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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>As filed with the Securities and Exchange
Commission on July 27, 2020</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right"><B>Registration No. 333-</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>UNITED STATES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SECURITIES AND EXCHANGE COMMISSION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Washington, D.C. 20549</B></P>



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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>FORM S-1</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>REGISTRATION STATEMENT</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>UNDER</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>THE SECURITIES ACT OF 1933</B></P>

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<P STYLE="font: 14pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>ShiftPixy, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(Exact name of registrant as specified in
its charter)</P>

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<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
<TD STYLE="width: 32%; border-bottom: black 1pt solid; font-size: 10pt; text-align: center"><FONT STYLE="font-size: 10pt"><B>Wyoming</B></FONT></TD>
<TD STYLE="width: 2%; padding-bottom: 1pt; font-size: 10pt; text-align: center">&nbsp;</TD>
<TD STYLE="width: 32%; border-bottom: black 1pt solid; font-size: 10pt; text-align: center"><FONT STYLE="font-size: 10pt"><B>3751</B></FONT></TD>
<TD STYLE="width: 2%; padding-bottom: 1pt; font-size: 10pt; text-align: center">&nbsp;</TD>
<TD STYLE="width: 32%; border-bottom: black 1pt solid; font-size: 10pt; text-align: center"><FONT STYLE="font-size: 10pt"><B>26-1449404</B></FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
<TD STYLE="text-align: center"><B>(State or other jurisdiction of</B> <B><BR>
incorporation or organization)</B></TD>
<TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD>
<TD STYLE="text-align: center"><B>(Primary Standard Industrial</B> <B><BR>
Classification Code Number)</B></TD>
<TD STYLE="font-size: 10pt; text-align: center">&nbsp;</TD>
<TD STYLE="text-align: center"><B>(I.R.S. Employer</B> <B><BR>
Identification No.)</B></TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B></B>&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>1 Venture, Suite 150</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Irvine, CA 92618</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(888) 798-9100</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(Address, including zip code, and telephone
number, including area code, of<BR>
registrant&rsquo;s principal executive offices)</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Scott Absher</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Chief Executive Officer</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>1 Venture, Suite 150</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Irvine, CA 92618</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(888) 798-9100</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(Name, address, including zip code, and
telephone number, including area code, of agent for service)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Copies to:</B></P>

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<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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    <TD STYLE="width: 49%; padding-bottom: 2.25pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Ivan K. Blumenthal, Esq.</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Daniel A. Bagliebter, Esq.</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Mintz, Levin, Cohn, Ferris, Glovsky and
        Popeo, P.C.</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>666 Third Avenue</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>New York, NY 10017</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(212) 935-3500</B></P></TD>
    <TD STYLE="white-space: nowrap; width: 3%; padding-right: 14.75pt; padding-bottom: 6pt; font-size: 10pt; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 48%; padding-bottom: 2.25pt">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Oded Har-Even, Esq.</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Ron Ben-Bassat, Esq.</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Sullivan &amp; Worcester LLP</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>1633 Broadway Street</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>New York, NY 10019</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(212) 660-3000</B></P></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Approximate date of commencement of proposed
sale to the public: As soon as practicable after the effective date of this registration statement.</B></P>

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<P STYLE="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">If any of the securities being registered
on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the
following box. <FONT STYLE="font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Wingdings">&#120;</FONT></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&nbsp;</P>

<P STYLE="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">If this Form is filed to register additional
securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement for the same offering. <FONT STYLE="font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Wingdings">&#168;</FONT></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&nbsp;</P>

<P STYLE="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">If this Form is a post-effective amendment
filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering. <FONT STYLE="font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Wingdings">&#168;</FONT></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&nbsp;</P>

<P STYLE="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">If this Form is a post-effective amendment
filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering. <FONT STYLE="font-family: Times New Roman, Times, Serif"><FONT STYLE="font-family: Wingdings">&#168;</FONT></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&nbsp;</P>

<P STYLE="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.
See the definitions of &ldquo;large accelerated filer,&rdquo; &ldquo;accelerated filer,&rdquo; &ldquo;smaller reporting company,&rdquo;
and &ldquo;emerging growth company&rdquo; in Rule 12b-2 of the Exchange Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" ALIGN="CENTER" STYLE="font: 10pt Times New Roman, Times, Serif; width: 80%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="width: 29%"><FONT STYLE="font-size: 10pt">Large accelerated filer</FONT></TD>
    <TD STYLE="white-space: nowrap; width: 2%"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 19%"><FONT STYLE="font-family: Wingdings; font-size: 10pt">&#168;</FONT><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="white-space: nowrap; width: 1%"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 34%"><FONT STYLE="font-size: 10pt">Accelerated filer</FONT></TD>
    <TD STYLE="white-space: nowrap; width: 1%"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 14%"><FONT STYLE="font-family: Wingdings; font-size: 10pt">&#168;</FONT><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="white-space: nowrap"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="white-space: nowrap"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="white-space: nowrap"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 10pt">Non-accelerated filer</FONT></TD>
    <TD STYLE="white-space: nowrap; vertical-align: bottom"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-family: Wingdings; font-size: 10pt">&#120;</FONT></TD>
    <TD STYLE="white-space: nowrap; vertical-align: bottom"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 10pt">Smaller reporting company</FONT></TD>
    <TD STYLE="white-space: nowrap; vertical-align: bottom"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: top"><FONT STYLE="font-family: Wingdings; font-size: 10pt">&#120;</FONT><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="white-space: nowrap; vertical-align: bottom"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="white-space: nowrap; vertical-align: bottom"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="white-space: nowrap; vertical-align: bottom"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: top"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="white-space: nowrap; vertical-align: bottom"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="white-space: nowrap; vertical-align: bottom"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom"><FONT STYLE="font-size: 10pt">Emerging growth company</FONT></TD>
    <TD STYLE="white-space: nowrap; vertical-align: bottom"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: top"><FONT STYLE="font-family: Wingdings; font-size: 10pt">&#120;</FONT><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0; text-indent: 0.25in">If an emerging growth company, indicate
by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. <FONT STYLE="font-family: Wingdings">&#168;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CALCULATION OF REGISTRATION FEE</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: black 1pt solid"><FONT STYLE="font-size: 10pt"><B>Title of Each Class of Securities to be Registered</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Proposed<BR>
Maximum<BR>
Aggregate<BR>
Offering Price<SUP>(1)(2)(3)</SUP></B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Amount of<BR>
Registration Fee</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="width: 74%"><FONT STYLE="font-size: 10pt">Common stock, par value $0.0001 per share</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">13,800,000</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">1,791.240</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD><FONT STYLE="font-size: 10pt">Pre-funded warrants to purchase shares of common stock and common stock issuable upon exercise thereof<SUP>(4) </SUP></FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">--</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">--</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD><FONT STYLE="font-size: 10pt">Warrants to purchase shares of common stock and shares of common stock issuable upon exercise thereof<SUP>(4)(5)(6)</SUP></FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">7,590,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">985.19</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD><FONT STYLE="font-size: 10pt">Underwriter&rsquo;s warrants and shares of common stock issuable upon exercise thereof<SUP>(6)</SUP></FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">660,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">85.67</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD><FONT STYLE="font-size: 10pt">Total</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">22,050,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">2,862.10</FONT></TD>
    <TD>&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">(1)</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt; background-color: white">Includes additional shares of common stock and warrants that the underwriters have the option to purchase solely to cover over-allotments, if any.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 5%; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 95%; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">(2)</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Estimated solely for the purpose of calculating the amount of the registration fee pursuant to Rule 457(o) of the Securities Act of 1933, as amended.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">(3)</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">The proposed maximum aggregate offering price of the common
stock proposed to be sold in the offering will be reduced on a dollar-for-dollar basis based on the aggregate offering price of
the pre-funded warrants offered and sold in the offering, and therefore the proposed aggregate maximum offering price of the common
stock and pre-funded warrants (including the common stock issuable upon exercise of the pre-funded warrants), if any, is $13,800,000.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">(4)</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Pursuant to Rule 416 of the Securities Act of 1933, as amended, the securities being registered hereunder include such indeterminate number of additional securities as may be issued after the date hereof as a result of stock splits, stock dividends or similar transactions.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">(5)</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">The warrants to purchase common stock are exercisable at a per
share price equal to 110% of the public offering price of one share of common stock. The proposed maximum aggregate public offering
price of the shares of common stock issuable upon the exercise of the warrants to purchase common stock was calculated to be $7,590,000,
which is equal to 110% of $6,900,000 (which is equal to 50% of $13,800,000), since each share of common stock or each pre-funded
warrant will receive a warrant to purchase one-half of one share of common stock.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">(6)</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Estimated solely for the purpose of calculating the registration
fee pursuant to Rule 457(g) under the Securities Act of 1933, as amended. The underwriter&rsquo;s warrants are exercisable at a
per-share exercise price equal to 110% of the public offering price per share of common stock. The proposed maximum aggregate offering
price of the underwriter&rsquo;s warrants is $660,000, which is equal to 110% of $600,000 (5% of $12,000,000).</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B>The Registrant hereby
amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such
date as the Securities and Exchange Commission, acting pursuant to Section 8(a), may determine.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>




<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-size: 10pt; color: #D2232A"><B>The
information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration
statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell
nor does it seek an offer to buy these securities in any state or other jurisdiction where the offer or sale is not permitted.&nbsp;</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; color: #D2232A"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="width: 33%"><FONT STYLE="font-size: 10pt; color: #D2232A"><B>PRELIMINARY PROSPECTUS</B></FONT></TD>
    <TD STYLE="width: 34%; text-align: center"><FONT STYLE="font-size: 10pt; color: #D2232A"><B>SUBJECT TO COMPLETION </B></FONT></TD>
    <TD STYLE="width: 33%; text-align: center"><FONT STYLE="font-size: 10pt; color: #D2232A"><B>DATED&nbsp;JULY 27,
    2020</B></FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; color: #D2232A">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; color: #D2232A"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; color: #D2232A">&nbsp;</P>



<P STYLE="font: 14pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in"><FONT STYLE="font-size: 10pt"><B>Shares
of Common Stock</B></FONT></P>

<P STYLE="font: 14pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 14pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: center; text-indent: 0.5in"><FONT STYLE="font-size: 10pt"><B>Pre-Funded
Warrants to Purchase Shares of Common Stock</B></FONT></P>

<P STYLE="font: 14pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: center; text-indent: 0.5in"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 14pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt"><B>Warrants
to Purchase Shares of Common Stock</B></FONT></P>

<P STYLE="font: 14pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt"><IMG SRC="tm2025554d1_s1img001.jpg" ALT="" STYLE="height: 88px; width: 224px"></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are offering &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock, par value $0.0001 per share and warrants to purchase up to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of our common stock (and the common stock
issuable from time to time upon the exercise of the warrants). Each share of our common stock is being sold together with a warrant,
or a purchase warrant, to purchase up to 0.5 shares of our common stock. Each purchase warrant will have an exercise price per
share of not less than 110% of the public offering price, will be exercisable immediately and will expire on the fifth anniversary
of the original issuance date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are also offering
to each purchaser, if any, whose purchase of shares of common stock in this offering would otherwise result in the purchaser, together
with its affiliates and certain related parties, beneficially owning more than 4.99% of our outstanding common stock immediately
following the consummation of this offering, the opportunity to purchase, if the purchaser so chooses, pre-funded warrants, in
lieu of shares of common stock that would otherwise result in the purchaser's beneficial ownership exceeding 4.99% (or at the election
of the purchaser, 9.99%) of our outstanding common stock. Each pre-funded warrant will be immediately exercisable for one share
of our common stock and may be exercised at any time until all of the pre-funded warrants are exercised in full. The purchase price
of each pre-funded warrant will equal the price per share at which the shares of common stock are being sold to the public in this
offering, minus $0.001, and the exercise price of each pre-funded warrant will be $0.001 per share. For each pre-funded warrant
we sell, the number of shares of common stock we are offering will be decreased on a one-for-one basis. Each pre-funded warrant
purchased in this offering in lieu of common stock is also being sold together with a purchase warrant. This offering also relates
to the shares of common stock issuable upon exercise of the purchase warrants and any pre-funded warrants sold in this offering.
Pursuant to this prospectus, we are also offering the shares of common stock issuable upon the exercise of the purchase warrants
and pre-funded warrants offered hereby.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The shares of common
stock and pre-funded warrants, if any, can each be purchased only with the accompanying purchase warrants (other than the over-allotment
option), but will be issued separately, and will be immediately separable upon issuance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our common stock is
listed on The Nasdaq Capital Market (&ldquo;Nasdaq&rdquo;), under the symbol &ldquo;PIXY.&rdquo; On July&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; , 2020, the last reported
sale price of our common stock was $ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The final public offering
price of the shares of common stock in this offering, including the price of any pre-funded warrant and accompanying purchase warrant,
and the exercise price for the accompanying purchase warrant will be determined through negotiation between us and the lead underwriter
in the offering and the recent market price used throughout this prospectus will not be indicative of the final offering price.
There is no established public trading market for the purchase warrants or pre-funded warrants, and we do not expect a market to
develop. In addition, we do not intend to apply for a listing of the purchase warrants or the pre-funded warrants on any national
securities exchange.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are an &ldquo;emerging
growth company,&rdquo; as defined in Section 2(a) of the Securities Act of 1933, as amended (the &ldquo;Securities Act&rdquo;),
and, as such, have elected to comply with certain reduced public disclosure requirements for this prospectus and future filings.
This prospectus complies with the requirements that apply to an issuer that is an emerging growth company. See &ldquo;Prospectus
Summary &mdash; Implications of Being an Emerging Growth Company.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>




<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><B>Investing in our
securities involves a high degree of risk. See &ldquo;Risk Factors&rdquo; beginning on page 9 of this prospectus to read about
factors you should consider before investing in our securities.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Per Share of Common Stock and accompanying Purchase Warrant</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Per<BR> Pre-Funded<BR> Warrant and accompanying Purchase Warrant</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Total</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 61%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">Public offering price<SUP>(1)</SUP></FONT></TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 10pt">Underwriting discounts and commissions<SUP>(2)</SUP></FONT></TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left">Proceeds, before expenses, to us</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(1)</TD><TD STYLE="text-align: justify">The public offering price is $ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share of common stock and accompanying purchase warrant and $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; per pre-funded warrant and
accompanying purchase warrant.</TD></TR></TABLE>

<P STYLE="text-align: justify; margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="text-align: justify; width: 0"></TD><TD STYLE="text-align: justify; width: 0.25in">(2)</TD><TD STYLE="text-align: justify">In addition, we have agreed to reimburse the underwriter for certain expenses and issue warrants to the underwriter in an amount
equal to 5% of the aggregate number of shares and shares issuable upon exercise of the pre-funded warrants. See &ldquo;Underwriting.&rdquo;</TD></TR></TABLE>

<P STYLE="text-align: justify; margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><B>Neither the Securities
and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The offering is being
underwritten on a firm commitment basis. We have granted the underwriters a 45-day option from the date of this prospectus to purchase
up to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;additional shares of our common stock and/or additional purchase warrants to purchase up to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of common stock
from us solely to cover over-allotments, if any.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><FONT STYLE="background-color: white">The
</FONT>underwriter expects <FONT STYLE="background-color: white">to deliver the shares of common stock, purchase warrants and any
pre-funded warrants to the purchasers on or about&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2020.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><I>Sole Book-Running Manager</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 14pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 18pt"><B>A.G.P.</B></FONT></P>

<P STYLE="font: 14pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt"><B>The date
of this prospectus is &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; , 2020</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt"><B>&nbsp;</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt"><B></B></FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt"><B></B></FONT>&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>TABLE OF CONTENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top; background-color: rgb(204,238,255)">
    <TD STYLE="width: 85%"><A HREF="#a_001">PROSPECTUS SUMMARY</A></TD>
    <TD STYLE="width: 7%">&nbsp;</TD>
    <TD STYLE="width: 8%"><A HREF="#a_001"><FONT STYLE="font-size: 10pt">1</FONT></A></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,238,255)">
    <TD><A HREF="#a_002">THE OFFERING</A></TD>
    <TD>&nbsp;</TD>
    <TD><A HREF="#a_002"><FONT STYLE="font-size: 10pt">7</FONT></A></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,238,255)">
    <TD><A HREF="#b_001">RISK FACTORS</A></TD>
    <TD>&nbsp;</TD>
    <TD><A HREF="#b_001"><FONT STYLE="font-size: 10pt">9</FONT></A></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,238,255)">
    <TD><A HREF="#b_002">CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS</A></TD>
    <TD>&nbsp;</TD>
    <TD><A HREF="#b_002"><FONT STYLE="font-size: 10pt">27</FONT></A></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,238,255)">
    <TD><A HREF="#b_003">USE OF PROCEEDS</A></TD>
    <TD>&nbsp;</TD>
    <TD><A HREF="#b_003"><FONT STYLE="font-size: 10pt">28</FONT></A></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,238,255)">
    <TD><A HREF="#b_004">DIVIDEND POLICY</A></TD>
    <TD>&nbsp;</TD>
    <TD><A HREF="#b_004"><FONT STYLE="font-size: 10pt">29</FONT></A></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,238,255)">
    <TD><A HREF="#b_005">CAPITALIZATION</A></TD>
    <TD>&nbsp;</TD>
    <TD><A HREF="#b_005"><FONT STYLE="font-size: 10pt">30</FONT></A></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,238,255)">
    <TD><A HREF="#f_001">DILUTION</A></TD>
    <TD>&nbsp;</TD>
    <TD><A HREF="#f_001"><FONT STYLE="font-size: 10pt">31</FONT></A></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,238,255)">
    <TD><A HREF="#f_002">MANAGEMENT&rsquo;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</A></TD>
    <TD>&nbsp;</TD>
    <TD><A HREF="#f_002"><FONT STYLE="font-size: 10pt">33</FONT></A></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,238,255)">
    <TD><A HREF="#g_001">BUSINESS</A></TD>
    <TD>&nbsp;</TD>
    <TD><A HREF="#g_001"><FONT STYLE="font-size: 10pt">53</FONT></A></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,238,255)">
    <TD><A HREF="#a_003">MANAGEMENT</A></TD>
    <TD>&nbsp;</TD>
    <TD><A HREF="#a_003"><FONT STYLE="font-size: 10pt">63</FONT></A></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,238,255)">
    <TD><A HREF="#a_004">EXECUTIVE COMPENSATION</A></TD>
    <TD>&nbsp;</TD>
    <TD><A HREF="#a_004"><FONT STYLE="font-size: 10pt">67</FONT></A></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,238,255)">
