Note 5: Stockholders’ Equity

Preferred Stock

As previously disclosed, in September 2016, the founding shareholders of the Company were granted options to acquire ShiftPixy preferred stock (the “Preferred Options”). The number of Preferred Options granted was based upon the number of shares held at that time. These Preferred Options are nontransferable and forfeited upon the sale of the related founding shares of common stock. Upon the occurrence of certain specified events, such founding shareholders may 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 common stock on a one-for-one basis pursuant to the Amended Restated Articles of Incorporation. The Preferred Options became exercisable to purchase shares of preferred stock in January 2020 and in March 2020 became exchangeable into an equal number of shares of common stock.

On June 4, 2020, Scott W. Absher, the Company's Chief Executive Officer, exercised 12,500,000 Preferred Options to purchase an equal number of shares of preferred stock. Immediately thereafter, Mr. Absher converted all 12,500,000 shares of preferred stock into 12,500,000 shares of common stock. These shares of common stock are subject to a two-year lockup from the date of the conversion. Between June 4, 2020 and August 31, 2020, an additional 294,490 Preferred Options were exercised and exchanged for a like number of shares of common stock. During the three months ended May 31, 2021, no preferred options were exercised or exchanged for a like number of shares of common stock. During the nine months ended May 31, 2021, an additional 12,500 Preferred Options were exercised and exchanged for a like number shares of common stock. As of the date of this Quarterly Report, 11,827,570 Preferred Options remain outstanding and exercisable. The right to exercise the options terminates on December 31, 2023. As stated above, the amount of the 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 such founding shareholders at the time such options were issued. Accordingly, in order to confirm the original intent of the granting options to purchase up to 50,000,000 shares of preferred stock to two of our founding shareholders, Mr. Absher and J. Stephen Holmes, at some point in the future the Company intends to adopt a second grant of options, exercisable upon the occurrence of certain specified events, granting an additional 12,500,000 options to each of Messrs. Absher and Holmes, whereby each option permits the holder to acquire one share of preferred stock of the Company for $0.0001 per share. Each share of preferred stock will be convertible into common stock on a one-for-one basis.

October 2020 Public Offering

On October 8, 2020, the Company entered into an underwriting agreement (the “October Underwriting Agreement”) with A.G.P./Alliance Global Partners (“AGP”) in connection with a public offering (the “October 2020 Offering”) of an aggregate of (i) 4,000,000 shares of our common stock and (ii) warrants to purchase 2,300,000 shares of common stock (the “October 2020 Common Warrants”), which included the partial exercise of AGP’s over-allotment option to purchase 300,000 additional October 2020 Common Warrants.

Each share of common stock was sold together with an October 2020 Common Warrant as a fixed combination, with each share of common stock sold being accompanied by an October 2020 Common Warrant to purchase 0.5 shares of common stock. Each share of common stock and accompanying October 2020 Common Warrant was sold at a price to the public of $3.00. The October 2020 Common Warrants were immediately exercisable, will expire on October 13, 2025, and have an exercise price of $3.30 per share, subject to anti-dilution and other adjustments for certain stock splits, stock dividends, or recapitalizations.

The October 2020 Offering closed on October 14, 2020, for gross proceeds of approximately $12.0 million, prior to deducting $1.3 million of costs consisting of underwriting discounts and commissions and offering expenses payable by the Company, which includes a partial exercise of the underwriter’s over-allotment option to purchase additional October 2020 Common Warrants. Pursuant to the October Underwriting Agreement, the Company, upon closing of the October 2020 Offering, issued to AGP warrants to purchase up to 200,000 shares of common stock (the “October Underwriter Warrants”), which is equivalent to 5.0% of the aggregate number of shares of common stock sold in the October 2020 Offering. The October Underwriter Warrants are exercisable at any time and from time to time, in whole or in part, commencing six months after the closing date and ending five years from the closing date, at a price per share equal to $3.30, which is equivalent to 110% of the public offering price per share.

May 2021 Private Placement

On May 13, 2021, the Company entered into a Securities Purchase Agreement with a large institutional investor (the “Purchaser”) pursuant to which the Company agreed to sell to the Purchaser an aggregate of (i) 2,320,000 shares (the “Shares”) of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), together with warrants (the “May 2021 Common Warrants”) to purchase up to 2,320,000 shares of Common Stock, with each May 2021 Common Warrant exercisable for one share of Common Stock at a price per share of $2.425, and (ii) 2,628,453 prefunded warrants (the “May 2021 Prefunded Warrants”), together with the May 2021 Common Warrants to purchase up to 2,628,453 shares of Common Stock, with each May 2021 Prefunded Warrant exercisable for one share of Common Stock at a price per share of $0.0001. Each share of Common Stock and accompanying May 2021 Common Warrant were sold together at a combined offering price of $2.425,  and each May 2021 Prefunded Warrant and accompanying May 2021 Common Warrant were sold together at a combined offering price of $2.4249.

The May 2021 Prefunded Warrants are immediately exercisable, at a nominal exercise price of $0.0001, and may be exercised at any time until all of the May 2021 Prefunded Warrants are exercised in full. The May 2021 Common Warrants have an exercise price of $2.425 per share, are immediately exercisable, and will expire five years from June 15, 2021, which is the date that the registration statement covering the resale of the shares underlying the Common Warrants was declared effective. The private placement closed on May 17, 2021, for gross proceeds of approximately $12.0 million, prior to deducting $0.94 million of costs consisting of Placement Agent commissions and offering expenses payable by the Company. In addition to the 7.0% of the aggregate gross proceeds cash fee, the Company issued to the Placement Agent 247,423 warrants to purchase an aggregate of up to five percent (5)% of the aggregate number of Shares and shares of Common Stock issuable upon exercise of the May 2021 Prefunded Warrants sold in the offering (the “Placement Agent Warrants”). The Placement Agent Warrants are exercisable for a period commencing six months after issuance and expire four years from the effective date of a registration statement for the resale of the underlying shares, and shall have an initial exercise price of $2.6675 per share.

Common Stock and Warrants

During the nine months ended May 31, 2021, the Company issued 4,000,000 shares of common stock pursuant to the October 2020 Offering at $3.00 per share, 2,320,000 shares of Common Stock, 2,628,453 May 2021 Prefunded Warrants and Common Warrants to purchase up to 4,948,453 shares of Common Stock pursuant to the May 2021 Private Placement. Each share of Common Stock and accompanying May 2021 Common Warrant were sold together at a combined offering price of $2.425, and each May 2021 Prefunded Warrant and accompanying May 2021 Common Warrant were sold together at a combined offering price of $2.4249.

The following table summarizes the changes in the Company's common stock and Prefunded warrants from August 31, 2020 to May 31, 2021:

 

 

The following table summarizes the Company's warrants outstanding as of May 31, 2021: