GlobeNewswire Inc | Jul 15, 2020 04:30PM EDT

July 15, 2020

IRVINE, Calif., July 15, 2020 (GLOBE NEWSWIRE) -- ShiftPixy, Inc. (NASDAQ: PIXY), a California-based gig engagement platform provider, today announced operating results for the quarter ended May 31, 2020 (2020 Third Quarter).

2020 Third Quarter Financial Highlights

-- Significantly improved balance sheet with cash position of $10.8 million and no long-term debt as of May 31, 2020 compared to cash of $0.4 million and long-term debt of $3.6 million as of February 29, 2020. -- Successfully closed $12 million public equity offering on May 26, 2020 and an additional $1.3 million through July 7, 2020. -- Resolved NASDAQ Delisting issue; cleared by NASDAQ after recapitalization. -- Fully converted all convertible debt outstanding. -- Net Loss of $73.2 million, or $2.73 per share included $67.1 million of non-cash and non-recurring below the line other expenses. Non-recurring expenses included capitalization related non-cash charges for preferred options and convertible notes recorded as paid in capital ($0 net equity impact). -- Net Loss excluding non-recurring items was $6.1 million or $0.23 per share. -- Continuing Operating Loss of $4.6 million as compared to $4.3 million for Q3 2019. -- Discontinued operations charge related to January 2020 Asset Sale of $1.5 million for increased workers compensation reserves. -- EBITDAS Loss (Operating Loss excluding depreciation and share-based compensation) improved to $3.9 million from $4.1 million the prior year period due to improved margins and reduced spending on our mobile application, offset by increased operating costs. -- Excluding non-recurring charges to gross margin for $0.3 million of COVID-19 related workers compensation reserves and $0.4 million of non-recurring cash basis operating expense charges, EBITDAS adjusted for non-recurring items would be negative $3.2 million. -- Despite COVID-19 related impacts on our Southern California based restaurant customers, gross billings grew 21% to $14.4 million, or $57.6 million on an annualized basis, compared to $11.9 million or $47.6 million for Q3-2019. -- Revenues increased 23% to $2.0 million compared to $1.6 million in the prior-year period. -- Gross profit was $141,000 including a $280,000 charge for additional workers compensation reserves, compared to $171,000 for Q3 2019. Excluding the COVID-19 related workers comp charge, gross profit would be 20.9% of revenues compared to 8.6% of revenues for Q3-2019. -- Operating expenses were $4.7 million compared to $4.5 million in Q3 2019. Excluding non-recurring charges, operating expenses were $4.0 million for Q3 2020. -- No resolution of Asset Sale working capital settlement due to COVID-19 delays.

2020 Third Quarter Operational Highlights and COVID -19 Impacts

-- Despite the impact of COVID-19, our customer count continues to increase with approximately 81 clients representing over 300 customer locations and 2,700 billed employees, an increase of 106% over Q3 2019. -- June 2020 ending billed employees recovered to 3,200 employees. Unfortunately, we do expect to be impacted by the July 13, 2020 COVID-19 restrictions implemented by the State of California. -- Average annualized gross billings per worksite employee decreased to $21,300 from $29,700 in Q3 2019 due to lower per employee billings during the COVID-19 pandemic. -- Despite our asset sale in January 2020, we remain staffed to manage up to 50,000 active worksite employees with our current corporate overhead. -- COVID-19 impacted our development cycles and has delayed key features for our HRIS and mobile application launch. -- We did not apply for PPP funds under the CARES Act. We elected to defer payment of certain federal taxes as an alternative to PPP funds. These taxes are accrued and will be paid beginning in fiscal 2021.

Despite a significant impact on our customers from the shutdown due to the COVID-19 pandemic, we are well positioned to provide them key support services. With our renewed focus on franchise operators as our target customers in the restaurant space, we see an increased need for the delivery features of our application as food operators increasingly move towards delivery as an increased source of revenues. We continue to see strong demand and new opportunities, stated Chief Executive Officer, Scott Absher. Our recapitalization and improved balance sheet have been instrumental in helping us address opening and re-opening opportunities with larger customers and we are excited to have a clean capital structure. COVID-19 related delays in the launch of our mobile application solution are now behind us as our team has migrated to add features that will provide us with new revenue sources from new markets. Our internal sales team has been streamlined and focused to take advantage of the application and we are extremely excited about our near-term opportunities for significantly larger customers in new markets.

About ShiftPixy

ShiftPixy is a disruptive human capital management platform, revolutionizing employment in the Gig Economy by delivering a next-gen mobile engagement technology to help businesses with shift-based employees navigate regulatory mandates, minimize administrative burdens and better connect with a ready-for-hire workforce. With expertise rooted in management's nearly 25 years of workers' compensation and compliance programs experience, ShiftPixy adds a needed layer for addressing compliance and continued demands for equitable employment practices in the growing Gig Economy.

ShiftPixy Cautionary StatementThe information provided in this release includes forward-looking statements, the achievement or success of which involves risks, uncertainties, and assumptions. Although such forward-looking statements are based upon what management of the Company believes are reasonable assumptions, there can be no assurance that forward-looking statements will prove to be accurate. If any of the risks or uncertainties, including those set forth below, materialize or if any of the assumptions proves incorrect, the results of ShiftPixy, Inc., could differ materially from the results expressed or implied by the forward-looking statements we make. The risks and uncertainties include, but are not limited to, risks associated with the nature of our business model; our ability to execute the Company's vision and growth strategy; our ability to attract and retain clients; our ability to assess and manage risks; changes in the law that affect our business and our ability to respond to such changes and incorporate them into our business model, as necessary; our ability to insure against and otherwise effectively manage risks that affect our business; risks arising from the Covid-19 pandemic or any other events that could cause wide-scale business disruptions; competition; reliance on third-party systems and software; our ability to protect and maintain our intellectual property; and general developments in the economy and financial markets. Statements made in connection with any guidance may refer to financial statements that have not been reviewed or audited. The Company undertakes no obligation to update forward-looking statements if circumstances or management's estimates or opinions should change, except as required by applicable securities laws. The information in this press release shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, and will not be deemed an admission as to the materiality of any information that is required to be disclosed solely by Regulation FD. Further information on these and other factors that could affect the financial results of ShiftPixy, Inc., is included in the filings we make with the Securities and Exchange Commission from time to time. These documents are available on the "SEC Filings" subsection of the "Investor Information" section of our website at https://ir.shiftpixy.com/financial-information/sec-filings. Consistent with the SECs April 2013 guidance on using social media outlets like Facebook and Twitter to make corporate disclosures and announce key information in compliance with Regulation FD, ShiftPixy is alerting investors and other members of the general public that ShiftPixy will provide updates on operations and progress required to be disclosed under Regulation FD through its social media on Facebook, Twitter, LinkedIn and YouTube. Investors, potential investors, shareholders and individuals interested in our Company are encouraged to keep informed by following us on Facebook, Twitter, LinkedIn and YouTube.

INVESTOR CONTACT:InvestorRelations@shiftpixy.com800.475.3655

ShiftPixy, Inc.Condensed Consolidated Balance Sheets



May 31, August 31, 2020 2019 (Unaudited) ASSETS Current assets Cash $ 10,835,000 $ 1,561,000 Accounts receivable, net 179,000 86,000 Unbilled accounts receivable 2,133,000 1,137,000 Note receivable, current portion 1,291,000 - Deposit ? workers? compensation 473,000 235,000 Prepaid expenses 295,000 349,000 Other current assets 190,000 244,000 Current assets of discontinued operations 2,386,000 10,419,000 Total current assets 17,782,000 14,031,000 Fixed assets, net 2,382,000 3,320,000 Note receivable, net 5,108,000 - Deposits ? workers? compensation 347,000 754,000 Deposits and other assets 140,000 124,000 Non current assets of discontinued 1,749,000 5,567,000 operationsTotal assets $ 27,508,000 $ 23,796,000 LIABILITIES AND STOCKHOLDERS? DEFICIT Current liabilities Accounts payable and other accrued $ 2,823,000 $ 4,455,000 liabilitiesPayroll related liabilities 8,704,000 8,533,000 Convertible notes, net - 3,351,000 Accrued workers? compensation costs 473,000 235,000 Default penalties accrual - 1,800,000 Derivative liability - 3,756,000 Current liabilities of discontinued 2,386,000 10,058,000 operationsTotal current liabilities 14,386,000 32,188,000 Non-current liabilities Accrued workers? compensation costs 1,098,000 525,000 Non-current liabilities of discontinued 5,533,000 3,853,000 operationsTotal liabilities 21,017,000 36,566,000 Commitments and contingencies Stockholders? equity (deficit) Preferred stock, 50,000,000 authorized - - shares; $0.0001 par valueCommon stock, 750,000,000 authorizedshares; $0.0001 par value; 3,857,316 and909,222 - - shares issued as of May 31, 2020 andAugust 31, 2019Additional paid-in capital 117,730,000 32,505,000 Treasury stock, at cost-0 and 13,953shares as of May 31, 2020 and August 31, - (325,000 )2019Accumulated deficit (111,239,000 ) (44,950,000 )Total stockholders? equity (deficit) 6,491,000 (12,770,000 )Total liabilities and stockholders? equity $ 27,508,000 $ 23,796,000 (deficit)