    <TD><A HREF="#a_005">PRINCIPAL SHAREHOLDERS</A></TD>
    <TD>&nbsp;</TD>
    <TD><A HREF="#a_005"><FONT STYLE="font-size: 10pt">70</FONT></A></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,238,255)">
    <TD><A HREF="#a_006">CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS</A></TD>
    <TD>&nbsp;</TD>
    <TD><A HREF="#a_006"><FONT STYLE="font-size: 10pt">71</FONT></A></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,238,255)">
    <TD><A HREF="#a_007">DESCRIPTION OF CAPITAL STOCK</A></TD>
    <TD>&nbsp;</TD>
    <TD><A HREF="#a_007"><FONT STYLE="font-size: 10pt">72</FONT></A></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,238,255)">
    <TD><A HREF="#k_001">MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES</A></TD>
    <TD>&nbsp;</TD>
    <TD><A HREF="#k_001"><FONT STYLE="font-size: 10pt">81</FONT></A></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,238,255)">
    <TD><A HREF="#k_002">UNDERWRITING</A></TD>
    <TD>&nbsp;</TD>
    <TD><A HREF="#k_002"><FONT STYLE="font-size: 10pt">86</FONT></A></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,238,255)">
    <TD><A HREF="#k_003">LEGAL MATTERS</A></TD>
    <TD>&nbsp;</TD>
    <TD><A HREF="#k_003"><FONT STYLE="font-size: 10pt">91</FONT></A></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,238,255)">
    <TD><A HREF="#k_004">EXPERTS</A></TD>
    <TD>&nbsp;</TD>
    <TD><A HREF="#k_004"><FONT STYLE="font-size: 10pt">91</FONT></A></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,238,255)">
    <TD><A HREF="#k_005">WHERE YOU CAN FIND MORE INFORMATION</A></TD>
    <TD>&nbsp;</TD>
    <TD><A HREF="#k_005"><FONT STYLE="font-size: 10pt">92</FONT></A></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,238,255)">
    <TD><A HREF="#a_009">INDEX TO FINANCIAL STATEMENTS</A></TD>
    <TD>&nbsp;</TD>
    <TD><A HREF="#a_009"><FONT STYLE="font-size: 10pt">F-1</FONT></A></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><FONT STYLE="background-color: white">You
should rely only on the information contained in this prospectus or in any free writing prospectus that we may provide to you in
connection with this offering. Neither we nor the </FONT>underwriter <FONT STYLE="background-color: white">has authorized anyone
to provide you with information different from, or in addition to, that contained in this prospectus or any such free writing prospectus.
If anyone provides you with different or inconsistent information, you should not rely on it. We can provide no assurance as to
the reliability of any other information that others may give you. Neither we nor the </FONT>underwriter <FONT STYLE="background-color: white">is
making an offer to sell or seeking offers to buy these securities in any jurisdiction where or to any person to whom the offer
or sale is not permitted. The information in this prospectus is accurate only as of the date on the front cover of this prospectus,
and the information in any free writing prospectus that we may provide you in connection with this offering is accurate only as
of the date of such free writing prospectus. Our business, financial condition, results of operations and prospects may have changed
since those dates.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Unless otherwise indicated,
information contained in this prospectus concerning our industry, competitive position and the markets in which we operate is based
on information from independent industry and research organizations, other third-party sources and management estimates. Management
estimates are derived from publicly available information released by independent industry analysts and other third-party sources,
as well as data from our internal research, and are based on assumptions we made upon reviewing such data and our experience in,
and knowledge of, such industry and markets, which we believe to be reasonable. In addition, projections, assumptions and estimates
of the future performance of the industry in which we operate and our future performance are necessarily subject to uncertainty
and risk due to a variety of factors, including those described in &ldquo;Risk Factors&rdquo; on page 9, &ldquo;Cautionary Note
Regarding Forward-Looking Statements&rdquo; on page 27 and elsewhere in this prospectus. These and other factors could cause results
to differ materially from those expressed in the estimates made by the independent parties and by us.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4pt; text-align: center"><B>&nbsp;</B></P>

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<DIV STYLE="padding-right: 10pt; padding-left: 10pt; border: Black 1pt solid">

