Viscom : achieves annual forecast for 2020 in difficult market environment
The following discussion of our financial condition and results of operations
should be read in conjunction with our financial statements and the related
notes, and other financial information included in this Quarterly Report, as
well as the information contained in our Annual Report on Form 10-K and 10-K/A
for the fiscal year ended August 31, 2022 ("Fiscal 2022"), filed with the SEC on
December 13, 2022 and December 14, 2022, respectively.

CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS AND INFORMATION


This Quarterly Report, the other reports, statements, and information that we
have previously filed or that we may subsequently file with the SEC, and public
announcements that we have previously made or may subsequently make, contain
"forward-looking statements" within the meaning of the federal securities laws,
including the Private Securities Litigation Reform Act of 1995, which statements
involve substantial risks and uncertainties. Unless the context is otherwise,
the forward-looking statements included or incorporated by reference in this
Quarterly Report and those reports, statements, information and announcements
address activities, events or developments that we expect or anticipate will or
may occur in the future. Forward-looking statements generally relate to future
events or our future financial or operating performance. In some cases, you can
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identify forward-looking statements because they contain words such as "may,"
"might," "will," "should," "expects," "plans," "anticipates," "could,"
"intends," "target," "projects," "contemplates," "believes," "estimates,"
"predicts," "potential" or "continue" or the negative of these words or other
similar terms or expressions that concern our expectations, strategy, plans or
intentions. Forward-looking statements contained in this Quarterly Report
include, but are not limited to, statements about:

• our future financial performance, including our revenue, costs of revenue and

                 operating expenses;


   •   our ability to achieve and grow profitability;

• the sufficiency of our cash, cash equivalents and investments to meet our

                 liquidity needs;


   •   our predictions about industry and market trends;


   •   our ability to expand successfully internationally;

• our ability to manage effectively our growth and future expenses, including

                 our growth and expenses associated with our sponsorship of various special
                 purpose acquisition companies;


   •   our estimated total addressable market;


• our ability to maintain, protect and enhance our intellectual property;

• our ability to comply with modified or new laws and regulations applying to

                 our business;


• the attraction and retention of qualified employees and key personnel;

• the effect that the novel coronavirus disease (“COVID-19”) or other public

                 health issues could have on our business, financial 

condition and the economy

                 in general;


• our ability to be successful in defending litigation brought against us; and

• our ability to continue to meet the listing requirements of Nasdaq.

We caution you that the forward-looking statements highlighted above do not
encompass all of the forward-looking statements made in this Quarterly Report.


We have based the forward-looking statements contained in this Quarterly Report
primarily on our current expectations and projections about future events and
trends that we believe may affect our business, financial condition, results of
operations and prospects. The outcome of the events described in these
forward-looking statements is subject to risks, uncertainties and other factors
described in the section entitled "Risk Factors" in this report and in our
Annual Report on Form 10-K and 10-K/A for Fiscal 2022, filed with the SEC on
December 13, 2021 and on December 14, 2022, respectively, which is expressly
incorporated herein by reference, and elsewhere in this Quarterly Report.
Moreover, we operate in a very competitive and challenging environment. New
risks and uncertainties emerge from time to time, and it is not possible for us
to predict all risks and uncertainties that could have an impact on the
forward-looking statements contained in this Quarterly Report. We cannot assure
you that the results, events and circumstances reflected in the forward-looking
statements will be achieved or occur, and actual results, events or
circumstances could differ materially from those described in the
forward-looking statements.

The forward-looking statements made in this Quarterly Report relate only to
events as of the date on which the statements are made. We undertake no
obligation to update any forward-looking statements made herein to reflect
events or circumstances after the date of this Quarterly Report or to reflect
new information or the occurrence of unanticipated events, except as required by
law. We may not actually achieve the plans, intentions or expectations disclosed
in our forward-looking statements and you should not place undue reliance on our
forward-looking statements. Our forward-looking statements do not reflect the
potential impact of any future acquisitions, mergers, dispositions, joint
ventures, other strategic transactions or investments we may make or enter into.

The risks and uncertainties we currently face are not the only ones we face. New
factors emerge from time to time, and it is not possible for us to predict which
will arise. There may be additional risks not presently known to us or that we
currently believe are immaterial to our business. In addition, we cannot assess
the impact of each factor on our business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statements. Our business, operating results,
liquidity and financial condition could be materially affected in an adverse
manner as a result of these risks.

The industry and market data contained in this Quarterly Report are based either
on our management's own estimates or, where indicated, independent industry
publications, reports by governmental agencies or market research firms or other
published
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independent sources and, in each case, are believed by our management to be
reasonable estimates. However, industry and market data are subject to change
and cannot always be verified with complete certainty due to limits on the
availability and reliability of raw data, the voluntary nature of the data
gathering process and other limitations and uncertainties inherent in any
statistical survey of market shares. We have not independently verified market
and industry data from third-party sources. In addition, consumption patterns
and customer preferences can and do change. As a result, you should be aware
that market share, ranking and other similar data set forth herein, and
estimates and beliefs based on such data, may not be verifiable or reliable.

