Quarterly report pursuant to Section 13 or 15(d)

Deferred Offering Costs - SPACs

Deferred Offering Costs - SPACs
3 Months Ended
Nov. 30, 2021
Noncontrolling Interest [Abstract]  
Deferred Offering Costs - SPACs Deferred Offering Costs - SPACs
During Fiscal 2021, the Company incurred professional fees related to the filing of registration statements for the IPOs of four SPACs. The Company also transferred certain Founder Shares of those SPACs to a third party which created a non-controlling interest in those entities. These Founder Shares of common stock were transferred to the SPACs’ underwriter representative (the “Representative”) at below fair market value, resulting in compensation and therefore deferred offering costs for the SPACs, and the creation of a minority interest. The non-controlling interest is recorded as a minority interest on the Balance Sheet and the Statement of Equity. There were no similar transactions for Fiscal 2020.

As of August 31, 2021, Deferred offering costs - SPACs totaled $48,261,000, consisting of $789,000 of legal and accounting fees related to the SPACs’ IPOs and $47,472,000 related to the non-controlling interest in consolidated subsidiaries.

The non-controlling interest – deferred offering costs represents the estimated value of the portion of our Founder Shares in each of the following SPACs that we received as a result of our sponsorship, and which we transferred to the Representative on April 22, 2021, at a price below the fair market value of the shares, as follows: (i) 2,000,000 shares of IHC common stock; (ii) 2,000,000 shares of TechStackery, Inc. ("TechStackery") common stock; (iii) 2,000,000 shares of Vital Human Capital, Inc. ("Vital") common stock; and (iv) 4,000,000 shares of Firemark Global Capital, Inc. ("Firemark") common stock. We estimate the total value of the 10,000,000 shares transferred, which represents deferred compensation to the Representative, to be $47,472,000, or $4.7472 per share. We arrived at this valuation by reference to similar SPAC IPO transactions, as set forth below:

1.Consistent with most SPAC IPOs, the market price of units (consisting of some combination of common stock and warrants) sold to the public in a SPAC IPO is $10 per unit.

2.We have valued the warrant portion of each Unit at $0.75. Deducting this value from the Unit yields a value of $9.25 per share of common stock at the time of the IPO, which we have applied to the value of each of the Founder Shares that we issued to the Representative.
3.We have applied a further discount of 48.8%, which is a blended discount designed to reflect the following contingencies and uncertainties: (a) 20% probability that the SPAC IPOs are never consummated; (b) 20% probability that none of our sponsored SPACs successfully complete their IBC; and (c) 21% additional discounts to account for future sponsor and Representative concessions, as well as the possibility of decrease in the value of the common stock of each SPAC.

One of the Company's sponsored SPACs, IHC, completed its IPO on October 22, 2021, resulting in the recognition of approximately $13 million of offering costs including $9.8 million that had been deferred as of August 31, 2021. No offering costs were incurred for TechStackery, Vital, or Firemark during the quarter ended November 30, 2021. A reconciliation of the deferred offering costs recorded by the Company as of November 30, 2021 is set forth below:

SPAC Shares Value
Offering Cost as of August 31, 20211
Offering cost paid by sponsor Total Offering costs as of August 31, 2021 Recorded to APIC Balance as of November 30, 2021
IHC 2,000,000 4.7472 9,494,000 274,000 9,768,000 (9,768,000)
2,000,000 4.7472 9,494,000 147,000 9,641,000 —  9,641,000
Vital 2,000,000 4.7472 9,494,000 147,000 9,641,000 —  9,641,000
Firemark 4,000,000 4.7472 18,990,000 221,000 19,211,000 —  19,211,000
$47,472,000 $789,000 $48,261,000 $(9,768,000) $38,493,000
1 Offering Costs represent that portion of our Founder Shares in each of the following SPACs that we received as a result of our sponsorship, and which we transferred to the Representative during fiscal 2021