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4pt; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4pt; text-align: center"><B><A NAME="a_001"></A>PROSPECTUS SUMMARY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4pt; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I>This summary highlights
information contained in greater detail elsewhere and does not contain all of the information that you should consider before deciding
to invest in our common stock, pre-funded warrants or purchase warrants. You should read the entire prospectus carefully, including
the &ldquo;Risk Factors,&rdquo; &ldquo;Management&rsquo;s Discussion and Analysis of Financial Condition and Results of Operations&rdquo;
and our financial statements and the related notes included in this prospectus, before making an investment decision. Unless otherwise
indicated in this prospectus or the context otherwise requires, all references to &ldquo;we,&rdquo; &ldquo;us,&rdquo; &ldquo;our,&rdquo;
and the &ldquo;Company&rdquo; refer to ShiftPixy, Inc.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Company Overview</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 3pt; text-align: justify; text-indent: 33pt">Our current
business, and the primary source of our revenues to date, has been under a traditional staffing services business model. 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, including the light industrial, services, and food and hospitality markets. We provide
human resources, employment compliance, insurance, payroll, and operational employment services solutions for our business clients
(&ldquo;clients&rdquo; or &ldquo;operators&rdquo;) and shift work or &ldquo;gig&rdquo; opportunities for worksite employees (&ldquo;WSEs&rdquo;
or &ldquo;shifters&rdquo;). As consideration for providing these services, we receive administrative or processing fees as a percentage
of a client&rsquo;s gross payroll, process and file payroll taxes and payroll tax returns, provide workers&rsquo; compensation
insurance, and provide employee benefits. We have built a substantial business on a recurring revenue model since our inception
in 2015. For the fiscal year ended August 31, 2019, including our discontinued operations related to the Vensure Asset Sale described
below, we processed over $350 million of payroll billings. Our business has significantly grown for each year since inception and
we expect to continue our track record of significant customer growth. However, we have experienced losses to date as we have invested
in both our technology solutions as well as the back-office operations required to service a large employee base under a traditional
staffing model.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 3pt; text-align: justify; text-indent: 33pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are currently focused
on clients in the restaurant and hospitality industries, traditionally market segments with high employee turnover and low pay
rates. We believe that our focus on these industries will be better served by our Human Resources Information System (&ldquo;HRIS&rdquo;)
technology platform and related mobile application which provide payroll and human resources tracking for our clients and will
result in lower operating costs, improved customer experience and revenue growth acceleration. All of our clients enter into service
agreements with us or our wholly-owned subsidiary, ReThink Human Capital Management, Inc. (&ldquo;ReThink&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 3pt; text-align: justify; text-indent: 33pt">Our revenues
for the fiscal year ended August 31, 2019 (&ldquo;Fiscal 2019&rdquo;) and through the first nine months of the fiscal year ending
August 31, 2020 (&ldquo;Fiscal 2020&rdquo;) primarily 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 applicable taxation authority, and workers&rsquo;
compensation premiums billed to the client for which we facilitate workers&rsquo; compensation coverage. Our costs of revenues
consist of accrued and paid payroll taxes and our costs to provide the workers&rsquo; compensation coverage including premiums
and loss reserves. A significant portion of our assets and liabilities is for our workers&rsquo; compensation reserves. Our cash
balances related to these reserves are carried as assets and our estimates of projected workers&rsquo; compensation claims are
carried as liabilities. Since Fiscal 2019, we have provided a self-funded workers&rsquo; compensation policy for up to $500,000
and purchased reinsurance for claims in excess of $500,000. We actively monitor and manage our clients and WSE&rsquo;s workers&rsquo;
compensation claims which we believe allows us to provide a lower cost workers&rsquo; compensation option for our clients than
they would otherwise be able to purchase on their own.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 3pt; text-align: justify; text-indent: 33pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 3pt; text-align: justify; text-indent: 33pt">As of August 31, 2019, we had 246 clients with over 13,000 WSEs,
and processed payroll of over $350 million during our Fiscal 2019, an increase of nearly 60% over our year ended August 31, 2018
(&ldquo;Fiscal 2018&rdquo;). Of these WSEs, approximately 60% represent workers in the restaurant industry. In addition, as of
August 31, 2019, there were an additional 12,000 inactive WSEs in our HRIS technology platform who are available for gig opportunities.
In January 2020, in connection with the Vensure Asset Sale described below, we assigned client contracts representing approximately
70% of our billable clients, which comprised approximately 88% of our quarterly revenue as of November 30, 2019, and certain operating
assets for $19.2 million in cash, of which $9.7 million was received at closing and $9.5 million is due over the next four years,
which was scheduled to commence in April 2020, subject to certain conditions, including the performance of the assigned contracts
and minimum working capital delivered. The payments have been delayed due to issues from the novel coronavirus disease (&ldquo;COVID-19&rdquo;).
For further discussion on the delayed payment to us pursuant to the Vensure Asset Sale, see &ldquo; &ndash; Recent Developments
&ndash; Vensure Asset Sale.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 3pt; text-align: justify; text-indent: 33pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Following the Vensure
Asset Sale, our client count, client site count, and billed WSE count decreased by approximately 88% from pre- Vensure Asset Sale
metrics. On a comparative basis from May 31, 2019 to February 29, 2020 (our last reporting period before the COVID-19 pandemic
materially impacted our business operations), our continuing and remaining client count increased from 35 to 83 customers, representing
approximately 250 client locations, and our billed WSEs increased from an average of 1,600 to 3,100 at the end of February 2020.
The quarter ended February 29, 2020 represented an annualized growth rate of over 100% for both clients and WSEs since November
30, 2019.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