The ShiftPixy logo and other trademarks or service marks of ShiftPixy, Inc.
appearing in this Quarterly Report on Form 10-Q are the property of ShiftPixy,
Inc. This Form 10-Q also includes trademarks, trade names and service marks that
are the property of other organizations. Solely for convenience, trademarks and
trade names referred to in this Form 10-Q appear without the ® and ™ symbols,
but those references are not intended to indicate, in any way, that we will not
assert, to the fullest extent under applicable law, our rights, or that the
applicable owner will not assert its rights, to these trademarks and trade
names.



Overview

Our current business, and the primary source of our revenues to date, has been
providing human resources, employment compliance, employment related insurance,
payroll, and operational employment services solutions for our business clients
using a comprehensive HRIS platform under a human capital fee-based business
model. We have developed a comprehensive human resources information system or
HRIS platform designed to provide real-time, agile business intelligence
information for our clients as well as an employment marketplace designed to
match client opportunities with a large workforce under a digital umbrella. Our
market focus is to use this traditional approach, coupled with developed
technology, to address underserved markets containing predominately lower wage
employees with high turnover, beginning with light industrial, services, and
food and hospitality markets. We provide human resources, employment compliance,
insurance-related, payroll, and operational employment services solutions for
our clients and shift work or gig opportunities for worksite employees (WSEs or
shifters). As consideration for providing these services, we receive
administrative or processing fees, typically as a percentage of a client's gross
payroll, process and file payroll taxes and payroll tax returns, provide
workers' compensation insurance, and provide employee benefits. We have built a
substantial business on a recurring revenue model since our inception in 2015.
For the three months ended November 30, 2022 and November 30, 2021, we processed
approximately $11.7 million and $14.1 million of payroll billings, respectively,
our primary operating metric, and incurred approximately $5.4 million and $8.7
million in operating losses for the three months ended November 30, 2022 and
November 31, 2021, respectively. Our loses were driven primarily by substantial
investments in our technology platform, our SPAC sponsorships and our ShiftPixy
Labs growth initiative, as well as by necessary upgrades to our back-office
operations to facilitate servicing a large WSE base under a traditional staffing
model.

For most of the fiscal year ending August 31, 2022, and continuing into the
first quarter of 2023 ending November 30, 2022, our primary focus was on clients
in the restaurant and hospitality industries, (market segments typically
characterized by high employee turnover and low pay rates), and healthcare
industries typically employing specialized personnel that command higher pay
rates. We believe that these industries are better served by our HRIS platform
and related mobile application, which provide payroll and human resources
tracking for our clients, and which we believe result in lower operating costs,
improved customer experience and revenue growth acceleration. California
continued to be our largest market during the three months ending November 30,
2022, accounting for approximately 48.78% of our gross billings. Washington and
New Mexico represented our other significant markets during the first quarter of
2023 ending November 30, 2022, representing approximately 22.43% of our total
gross billings. (Our other locations did not contribute revenue to a material
degree.) All of our clients enter into client services agreements ("CSAs") with
us or one of our wholly owned subsidiaries.

Our business focus during the fiscal year ending August 31, 2022, and continuing
into the three months ending November 30, 2022, was to complete our HRIS
platform and to expand that platform to position the Company for rapid billings
growth as well as to expand our product offerings to increase our monetization
of our payroll billings. Now we feel that our HRIS platform is at completion
stage and our IT development cost has started to stabilize with a significant
cost reduction year over year, we are focused in the maintenance and minor
functionality improvements to keep our technology at a top level of excellence
in functionality. To that end, we identified and began to execute on various
growth strategies, and expect that our execution of these strategies, if
successful, will yield significant customer growth driven by widespread adoption
of our technology
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offerings, which we believe represents a substantial value proposition to our
clients as a valuable source of agile human capital business intelligence.

Our revenues for the first quarter of 2023 ending November 30, 2022, consisted
of: i) staffing solutions revenues equal to gross billings for staffing
solutions clients; and ii) EAS solutions revenues which consist of
administrative fees calculated as a percentage of gross payroll processed,
payroll taxes due on WSEs billed to the client and remitted to the taxation
authority, and workers' compensation premiums billed to the client for which we
facilitate coverage for our clients. Our costs of revenues for EAS solutions
revenues consist of the accrued and paid payroll taxes and our costs to provide
the workers' compensation coverage and administration related services,
including premiums and loss reserves. For staffing solutions revenues, our cost
of revenues also included the gross payroll paid to staffing solutions
employees. A significant portion of our liabilities is for our projected
workers' compensation claims, carried as liabilities. We provided a self-funded
workers' compensation policy up to $500,000 and purchased reinsurance for claims
in excess of that limit through February 28, 2021, after which we changed to a
direct cost premium only workers' compensation program.

We believe that our customer value proposition is to provide a combination of
overall net cost savings to our clients, for which they are willing to pay
increased administrative fees, as follows:


•Payroll tax compliance and management services;
•Governmental HR compliance services, such as compliance with the Affordable
Care Act ("ACA");
•Reduced client workers' compensation premiums or enhanced coverage; and
•Access to an employee pool of potential applicants to reduce turnover costs.

We have invested heavily in a robust, cloud-based HRIS platform (the ShiftPixy
“Ecosystem”) in order to:


•Reduce WSE management costs;
•Automate new WSE and client onboarding; and
•Provide value-added services for our business clients resulting in additional
revenue streams to the Company.

Our cloud-based HRIS platform captures, holds, and processes HR and payroll
information for clients and WSEs through an easy-to-use customized front-end
interface coupled with a secure, remotely hosted database. The HRIS platform can
be accessed by either a desktop computer or an easy to use smartphone
application designed with legally binding HR workflows in mind. Once fully
implemented, we expect to reduce the time, expense, and error rate for
on-boarding WSEs into our ecosystem. This allows our HRIS platform to serve as a
"gig" marketplace for WSEs and clients and for client businesses to better
manage their human capital needs.

We see our technology platform as a key competitive advantage and differentiator
to our competitors and one that will allow us to expand our human capital
business beyond our current focus of low-wage employees and healthcare workers.
We believe that providing this baseline business, coupled with a technology
solution to address additional concerns such as employee scheduling and
turnover, will provide a unique, cost effective solution to the HR compliance,
staffing, and scheduling problems that these businesses face. We are completing
additional features that we expect to generate additional revenue streams,
enhance and expand our product offering, increase our client customer and WSE
counts, and increase our revenues and profit per existing WSE.

COVID-19 Pandemic Impact


The COVID-19 pandemic continues to provide both business setbacks and business
opportunities. Our growth trajectory has been muted by the economic impacts of
the COVID-19 pandemic on our core business clients, primarily restaurants and
nurse staffing organizations supplying health services not related to COVID-19.
However, many of our clients have, with the benefit of Payroll Protection Plan
loans ("PPP Loans") under the CARES Act and with adjustments to business
offerings to accommodate the impact of the virus and the related government
response thereto, learned to respond to and in some cases grow despite the
pandemic. Thus far, the impact of the variants of the disease have been largely
inconsequential. However, if the disease or its variants further impose on the
health of residents of states wherein we have a significant presence, the
effects thereof, including the government response thereto, could have a
material impact on our revenues.

Significant Developments in the Three Months Ended November 30, 2022.

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Financing Activities

September 2022 Private Placement


On September 20, 2022, the Company entered into a securities purchase agreement
(the "Purchase Agreement") with a large institutional investor (the "Purchaser")
pursuant to which the Company sold to the Purchaser an aggregate of 416,667
shares (the "Shares") of its common stock together with warrants (the
"Warrants") to purchase up to 833,334 shares of common stock (collectively, the
"Offering"). Each share of common stock and two accompanying Warrants were sold
together at a combined offering price of $12.00. The Warrants are exercisable
for a period of seven years commencing upon issuance at an exercise price of
$12.00, subject to adjustment. The Offering closed on September 23, 2022. The
gross proceeds to the Company from the Offering were approximately $5 million.

In connection with the Purchase Agreement, the Company and the Purchaser entered
into amendment No. 1 to warrants (the "Warrant Amendment"). Pursuant to the
Warrant Amendment, the exercise price of (i) 25,233 warrants issued on September
3, 2021, and (ii) 98,969 warrants issued on January 28, 2022, was reduced to
$0.01.

A.G.P./Alliance Global Partners (the "Placement Agent") acted as the exclusive
placement agent in connection with the Offering pursuant to the terms of a
placement agent agreement, dated September 20, 2022, between the Company and the
Placement Agent (the "Placement Agent Agreement"). Pursuant to the Placement
Agent Agreement, the Company paid the Placement Agent a fee equal to 7.0% of the
aggregate gross proceeds from the Offering. In addition to the cash fee, the
Company issued to the Placement Agent warrants to purchase up to 20,833 shares
of common stock (5% of the number of shares sold in the Offering (the "Placement
Agent Warrants")). The Placement Agent Warrants will be exercisable for a period
commencing six months from issuance, will expire four years from the
effectiveness of a registration statement for the resale of the underlying
shares, and have an initial exercise price of $13.20 per share.


Growth Initiatives


During the first quarter of Fiscal 2023, we concluded activities associated with
our SPAC-related growth initiative, and we continued to execute on our other
primary growth initiative, which is designed to leverage our technology
solution, knowledge, and expertise to provide for significant revenue growth for
the human capital management services we provide to our clients.

