|3 Months Ended
Nov. 30, 2021
|Risks and Uncertainties [Abstract]
The accompanying financial statements have been prepared in conformity with GAAP, which contemplate continuation of the Company as a going concern. Historically, the Company has funded itself either through cash flow from operations or the raising of capital through equity sales. If the Company is unable to obtain additional capital, it may not be able to make payments in a timely manner or otherwise fund its operations. The COVID-19 pandemic continued to negatively impact worldwide economic activity through most of Fiscal 2021, including within the United States where our operations are based. While these negative impacts began to ameliorate during Fiscal 2021, prolonged workforce disruptions still negatively impacted sales for the majority of the three month period ended November 30, 2021, as well as the Company’s overall liquidity.
As of the end of the three months ended November 30, 2021, the Company had cash of $2.1 million and a working capital deficit of $11.9 million. During this same period, the Company used approximately $6.67 million of cash from its continuing operations and incurred recurring losses, resulting in an accumulated deficit of $158.1 million as of November 30, 2021.
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 going concern for at least one year from issuance of these financial statements. The Company’s plans to alleviate this substantial doubt are discussed below. These plans include raising additional capital to fund expansion of its operations, including the continued development and support of its HRIS platform, its SPAC sponsorship activities, and its ShiftPixy Labs growth initiative.
The Company believes that IHC has the potential to generate revenues during Fiscal 2022, provided that IHC successfully completes its IBC and the Company is able to enter into one or more client services agreements with IHC on favorable terms. Similarly, the Company believes that its future relationship with Vital and TechStackery will provide us with the potential to generate revenues, provided that each of these SPACs is able to launch its IPO and complete its IBC successfully, and the Company is able to enter into one or more client services agreements with each of these SPACs on favorable terms. The Company also believes that Firemark has the potential to generate additional payroll billings through contractual arrangements by which the Company is able to provide low-cost insurance product offerings to its clients, provided that Firemark is able to launch its IPO and complete its IBC successfully, and the Company is able to enter into a contractual relationship with Firemark on favorable terms.
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 sound 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 significant value for its shareholders.
Further, on March 27, 2020, Former President Trump signed into law the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carry-back periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, increased limitations on qualified charitable contributions, and technical corrections to tax depreciation methods for qualified improvement property. Pursuant to Section 2302 of the CARES Act, the Company is deferring payment of taxes totaling $318,000 until December 31, 2022. These deferrals will allow the Company to preserve capital for use in its growth initiatives which, in turn, are expected to generate substantial revenue and cash flow if successful.
Also, the Company closed a private placement transaction with a large institutional investor on September 3, 2021, (immediately following the close of Fiscal 2021), which yielded proceeds to the Company of approximately $11.9 million net of fees and expenses. The Company expects to engage in additional sales of its securities during Fiscal 2022, 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, (including the proceeds of the September 2021 private placement), along with its anticipated revenue growth and proceeds from future sales of its securities, when combined with prudent expense management, will be sufficient to 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. These consolidated financial statements do not include any adjustments for this uncertainty.