</DIV>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 3pt; text-align: justify; text-indent: 33pt">The COVID-19 pandemic has had a significant impact upon and
delayed our expected growth, which we have observed through a decrease in our billed customers and WSEs beginning in mid-March
2020, when the State of California first implemented &ldquo;lockdown&rdquo; measures. Significantly, all of our February 29, 2020
billed WSEs worked for clients located in Southern California, and many of these clients were required to furlough or layoff employees
or, in some cases, completely close their operations. However, during the quarter ended May 31, 2020, we continued to close new
customer opportunities. The combination of our sales efforts and the opportunities our services provide to businesses impacted
by the COVID-19 pandemic resulted in additional business opportunities for new client location additions, but our WSE billings
per client location decreased as many clients were shut down, or reduced staffing during the quarter ended May 31, 2020. For the
month of May 2020, our billed client count decreased to 81 clients, but client locations increased by 24% to over 300 client locations
compared to February 2020. Monthly &ldquo;normalized&rdquo; gross client billings decreased 23% from February 2020 to May 2020
as a result of the reduced staffing levels. (&ldquo;Normalized&rdquo; gross billings represent actual billings adjusted for the
number of billable days in a given month, e.g., 29 billable days in February 2020 and 31 billable days in May 2020). As the Southern
California economy experienced modest recovery in June, we experienced continued client additions and some degree of gross billing
recovery. For the month of June 2020, our client count increased to 84 clients, with active billings representing 315 client locations
(an increase of 26% from February 2020 and equivalent to a 150% annualized client location growth rate), while gross client billings
exceeded &ldquo;normalized&rdquo; February 2020 billings. On July 13, 2020, the Governor of the State of California re-implemented
certain COVID-19 related lockdown restrictions in most of the counties in the state, including those located in Southern California
where most of our clients reside.&nbsp; These lockdown restrictions will likely require that in-person dining be prohibited for
at least one month.&nbsp; We believe that our business will be impacted based upon the negative effect on those clients that rely
more heavily upon in-person dining, but we have not had an opportunity to evaluate fully&nbsp;the probable impact of this lockdown
development on our overall customer base as of the date of this prospectus. For further discussion on the impact of COVID-19 on
our business, see &ldquo; &ndash; Recent Developments &ndash; COVID-19 Related Considerations.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 3pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Our Services</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our core business is
to provide regular payroll processing services to clients under an employer administration services (&ldquo;EAS&rdquo;) model in
addition to individual services, such as payroll tax compliance, workers&rsquo; compensation insurance, and employee HR compliance
management. In addition, in November, 2019, we launched our employee onboarding and scheduling functions to our customers in the
mobile application. We expect to complete the full commercial launch of our mobile application software later this calendar year,
which will provide additional services including &ldquo;white label&rdquo; food delivery functionality.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 3pt; text-align: justify; text-indent: 33pt">Our core EAS
are provided via standard legal contracts with our business clients, customized for each client&rsquo;s specific needs, and are
typically one year in length and cancelable with 30 days&rsquo; notice by either party. Through May 31, 2020, we have not had any
material revenues or billings generated by our HRIS from additional value-added services. We consider our future service offering
to be our future, which we believe will provide for additional revenue streams and support cost reductions for existing and future
business clients. Future services, including technology-based services provided through our HRIS system and mobile application,
will be offered through &ldquo;a la carte&rdquo; pricing via customizable on-line contracts.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 3pt; text-align: justify; text-indent: 33pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The new market trend
towards flexible, temporary or freelance jobs, often involving connecting with clients or customers through an online platform
(the &ldquo;Gig Economy&rdquo;) has created legal issues regarding the classification of workers as independent contractors or
employees. In addition, the rising trend of predictive scheduling creates logistical issues for our clients with respect to workers&rsquo;
schedules. We provide our solution primarily by absorbing our clients&rsquo; workers, whom we call WSEs but may also be called
&ldquo;shift workers,&rdquo; &ldquo;shifters,&rdquo; &ldquo;gig workers,&rdquo; or &ldquo;assigned employees.&rdquo; WSEs are carried
under a ShiftPixy corporate employee umbrella, pursuant to which we shoulder certain employment-related compliance responsibilities
for our business clients as part of our services provided. This arrangement benefits WSEs by opening additional work opportunities
through access to other shift work with our other clients. Each WSE further benefits from employee status benefits through our
benefit plan offerings, including minimum essential health insurance coverage plans and a 401(k) plan, while enjoying workers&rsquo;
compensation coverage and other protections provided by applicable employment laws.<B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Competition</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 3pt; text-align: justify; text-indent: 33pt">We have two
primary sources of competition. Competitors to our gig business model include businesses such as ShiftGig, Instawork, Snag, Jobletics
and other comparable businesses that seek to arrange short-term work assignments for both employees and independent contractors.
Competitors to our HRIS system include businesses such as Kelly Services, ManpowerGroup, and Barrett Business Services, which provide
human resource software solutions.&nbsp;We believe our service offering competes effectively based on our strategy of combining
an ecosystem of employment services with the individualized ability to link trained workers to specific shift-work opportunities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 3pt; text-align: justify; text-indent: 33pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Recent Developments</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I>Reverse Stock Split</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On November 13, 2019,
our board of directors authorized a one-for-forty (1:40) reverse split of our issued and outstanding common stock that became effective
on December 16, 2019 (the &ldquo;Reverse Stock Split&rdquo;). As a result of the Reverse Stock Split, each forty (40) shares of
our issued and outstanding common stock were automatically combined and converted into one issued and outstanding share of common
stock. The Reverse Stock Split affected all issued and outstanding shares of our common stock, as well as common stock underlying
stock options to purchase shares of common stock and warrants outstanding immediately prior to the effectiveness of the Reverse
Stock Split. The Reverse Stock Split did not alter the number of shares of preferred stock underlying the Preferred Options (as
defined below) and did not decrease the number of authorized shares of our common stock or preferred stock, alter the par value
of our common stock or preferred stock, both of which remain at $0.0001 per share, nor modify any voting rights or other terms
of our capital stock. Unless otherwise indicated, all information set forth in this prospectus gives effect to the Reverse Stock
Split.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>&nbsp;&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