Transformative Sales Growth Strategy


In second half of Fiscal 2022, ShiftPixy activated an agile business development
plan for rapid organic growth starting in the first quarter of Fiscal 2023,
focused on building scalable long-term revenue creation with a goal to become
the market leader in U.S. contingent labor through increasingly diverse service
offerings. By helping Fortune 1000 companies rethink human capital, ShiftPixy's
novel technology and proprietary sourcing tools are designed to disrupt not only
traditional thinking about staffing, but also provide a cure to toxic employee
turnover and thus provide labor cost certainty.

This new and compelling go-to-market strategy is prepared to leverage the
recently expanded staffing platform on the ShiftPixy Human Resources Information
System ("HRIS") that offers clients an industry-leading digital and mobile
technology to handle the duties and demands of human capital management at
significant scale. An enhanced value proposition will offer clients automation,
acceleration, liberation, and some indemnification, which we believe will drive
growth and deliver value to stakeholders while also increasing our market share.
Successful execution of this sales growth plan will leave ShiftPixy
strategically positioned for secular growth in the $123 billion temporary and
contract employment staffing market in the U.S.

The Company's transformative sales growth strategy will capitalize on several
economic developments in attractive vertical markets including retail, skilled
trades, logistics, manufacturing, healthcare, and hospitality. A sustained surge
in e-commerce is driving the need for supply chain expansions that require
additional warehouses and the labor necessary to expedite delivery and returns.
Likewise, a re-focus on domestic manufacturing capacity expansion for critical
technology and an acute labor supply gap is leading to a surge in demand for
ShiftPixy's contingent and flexible skilled labor pool. Additional tailwinds
supporting our growth strategy include positive demographic trends as the labor
market reprioritizes flexibility, control, and access to job opportunities
anywhere and anytime.

ShiftPixy's business development plan offers immediate solutions to critical
workflow challenges for human capital acquisition, talent management, labor
force retention, worker supply chain disruptions, and runaway hiring costs.
ShiftPixy's continuous improvement of its client and candidate experience
elevates engagement and satisfaction for neglected contingent and temporary
workers. The completion of the Company's current sales growth strategy is
expected to create one of the largest employers in the U.S. in 2023 and build
the fastest growing flexible labor force to meet the demands of a fast-changing
human capital market while ushering significant enterprise value creation and
recurring revenue growth for our shareholders.
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ShiftPixy Labs


On July 29, 2020, we announced the launch of ShiftPixy Labs, which includes the
development of ghost kitchens in conjunction with our wholly-owned subsidiary,
ShiftPixy Ghost Kitchens, Inc. Through this initiative, we intend to bring
various food delivery concepts to market that will combine with our HRIS
platform to create an easily replicated, comprehensive food preparation and
delivery solution. The initial phase of this initiative is being implemented in
our dedicated kitchen facility located in close proximity to our Miami
headquarters, which we are already showcasing through the distribution of video
programming on social media produced and distributed by our wholly-owned
subsidiary, ShiftPixy Productions, Inc. If successful, we intend to replicate
this initiative in similarly constructed facilities throughout the United States
and in selected international locations. We also intend to provide similar
services via mobile kitchen concepts, all of which will be heavily reliant on
our HRIS platform and which we believe will capitalize on trends observed during
the COVID-19 pandemic toward providing customers with a higher quality prepared
food delivery product that is more responsive to their needs.

The idea of ShiftPixy Labs, originated from discussions with our restaurant
clients, combined with our observations of industry trends that appear to have
accelerated during the pandemic. Beginning in Calendar 2020, we recognized a
significant uptick in the use of mobile applications to order take-out food
either for individual pickup or third-party delivery, which grew even more
dramatically as the pandemic took hold. Not surprisingly, the establishment of
fulfillment kitchens for third party delivery also spread rapidly during this
time period, initially among national fast food franchise chains but then among
smaller QSRs.

We believe that the restaurant industry is in the midst of a food fulfillment
paradigm shift that will ultimately result in the widespread use of "ghost
kitchens" in a shared environment. Similar to shared office work locations, a
shared kitchen can provide significant cost efficiencies and savings compared to
the cost of operating multiple retail restaurant locations. Coupled with
ShiftPixy's technology stack, which includes order delivery and dispatch, we
believe that the ghost kitchen solutions that emerge from ShiftPixy Labs will
provide a robust and effective delivery order fulfillment option for our
clients.

We have also observed the growing impact of social media platforms over the past
five years, a trend which has accelerated through the pandemic. As this trend
has gained steam, many social media influencers have successfully capitalized on
their popularity by establishing new business concepts in a variety of
industries, including within the QSR space. Some of these QSRs are identified as
"virtual" restaurants with delivery-only service fulfilled by centralized ghost
kitchens. We intend to capitalize on this trend by creating an extensive social
media presence for ShiftPixy Labs.