These unaudited interim condensed consolidated financial statements should be read with the accompanying footnotes and Management Discussion and Analysis available on Form 10-Q file on July 15, 2020 with the Securities and Exchange Commission.

ShiftPixy Inc.Condensed Consolidated Statements of Operations(Unaudited)



For the Three Months Ended For the Nine Months Ended May 31, 2020 May 31, 2019 May 31, 2020 May 31, 2019 Revenues(grossbillings of$14.4 millionand $11.9million lessworksiteemployeepayroll costof $12.4million and$10.3million,respectivelyfor the three $ 2,014,000 $ 1,638,000 $ 6,775,000 $ 3,658,000 months ended;gross billingsof $47.0million and$25.9 millionless worksiteemployeepayroll costof $40.3million and$22.3 million,respectivelyfornine monthsended)Cost of 1,873,000 1,467,000 6,051,000 3,126,000 revenueGross profit 141,000 171,000 724,000 532,000 Operating expenses:Salaries,wages, and 1,793,000 1,152,000 5,246,000 3,182,000 payroll taxesStock-basedcompensation ? 150,000 (5,000 ) 895,000 154,000 general andadministrativeCommissions 27,000 64,000 137,000 130,000 Professional 439,000 1,280,000 2,276,000 2,799,000 feesSoftware 686,000 221,000 1,390,000 1,249,000 developmentDepreciationand 545,000 222,000 1,025,000 603,000 amortizationGeneral and 1,054,000 1,541,000 2,617,000 3,654,000 administrativeTotaloperating 4,694,000 4,475,000 13,586,000 11,771,000 expenses Operating Loss (4,553,000 ) (4,304,000 ) (12,862,000 ) (11,239,000 ) Other(expense) income:Interest (559,000 ) (4,345,000 ) (2,524,000 ) (6,270,000 )expenseExpenserelated to (62,091,000 ) - (62,091,000 ) - preferredoptionsExpenserelated to - - (22,000 ) - modificationof warrantsLoss from debt (2,842,000 ) - (3,500,000 ) - conversionInducement (57,000 ) (2,273,000 ) (624,000 ) (3,829,000 )lossLoss on debt (1,592,000 ) - (1,592,000 ) - extinguishmentChange in fairvaluederivative and 6,000 4,748,000 1,777,000 4,748,000 warrantliabilityLoss onconvertible - - - 2,611,000 notesettlementGain onconvertible - - 760,000 - note penaltiesaccrualTotal other(expense) (67,135,000 ) (1,870,000 ) (67,816,000 ) (2,740,000 )incomeLoss fromcontinuing (71,688,000 ) (6,174,000 ) (80,678,000 ) (13,979,000 )operationsIncome (Loss)from discontinuedoperationsIncome (Loss)from (1,490,000 ) 1,178,000 (1,293,000 ) 4,596,000 discontinuedoperationsGain from - - 15,682,000 - asset saleTotal Income(Loss) fromdiscontinued (1,490,000 ) 1,178,000 14,389,000 4,596,000 operations,net of tax Net loss $ (73,178,000 ) $ (4,996,000 ) $ (66,289,000 ) $ (9,383,000 ) Net Loss pershare, Basic and dilutedContinuing $ (2.73 ) $ (7.92 ) $ (5.49 ) $ (18.54 )operationsDiscontinued operationsOperating (0.06 ) 1.51 (0.09 ) 6.10 income (loss) Gain on sale - - 1.07 - of assetsTotaldiscontinued (0.06 ) 1.51 0.98 6.10 operationsNet Loss pershare of )common stock ? $ (2.79 ) $ (6.41 ) $ (4.51 $ (12.44 )Basic anddiluted Weightedaverage commonstock 26,249,518 779,634 14,708,554 753,808 outstanding ?Basic anddiluted

These unaudited interim condensed consolidated financial statements should be read with the accompanying footnotes and Management Discussion and Analysis available on Form 10-Q file on July 15, 2020 with the Securities and Exchange Commission.