|12 Months Ended
Aug. 31, 2018
|Notes to Financial Statements
|Note 3: Going Concern
As of August 31, 2018, the Company had cash of $1.6 million and a working capital deficiency of $13.2 million. During the year ended August 31, 2018, the Company used approximately $9.5 million of cash in its operation, of which $6.6 million was attributed to the mobile development costs and $1.4 million was attributed to the workers’ compensation deposit. The Company has incurred recurring losses resulted in an accumulated deficit of $26.0 million as of August 31, 2018. These conditions raise substantial doubt as to our ability to continue as going concern within one year from issuance date of the financial statements.
The ability of the Company to continue as a going concern is dependent upon generating profitable operations in the future and obtaining additional funds by way of public or private offering to meet the Company’s obligations and repay its liabilities when they become due.
Historically, the Company’s principal source of financing has come through the sale of its common stock and issuance of convertible notes. The Company successfully completed an Initial Public Offering (IPO) on NASDAQ on June 29, 2017, raising a total of $12 million ($10.9 million net of costs). In June 2018, the Company completed a private placement of 8% senior secured convertible notes to institutional investors raising $9 million of gross proceeds ($8.4 million net of costs)
Exclusive of the developments costs and the initial deposits made to our workers’ compensation program, the Company is currently using $0.4 million each quarter from its operations a little over $0.1 million per month. The Company has already realized a significant reduction to its workers compensation expense resulting from changing certain providers and achieving some economies of scale. The Company continues to experience significant growth in the number of worksite employees, which would generate additional administrative fees that would offset the current level of operating cash burn.
The key features of the Company’s mobile application have been fully developed, one of the key features has been released and two other key features are now ready to be released. The deployment of these features expected in the first calendar quarter of 2019, would further accelerate growth as the Company’s clients would be able to remediate their turnover issues. The Company also developed an additional driver management layer to its mobile platform and plan to begin using this “delivery feature” of its mobile platform during the first calendar quarter of 2019.
The Company’s plans and expectations for the next 12 months include raising capital to help fund expansion of its operations, including the development and support of its IT and HR platform. The Company engaged an investment banking firm to assist the Company in (i) preparing information materials, (ii) advising the Company concerning the structure, price and conditions and (iii) organizing the marketing efforts with potential investors in connection with a financing transaction.
The Company believe that its current cash position, along with its revenue growth and the financing from potential institutional investors will be sufficient to fund its operations for at least a year from the date these financials are available. If these sources do not provide the capital necessary to fund the Company’s operations during the next twelve months from the date of this report, the Company may need to curtail certain aspects of its operations or expansion activities, consider the sale of its 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 terms advantageous to the Company or that any such additional financing would be available to the Company. These consolidated financial statements do not include any adjustments from this uncertainty.