Many restaurant entrepreneurs have also become successful during the pandemic by
moving outside through the use of mobile food trucks, which can be used as a
launching point for restaurants and ultimately expanded to traditional indoor
dining locations. We have researched this phenomenon and, coupled with our
experience in the restaurant industry, believe a significant business
opportunity exists to assist with the fulfillment of new restaurant ideas and
rapidly expand those ideas across a broad geographic footprint utilizing
centralized ghost kitchen fulfillment centers. Again, we believe that ShiftPixy
Labs will provide solutions that will facilitate the rapid growth of these new
businesses, through a combination of centralized ghost kitchens and an available
pool of human capital resources provided through our HRIS platform, as well as
though other business assistance provided by our management team.

During Fiscal 2021, we established an industrial facility in Miami that we
expect to be fully completed and operational during Fiscal 2023. During Fiscal
2022 we equipped this facility with ten standardized kitchen stations in both
single and double kitchen configurations built within standard cargo container
shells and order a food truck for mobile operation. We expect this facility,
upon completion, to function as a state-of-the-art ghost kitchen space that will
be used to incubate restaurant ideas through collaboration and partnerships with
local innovative chefs, resulting in sound businesses that provide recurring
revenue to us in a variety of ways, both through direct sales and utilization of
the ShiftPixy Ecosystem, our HRIS platform, and other human capital services
that we provide. To the extent that this business model is successful and can be
replicated in other locations, it has the potential to contribute significant
revenue to us in the future.

We may also take equity stakes in various branded restaurants that we develop
and operate with our partners through ShiftPixy Labs. Such ownership interests
will be held to the extent that it is consistent with our continued existence as
an operating company, and to the extent that we believe such ownership interests
have the potential to create significant value for our shareholders.

Workers’ Compensation Insurance


During Fiscal 2021, the Company made a strategic decision to change its approach
to securing workers' compensation coverage for our clients. This was primarily
due to rapidly increasing loss development factors stemming in part from the
COVID-19
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pandemic. The combination of increased claims from WSEs, the inability of WSEs
to obtain employment quickly and return to work after injury claims, and
increasing loss development factor rates from our insurance and reinsurance
carriers resulted in significantly larger potential loss exposures, claims
payments, and additional expense accruals. Starting on January 1, 2021, we began
to migrate our clients to our new direct cost program, which we believe
significantly limits our claims exposure. Effective March 1, 2021, all of our
clients had migrated to the direct cost program.

For the first quarter of Fiscal 2023, included in our cost of sales was
approximately $200,000 of expense for claims estimate increases relating to loss
reserves activity for the legacy Sunz and Everest programs. These claims
estimates are the subject of ongoing litigation with our former workers'
compensation insurance providers, Sunz and Everest, as described in Note 11,
Contingencies, above. We are currently re-evaluating our workers' compensation
liability estimates under our legacy Sunz and Everest programs.

Vensure Asset Sale Note Receivable Reconciliation


On January 3, 2020, we entered into an asset purchase agreement with Shiftable
HR Acquisition, LLC, a wholly-owned subsidiary of Vensure, pursuant to which we
assigned client contracts representing approximately 88% of our quarterly
revenue as of November 30, 2019, including 100% of our existing PEO business
effective as of December 31, 2019, and we transferred $1.6 million of working
capital assets, including cash balances and certain operating assets associated
with the assigned client contracts included in the agreement. Gross proceeds
from the Asset Sale were $19.2 million, of which $9.7 million was received at
closing and $9.5 million was embodied in the Note Receivable described above, to
be paid out in equal monthly payments for the next four years after certain
transaction conditions were met. During our third quarter of Fiscal 2022, we
recorded an asset impairment to adjust the net realizable value of the long-term
note receivable to zero. As of November 30, 2022, Vensure and the Company were
engaged in litigation regarding the amount owed to the Company pursuant to the
Note Receivable, as described in Note 11, Contingencies, above.

•Served approximately 68 clients and an average of 2,000 WSEs for the period
ending November 30, 2022 vs. 72 clients and an average of 3,000 WSEs for the
same period ending November 30, 2021.

•We processed approximately $11.7 million of gross payroll billings from
continuing operations for the three months ended November 30, 2022, representing
a decrease of 24.1% when compared to the three months ended November 30, 2021,
due to the loss of a few clients during such period  Our continuing operations
mix remained consistent for the three months ended November 30, 2022, when
compared to the three months ended November 30, 2021, primarily consisting of
QSR or quick service restaurant , WSEs. (For further information, please refer
to the "Non-GAAP Financial Measures" section below.)

•Our revenues decreased 3.7 million for the three months ended November 30,
2022, compared to the same period in Fiscal 2021, primarily due to the loss of a
few clients during the second half of Fiscal 2022, for which the full impact is
reflected during the first quarterly reporting of Fiscal 2023.

•Our gross margin was 8% for the three months ended November 30, 2022, and 8%
over the same period in Fiscal 2022, remaining consistent for both periods.


•Our operating loss for the three months ended November 30, 2022 decreased
approximately $3.4 million compared to the same period in Fiscal 2022. The
decrease is due to cost reductions of $1.6 million in payroll expenses and the
reduction or approximately $1.1 million in software development costs net by the
increase of approximately $-0.2 million in interest and penalties on outstanding
payroll liabilities due.

