Quarterly report pursuant to Section 13 or 15(d)

Liquidity

v3.8.0.1
Liquidity
3 Months Ended
Nov. 30, 2017
Notes to Financial Statements  
Note 3: Liquidity

The accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

 

As of November 30, 2017, the Company has accumulated losses since inception of approximately $12.7 million. The Company has a history of negative cash flows from operations.

 

Since inception, the Company’s principal source of financing has come through the sale of its common stock. The Company successfully completed an Initial Public Offering (IPO) on June 29, 2017, raising a gross amount of $12 million ($10.9 million net of costs).

 

As of November 30, 2017, the Company had cash and cash equivalents of $2.8 million and working capital of $2.0 million. During the three months ended November 30, 2017, the Company has used approximately $3.0 million in cash from operation, of which $2.2 million was attributed to the mobile application development costs ($1.9 million) and workers’ compensation deposit ($0.3 million). Exclusive of the development costs which, if needed, can be deferred and/or suspended with proper notification until funding is available, the Company is currently using $0.8 million each quarter from its operations or less than $0.3 million per month.

 

As a consequence of changing certain providers and achieving some economies of scale, the Company has realized a significant reduction to its workers’ compensation expense going forward. In addition, the Company has experienced significant growth in the number of worksite employees and clients in the months following its fiscal quarter end. Since November 30, 2017, the Company has added, through executed service agreements, approximately 16 clients, servicing 2,100 worksite employees with approximately $130 million in additional gross billings per year.

 

We also anticipate that, as a result of the significant growth in activity that we have experienced so far in the second quarter and the savings realized in connection with our workers’ compensation program, that cash used in operations will be reduced from its current level of less than $0.3 million per month. We believe that our current cash position, along with our revenue growth will be sufficient to fund our operations for at least a year from the date these financials are available, assuming the Company postpones the funding of further development of its technology platform, which the Company has the right to do and without scaling back any of its operations.

 

Additional funding sources could include issuance of equity or other sources. If the Company is unable to raise sufficient additional funds or generate positive cash flow when required, it will have to develop and implement a plan which may include but may not be limited to such measures as extending payables, reducing overhead, suspending the development of our technology platform and/or delaying the remittance of taxes.

 

There can be no assurance that such a plan will be successful. We have considerable discretion over the extent of expenditures and have the ability to curtail the related cash flows as needed. We believe that all of these factors are sufficient to alleviate substantial doubt about the Company’s ability to continue as a going concern.