commencing on March 3, 2022 (six months after issuance) and expire four years from the effective date (which has not yet occurred) of a registration statement for the resale of the underlying shares, and have an initial exercise price per share of $1.7545. .

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The following table summarizes the changes in the Company’s common stock and Prefunded Warrants from August 31, 2021 to November 30, 2021.


	Number of shares	Weighted average remaining life (years)	Weighted average exercise price
Warrants outstanding, August 31, 2021	9,592,085	4.7	$	3.87
Issued	7,899,687	4.7	1.60
(Cancelled)	—	—	—
(Exercised)	—	—	—
Warrants outstanding, November 30, 2021	17,491,772	4.7	2.83
Warrants exercisable, November 30, 2021	17,115,596	4.7	$	2.85

The following table summarizes the Company’s warrants outstanding as of November 30, 2021:


	Warrants Outstanding	Weighted average Life of Outstanding Warrants in years	Exercise price
Sep 2021 Common Warrants	2,850,000	4.8	$	1.60
Sep 2021 Prefunded Warrants (1)	4,673,511	4.8	1.59
Sep 2021Underwriter Warrants (2)	376,176	4.8	1.75
May 2021 Common Warrants	4,948,453	4.5	2.43
May 2021Underwriter Warrants	247,423	4.5	2.43
October 2020 Common Warrants	2,300,000	3.8	3.30
October 2020 Underwriter Warrants	200,000	3.8	3.30
November 2020 Common Warrants	1,277,580	3.5	5.40
November 2020 Underwriter Warrants	111,108	3.5	5.40
March 2020 Exchange Warrants	423,669	3.8	10.17
Amended March 2019 Warrants	66,288	2.3	40.00
March 2019 Services Warrants	3,366	2.3	70.00
June 2018 Warrants	6,276	2.1	40.00
June 2018 Services Warrants	5,422	2.1	99.60
2017 PIPE Warrants	2,500	1.0	276.00
	17,491,772	4.4	$	2.83

(1)The September 2021 Prefunded Warrants were sold as part of a Prefunded Warrant Unit as described above at a nominal price of $0.0001 per share.

(2)The September 2021 Placement Agent Warrants become exercisable six months from issuance and expire four years from the effective date (which has not yet occurred) of the registration statement covering the resale of the underlying shares.

Note 8: Stock Based Compensation

Employee Stock Option Plan Increase

In March 2017, the Company adopted its 2017 Stock Option/Stock Issuance Plan (the “Plan”). The Plan provides incentives to eligible employees, officers, directors and consultants in the form of incentive stock options (“ISOs”), non-qualified stock options (“NQs”), (each of which is exercisable into shares of common stock), (collectively, “Options”) or shares of common stock (“Share Grants”).

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On July 1, 2020, the Company's board of directors unanimously approved an increase in the number of shares of common stock issuable under the Plan from 250,000 to 3,000,000. On March 31, 2021, the Company’s shareholders approved the increase in the number of shares of common stock issuable under the Plan as well as any contingent grant awards under the Plan on or subsequent to July 1, 2020. On June 4, 2021, the Company registered an aggregate of 3,000,000 shares, par value $0.0001 per share, reserved for issuance under the Plan.

For all options granted prior to July 1, 2020, each option has a term of service vesting provision over a period of time as follows: 25% vest after a 12-month service period following the award, with the balance vesting in equal monthly installments over the succeeding 36 months. Options granted on or after July 1, 2020 typically vest over four years, with 25% of the grant vesting one year from the grant date, and the remainder in equal quarterly installments over the succeeding 12 quarters. All options granted to date have a stated ten-year term and, as of November 30, 2021, all options granted to date are exercisable.

Stock grants are issued at fair value, considered to be the market price on the grant date. The fair value of option awards is estimated on the grant date using the Black-Scholes stock option pricing model.

Following its adoption of ASU 2016-9, the Company elected to account for forfeitures under the Plan as they occur. Any compensation cost previously recognized for an unvested award that is forfeited because of a failure to satisfy a service condition is reversed in the period of the forfeiture.

The Company recognized approximately $408,000 and $496,000 of compensation expense for the three months ended November 30, 2021 and November 30, 2020, respectively.

The Company compensates its board members through grants of common stock for services performed. These services have been accrued within the accounts payable and other accrued liabilities on the condensed consolidated balance sheet. The Company has incurred $56,000 and $75,000 for the three months ended November 30, 2021 and November 30, 2020, respectively.

The following table summarizes option activity during the three months ended November 30, 2021:


	Options Outstanding and Exercisable
	Number of Options	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price
		(In years)
Balance Outstanding, August 31, 2021	1,776,115	8.90	$	6.80
Granted	105,000	9.87	1.18
Exercised	—	—	—
Forfeited	(58,125)	3.19	3.89
Balance Outstanding at November 30, 2021	1,822,990	8.83	$	6.41

Balance Exercisable at November 30, 2021	1,822,990

Options outstanding as of November 30, 2021 had aggregate intrinsic value of $0.

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At November 30, 2021, the total unrecognized deferred share-based compensation expected to be recognized over the remaining weighted average vesting periods of 2.77 years for outstanding grants was $3,785,000. Option vesting activity from August 31, 2021, through November 30, 2021 was as follows:


Options Vested	Number of Options	Weighted Remaining Contractual Life	Weighted Average Exercise Price
		(In years)
Balance, August 31, 2021	309,257	8.63	$	16.92
Vested	93,001	8.85	5.65
Exercised	—	—	—
Forfeited	—	—	—
Balance, November 30, 2021	402,258	8.70	$	14.31

The following table summarizes information about stock options outstanding and vested at November 30, 2021:


	Options Outstanding				Options Vested
Exercise Prices	Number of Options Exercisable	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Number of Options	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price
		(In Years)				(In Years)
$1.36 - 10.00	1,782,293	8.4	$	4.27	366,810	8.9	$	5.15
$10.01 - $40.00	3,500	7.5	21.69		2,289	7.5	21.69
$40.01 - $80.00	13,396	7.3