Our financial performance for the three months ended November 30, 2022, compared
to the three months ended November 30, 2021, included the significant items set
forth herein below.

Results of Operations

The following table summarizes the condensed consolidated results of our
operations for the three months ended November 30, 2022, and November 30, 2021.

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                                                                    For the Three Months Ended
                                                                November 30,           November 30,
                                                                    2022                   2021
Revenues (See Note 2)                                         $    5,266,000          $  8,940,000
Cost of revenue                                                    4,845,000             8,245,000
Gross profit  (loss)                                                 421,000               695,000

Operating expenses:
Salaries, wages, and payroll taxes                                 2,259,000             3,890,000
Stock-based compensation - general and administrative
Commissions                                                           10,000                27,000
Professional fees                                                  1,195,000             1,737,000
Software development                                                  60,000             1,161,000
Depreciation and amortization                                        149,000               123,000
General and administrative                                         1,971,000             2,340,000
Total operating expenses                                           5,644,000             9,278,000

Operating Loss                                                    (5,223,000)           (8,583,000)
Other (expense) income:
Interest expense                                                           -                (1,000)
Other income                                                               -                     -
Expensed SPAC offering costs                                               -                     -
Total other expense                                                        -                 4,000
Loss from continuing operations                                   (5,223,000)           (8,579,000)

Total (loss) income from discontinued operations, net of tax        (200,000)             (134,000)

Net loss                                                      $   (5,423,000)         $ (8,713,000)

Preferred stock preferential dividend                           (127,145,000)                    -
Net loss attributable to common shareholders                  $ 

(132,568,000) $ (8,713,000)


Net loss attributable to common shareholders
Continuing operations                                         $       (13.88)         $     (24.00)
Discontinued operations                                                (0.02)                    -
Net  loss per common share - Basic and diluted                $       

(13.90) $ (24.00)

Weighted average common shares outstanding – Basic and
diluted

                                                            9,533,982               359,452


We report our revenues as gross billings, net of related direct labor costs for
our EAS/HCM clients and revenues without reduction of labor costs for staffing
services clients.

The following table presents certain information related to our gross profit
components (unaudited):

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                                                                  For the Three Months Ended
                                                             November 30,            November 30,
                                                                 2022                    2021
Gross Billings for HCM                                     $        11.7           $        14.1
Gross Wages for HCM                                        $       (10.3)          $       (12.3)
Total Net Revenue for HCM                                  $         1.4                        1.8
Revenue for Staffing                                                 3.8                     7.1
Total Net Revenues (in millions)                           $         5.3           $         8.9
Increase (Decrease), Quarter over Quarter (in millions)             (3.6)                    6.4
Percentage Increase (Decrease), Quarter over Quarter               (40.4)  %               257.2  %

Cost of Revenues (in millions)                             $         4.8           $         8.2
Increase (Decrease), Quarter over Quarter (in millions)             (3.4)                   6.30
Percentage Increase (Decrease), Quarter over Quarter               (41.5)  %               314.3  %

Gross Profit (in millions)                                 $         0.4           $         0.7
Increase (Decrease), Quarter over Quarter (in millions)             (0.3)                    0.2
Percentage Increase (Decrease), Quarter over Quarter               (42.9)  %                35.5  %
Gross Profit Percentage of Revenues                                  7.5   %                 7.8  %


Three months ended November 30, 2022


Net revenue for our HCM services excludes the payroll cost component of gross
billings. With respect to staffing services, employer payroll taxes, employee
benefit programs, and workers' compensation insurance, we believe that we are
the primary obligor, and we have latitude in establishing price, selecting
suppliers, and determining the service specifications. As such, the billings for
those components are included as revenue. Revenues are recognized ratably over
the payroll period as WSEs perform their services at the client worksite. See
also non-GAAP Financial Measures below.

Net Revenue decreased approximately $3.7 million from $8.9 million for the three
months ended November 30, 2022 to $5.3 million for the three months ended
November 30, 2022. The decrease is based on the loss of a few clients during the
third quarterly reporting of Fiscal 2022, for which the full impact of the loss
of this revenue is being reflected in the first quarterly reporting of Fiscal
2023. Average WSEs decreased by approximately $1,000 for the thee months ending
November 30, 2022.

Net revenue per WSE remained consistent for the three month period ended
November 30, 2022 compared to the same period in FY 2022.


For the three months ended November 30, 2022, our revenue associated with
administrative fees decreased by $0.2 million,, our tax revenues by $0.5 million
, workers' compensation revenue by $0.1 million, for our administrative fees by
$0.3 million and our tax revenue by $0.7 million , compared to the same period
in Fiscal 2022. The decrease is consistent with our billed wages decrease for
the three months ended November 30, 2022, compared the same period in Fiscal
2022.

