|3 Months Ended|
Nov. 30, 2022
|Risks and Uncertainties [Abstract]|
|Going Concern||Going Concern
The accompanying unaudited condensed financial statements have been prepared in conformity with GAAP, which contemplate continuation of the Company as a going concern. As of November 30, 2022, the Company had cash of $0.9 million and a working capital deficit of $32.0 million. During this period, the Company used approximately $3.7 million of cash from its continuing operations and incurred recurring losses, resulting in an accumulated deficit of $198.1 million. As of November 30, 2022, the Company is delinquent with respect to remitting payroll tax payments to the IRS. The Company has been in communication with the IRS regarding amounts owing in relation to credits due. In addition, some clients have filed suits against the Company, demanding that the Company take action to seek additional ERTC tax credits for the subject periods. Until the matter is concluded and the taxes are paid, the IRS could, subject to its standard processes and the Company’s rights to respond, implement collection actions, including such actions as levying against Company bank accounts, to recover the amounts that it calculates to be due and owing.
Historically, the Company's principal source of financing has come through the sale of the Company's common stock, including in certain instances, warrants and issuance of convertible notes. In September 2022, we raised approximately $5.0 million ($4.4 million, net of costs) in connection with the underwriting of a private placement offering. See Note 7, stockholders' deficit.
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 a going concern for at least one year from issuance of these financial statements. The Company's plans and expectations for the next twelve months include raising additional capital to help fund expansion of our operations and strengthening of the Company's sales force strategy by focusing on staffing services as the Company's key driver to improve the Company's margin and the continued support and functionality improvement of the Company's information technology (“IT”) and HRIS platform. This expanded go-to-market strategy will focus on building a national account portfolio managed by a newly-formed regional team of senior sales executives singularly focused on sustained quarterly revenue growth and gross profit margin expansion. We expect to continue to invest in the Company's HRIS platform, ShiftPixy Labs, and other growth initiatives, all of which have required and will continue to require significant cash expenditures.
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 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 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 value for its shareholders.
The Company expects to engage in additional sales of its securities during this fiscal year 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, along with its anticipated revenue growth and proceedsfrom future sales of its securities, when combined with prudent expense management, will 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. If the Company is not successful on obtaining the necessary financing, we do not currently have the cash resources to meet our operating commitments for the next twelve months. These consolidated financial statements do not include any adjustments for this uncertainty.
The entire disclosure when substantial doubt is raised about the ability to continue as a going concern. Includes, but is not limited to, principal conditions or events that raised substantial doubt about the ability to continue as a going concern, management's evaluation of the significance of those conditions or events in relation to the ability to meet its obligations, and management's plans that alleviated or are intended to mitigate the conditions or events that raise substantial doubt about the ability to continue as a going concern.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef