Annual report pursuant to Section 13 and 15(d)

Stockholders' Equity

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Stockholders' Equity
12 Months Ended
Aug. 31, 2018
Notes to Financial Statements  
Note 8: Stockholders Equity

Preferred Stock

 

In September 2016, the Company issued options to purchase preferred stock at $0.0001 per share to our shareholders of record as of September 28, 2016. The number of options is equal to the lesser of (a) the number of shares of common stock held by such Shareholder on September 28, 2016, or (b) the number of shares of common stock held by such Shareholder on date of the Shareholder’s exercise of the aforesaid Option. Preferred Stockholders can elect a majority of the directors on the Board of Directors of the Corporation and does not include any rights to dividends, conversion to shares of Common Stock, or preference upon liquidation of the Corporation. The Option is exercisable only upon the acquisition of a 20% or greater voting interest in the Corporation by a party other than the founding shareholders, or prior to any proposed merger, consolidation (in which the Corporation’s Common Stock is changed or exchanged) or sale of at least 50% of the Corporation’s assets or earning power (other than a reincorporation). The right to exercise the Option terminates on December 31, 2023.

 

Common Stock

 

During the years ended August 31, 2018 and 2017, the Company has issued shares of common stock as follows:

 

During the year ended August 31, 2018, the Company issued 37,500 shares of common stock following the exercise of warrants with an exercise price of $2.00 for $75,000.

 

During the fiscal year ended August 31, 2017, the Company issued 67,500 shares of common stock following the exercise of warrants, of which 57,500 with an exercise price of $2.00 and 10,000 with an exercise price of $3.00 for $145,000.

  

On September 28, 2017, the Company issued to two independent directors each 26,316 shares of common stock through the ShiftPixy, Inc., 2017 Stock Option/Stock Issuance Plan (“the Plan”), of which 50% vested on the date marking their six-month anniversary and the remaining 50% of the shares will vest ratably over the remaining service period through November 28, 2018. For the year ended August 31, 2018, the Company recognized $75,000 of compensation expense in its shareholders’ equity for the 50% that have fully vested on the six-month anniversary and $61,850 of compensation expense for the balance.

 

On August 7, 2018, the Board of Directors awarded 24,592 shares of common stock having a value of $75,000 to Kenneth W. Weaver, of which 50% fully vested upon issuance considering Mr. Weaver completed services under his director agreement through May 31, 2018, and the remaining 50% will vest ratably over the remaining service period through November 30, 2018. For the year ended August 31, 2018, the Company recognized $37,503 of compensation expense in its shareholders’ equity for the 50% that have fully vested and have accrued $18,751 of compensation expense for the balance.

  

On March 16, 2017, the Company granted 50,000 common shares through the Plan to Kenneth W. Weaver, of which 25,000 common shares fully vested on December 5, 2017, as a consequence of Mr. Weaver continued service through that date. During the years ended August 31, 2018 and 2017, the Company recognized 13,251 and 36,749, respectively shares of common stock for services for total compensation expense of $50,354 and $139,646, respectively, recognized in its statement of operation.

  

During the year ended August 31, 2017, the Company sold 2,000,000 shares of common stock for $10,887,261 in cash, net of offering costs paid of $1,112,739.

 

During the year ended August 31, 2017, the Company sold 394,375 shares of common stock for $1,577,500 in cash. The Company also issued 635,313 warrants in connection with these stock sales during the year ended August 31, 2017. The warrants have exercise prices ranging from $4 to $6.90 per warrant.

 

During the year ended August 31, 2017, the Company issued 86,749 shares of common stock for services. The Company expensed the fair value of the common stock issued of $329,645.

 

Warrants

 

The following tables summarize our warrants outstanding as of August 31, 2018 and 2017:

 

    Number of shares     Weighted average remaining life (years)     Weighted average exercise price  
Warrants outstanding, August 31, 2016     2,027,600       2.5     $ 2.50  
Issued     635,313       1.5     $ 4.46  
(Exercised)     (67,500 )     -       2.00  
(Cancelled)     -       -       -  
(Expired)     -       -       -  
Warrants outstanding, August 31, 2017     2,595,413       1.5     $ 2.99  
Issued     1,220,883       5.3     $ 2.49  
(Exercised)     (37,500 )     1.2       2.00  
(Cancelled)     -       -       -  
(Expired)     -       -       -  
Warrants outstanding, August 31, 2018     3,778,796       2.13     $ 2.84  

  

The following table summarizes information about warrants outstanding as of August 31, 2018:

 

Exercise price     Warrants Outstanding    

Weighted average life of

outstanding warrants in years

 
$ 2.00       918,800       0.5  
$ 2.49       1,220,883       5.3  
$ 3.00       1,003,800       0.5  
$ 4.00       535,313       0.5  
$ 6.90       100,000       3.8  
          3,778,796       2.4  

 

The total aggregated intrinsic value of warrants as of August 31, 2018, and 2017 is $2,610,235, and $3,190,895, respectively.

 

During the year ended August 31, 2018, the Company issued warrants to purchase 1,220,883 shares of common stock to investors in connection with the senior secured convertible notes, with exercise price of $2.49 per warrant with expiration date of 5 years. The Company valued the issued warrants using the Black-Scholes option-pricing model with the following assumptions: dividend yield of zero, years to maturity of 5 years, risk free rates of 2.78 percent, and annualized volatility of 29.17%.

 

During the year ended August 31, 2017, the Company issued warrants to purchase 635,313 shares of common stock to investors in connection with the sales of common stock, with exercise prices ranging from $4.0 to $6.90 per warrant with expiration dates ranging from 6 months to 3.8 years.