Cost of Revenues includes our costs associated with employer taxes, workers'
compensation insurance premiums, and the gross wages paid for our staffing
clients. Cost of revenues for the three months ended November 30, 2022,
decreased by $3.4 million to $4.8 millions from $8.2 million for the same period
in Fiscal 2022. The decrease is correlated with the decrease in our net
revenues, respectively.

The contributors to the decrease in cost of revenue for the three months ended
November 30, 2022, are; a decrease of $3.4 million in gross wages related
primarily to $2.8 million decrease in gross wages and $0.5 million decrease in
taxes, respectively.


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Gross Profit for the three months ended November 30, 2022 decreased by
$0.3 million, compared to the same period in Fiscal 2022.


The decrease for the three months ended November 30, 2022 was primarily driven
by the decrease in net revenues, consistent with our $5.1 million decrease in
gross billings compared to the same period in Fiscal 2022.

Operating expenses for the three months ended November 30, 2022, decreased by
$3.6 million to $5.6 million from $9.3 million, compared to the same period in
Fiscal 2022. The decrease in operating expenses for the three months ended
November 30, 2022 is primarily due to a decrease of approximately $1.6 million
in payroll related expenses due to the reduction in employees, $0.5 million in
professional fees, due the ceased operations of our sponsored SPACs
and,$1.1 million in software development cost, based on the elimination of
external IT consultants as our application was substantially completed during
the third quarterly reporting of Fiscal 2022, net by the increased costs of
$0.2 million in interest and penalties on payroll liabilities due.

The following table presents certain information related to our operating
expenses (unaudited):

                                           For the Three months Ended
                                         November 30,         November 30,
                                             2022                 2021
Operating expenses:
Salaries, wages, and payroll taxes   $    2,259,000          $  3,890,000
Commissions                                  10,000                27,000
Professional fees                         1,195,000             1,737,000
Software development                         60,000             1,161,000
Depreciation and amortization               149,000               123,000
General and administrative                1,971,000             2,340,000
Total operating expenses             $    5,644,000          $  9,278,000


Operating expenses decreased for the three months ended November 30, 2022 by
$3.6 million, compared with the same period of Fiscal 2022. The components of
operating expenses changed as follows:

Salaries, wages and payroll taxes decreased for the three months ended
November 30, 2022, by approximately $1.6 million, in comparison to the same
period in Fiscal 2022. The decrease is primarily attributable to the significant
reduction in employees in the executive, operations, and software development
ranks of our business. Our corporate employee count decreased from 85 employees
as of November 30, 2021, to 65 employees as of November 30, 2022.

Professional fees consists of legal fees, accounting and public company costs,
board fees, and consulting fees. Professional fees for the three months ended
November 30, 2022, decreased by $0.5 million , compared to the same period in
Fiscal 2022. The decrease is primarily attributable to our termination of our
sponsorship of IHC's IBC-related activities, net by our legal fees related to
our current active litigation.

Software development consists of costs associated with research and development
outsourced to third parties. Software development costs decreased by
$1.1 million ,, for the three months ended November 30, 2022, respectively,
compared to the same period in Fiscal 2022. The decrease is based on our
substantial completion of our application during our third quarterly reporting
of Fiscal 2022 and the strategic decision to hold our IT development
outsourcing, focusing on the use of internal resources for the maintenance and
non significant application improvements.

General and administrative expenses consist of office rent and related overhead,
software licenses, insurance, penalties, business taxes, stock based
compensation, travel and entertainment, and other general business expenses.
General and administrative expenses for the three months ended November 30,
2022, decrease by $0.4 million, compared with the same period of Fiscal 2022.
The decrease was a result of reduced directors and insurance premiums due to
less coverage from failed SPAC. Non-cash cash stock compensation expense
decrease by $0.2 million and an increase of $0.2 million in general and
administrative expenses primarily due to interest and penalties related to the
outstanding payroll taxes liabilities.

Net loss for the three months ended November 30, 2022, decreased by $3.3
million
, from $8.71 million to $5.4 million, compared to the same period in
Fiscal 2022. The decrease is mainly driven by the reduction in the costs
described above, net by

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the interest and dividends received from the Trust account and the gain from the
renegotiation our D&O insurance for our sponsored SPAC.

Loss from continuing operations for the three months ended November 30, 2022,
decreased by $3.3 million and was describe above.


Loss from discontinued operations. For the three months ended November 30, 2022,
we recorded a loss primarily based upon our reassessment of our workers'
compensation claims reserve associated with the clients that we transferred to
Vensure in connection with the Vensure Asset Sale. For the three months ended
November 30, 2022, the loss from discontinued operations increased $0.1 million,
compared with the same period in Fiscal 2022. The negligible increase for the
three months ended November 30, 2022, is due to the reassessment of claims
liability for the period.

Liquidity and Capital Resources


As of November 30, 2022, the Company had cash of $0.9 million and a working
capital deficit of $32.0 million. During this same period, the Company used
approximately $3.7 million of cash from its continuing operations and incurred
recurring losses, resulting in an accumulated deficit of $198.1 million as of
November 30, 2022.

On September 20, 2022, the Company entered into a securities purchase agreement
(the "Purchase Agreement") with a large institutional investor (the "Purchaser")
pursuant to which the Company sold to the Purchaser an aggregate of 416,667
shares (the "Shares") of its common stock together with warrants (the
"Warrants") to purchase up to 833,334 shares of common stock (collectively, the
"Offering"). Each share of common stock and two accompanying Warrants were sold
together at a combined offering price of $12.00. The Warrants are exercisable
for a period of seven years commencing upon issuance at an exercise price of
$12.00, subject to adjustment. The Offering closed on September 23, 2022. The
net gross proceeds to the Company from the Offering was $4,738,000 .

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 a going concern for at least one year from issuance of these
financial statements. For a discussion of our liquidity and capital resources,
see Note 6, Going Concern, to the Notes to the Condensed Consolidated Financial
Statements in "Part I, Item 1. Condensed Consolidated Financial Statements" of
this Quarterly Report.

Non-GAAP Financial Measures

In addition to financial measures presented in accordance with GAAP, we monitor
other non-GAAP measures that we use to manage our business, make planning
decisions and allocate resources. These key financial measures provide an
additional view of our operational performance over the long term and provide
useful information that we use to maintain and grow our business. The
presentation of these non-GAAP financial measures is used to enhance the
understanding of certain aspects of our financial performance. They are not
meant to be considered in isolation, superior to, or as a substitute for the
directly comparable financial measures presented in accordance with GAAP.

Our revenue recognition policy differs for our EAS/HCM and staffing clients and
is dependent on the respective CSA applicable to each client. During Fiscal
2021, some of our EAS clients migrated to a staffing CSA. Our policy is to
report revenues as gross billings, net of related direct labor costs, for our
EAS/HCM clients, and revenues without reduction for labor costs for staffing
clients. For the three months ended November 30, 2022, our gross billings from
HCM and staffing services totaled approximately $11.7 million and $3.8 million
(total of $15.5 million), representing 75% and 25% of our gross revenue,
respectively. For the three months ended November 30, 2021, our gross billings
from HCM and staffing services totaled approximately $14.1 million and $7.1
million (total of $21.2 million), representing 66.4% and 33.6% of our gross
revenue, respectively.

Gross billings represent billings to our business clients and include WSE gross
wages, employer payroll taxes, and workers' compensation premiums as well as
administrative fees for our value-added services and other charges for workforce
management support. Gross billings for our HCM services are a non-GAAP
measurement that we believe to represent a key revenue-based operating metric,
along with number of WSEs and number of clients. Active WSEs are defined as
employees on our HRIS platform that have provided services for at least one of
our clients for any reported period. Our primary profitability metrics are gross
profit, and our primary driver of gross profit is administrative fees.
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Reconciliation of GAAP to Non-GAAP Measure

Gross Billings to Net Revenues


The following table presents a reconciliation of our Gross Billings (unaudited)
to Revenues:

                                                             For the Three Months Ended November
                                                                             30,
($ in millions)                                                   2022                   2021
Gross Billings                                              $         11.7          $      14.1
Less: Adjustment to Gross Billings                          $         10.3          $      12.3
Revenues                                                    $          1.4          $       1.8


The following table provides the key revenue and our primary gross profit driver
used by management (unaudited).


                                                                 For the 

Three Months Ended November 30,

                                                                        2022                      2021

Administrative Fees (in millions)                              $              0.3            $       0.5
Increase (Decrease), Quarter over Quarter (in millions)        $             (0.2)           $       0.1
Percentage Increase (Decrease), Quarter over Quarter                        (38.2)   %              34.9  %
Administrative Fee % of Gross Billings                                        1.8    %               2.2  %

Average WSEs (unaudited)                                                    2,000                  3,000
Average Gross Billings per Average WSE                         $            8,049            $     7,066


Average Active WSEs totaled approximately 2,000, decreased for the three months
ended November 30, 2022 as compared to 3,000 WSE for three months ending
November 30, 2021 was due the decrease in rnet revenue. was due to loss of
client.s

Material Commitments


We do not have any contractual obligations for ongoing capital expenditures at
this time. We do, however, purchase equipment and software necessary to conduct
our operations on an as needed basis.

Contingencies


For a discussion of contingencies, see Note 11, Contingencies, to the Notes to
the Condensed Consolidated Financial Statements in "Part I, Item 1. Condensed
Consolidated Financial Statements " of this Quarterly Report.

New and Recently Adopted Accounting Standards


For a listing of our new and recently adopted accounting standards, see Note 2,
Summary of Significant Accounting Policies, to the Notes to the Condensed
Consolidated Financial Statements in "Part I, Item 1. Condensed Consolidated
Financial Statements " of this Quarterly Report.

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2 Comments

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