</DIV>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I>Vensure Asset Sale</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On January 3, 2020, effective January 1,
2020, we entered into an asset purchase agreement with Shiftable HR Acquisition, LLC, part of Vensure Employer Services, Inc. (&ldquo;Vensure&rdquo;),
that assigned client contracts representing approximately 70% of our billable clients, including 100% of our existing Professional
Employer Organization (&ldquo;PEO&rdquo;) business, which comprised approximately 88% of our quarterly revenue as of November 30,
2019 and certain operating assets in exchange for up to approximately $19.2 million of consideration (the &ldquo;Vensure Asset
Sale&rdquo;). We received $9.7 million upon closing and expect to receive additional proceeds of approximately $2.4 million per
year, payable monthly, for the next four years if certain transaction conditions are met, including the performance of the assigned
client contracts. During the nine months ended May 31, 2020, we estimated $1.3 million of working capital adjustments, recorded
as a decrease in the note receivable, and to date we have recorded no adjustments for the client contract performance guarantee
during the nine months ended May 31, 2020. The Vensure Asset Sale required a 90 day settlement period for the contract assets and
liabilities associated with working capital. Due to disruptions from COVID-19, the parties to the Vensure Asset Sale have informally
agreed to extend the settlement period of the working capital adjustment. We will not begin to receive any additional proceeds
until the working capital adjustment has been completed.&nbsp;&nbsp; This transaction required us to relinquish our service rights
to certain clients but allowed us to retain the clients&rsquo; WSE information in our HRIS platform which now represents approximately
35,000 potential gig employees. We also retained all of our intellectual property rights, including our HRIS and our mobile application
technology, and 47 clients with approximately 2,400 billable WSEs.</P>

<P STYLE="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I>Convertible Note
Settlements</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Between December 5, 2019 and March 24, 2020,
we entered into a series of settlements, agreed upon note conversions, note exchanges, and principal repayments (the &ldquo;Convertible
Note Settlements&rdquo;) for (i) our 8% Senior Secured Convertible Notes we issued on June 4, 2018 (the &ldquo;June 2018 Notes&rdquo;),
(ii) certain of our 8% Senior Secured Convertible Notes we issued pursuant to a Limited Settlement Agreement and Mutual Release,
dated December 20, 2018, with certain holders of the June 2018 Notes (the &ldquo;December 2018 Notes&rdquo;), (iii) certain of
our Convertible Notes issued on March 12, 2019 (the &ldquo;March 2019 Notes&rdquo;) and, together with the June 2018 Notes and
the December 2018 Notes, the &ldquo;Convertible Notes&rdquo;) and (iv) all of our warrants issued in connection with the March
2019 Notes (the &ldquo;March 2019 Warrants&rdquo;) that previously included full-ratchet anti-dilution price protection. Pursuant
to the Convertible Note Settlements, we issued an adjustment of 302,271 shares of common stock for conversions and 123,358 shares
of common stock for inducements and cashless warrant exercises for the Convertible Notes and to extinguish the remaining March
2019 Notes and March 2019 Warrants with full-ratchet anti-dilution protection. On December 5, 2019, we exchanged $2,445,000 of
the March 2019 Notes and $222,000 of the June 2018 Notes for new Senior Convertible Notes in an aggregate principal amount of $2,934,000
(the &ldquo;December 2019 Exchange Notes&rdquo; and, together with the June 2018 Notes, the December 2018 Notes and the March 2019
Notes, the &ldquo;Senior Convertible Notes&rdquo;). On March 23, 2020 and March 24, 2020, we (i) further amended the December 2019
Exchange Notes to fix the conversion price at $9.20 per share of common stock, (ii) exchanged $772,000 of the March 2019 Notes
with full-ratchet anti-dilution price protection for $997,000 of amended March 2019 Notes with a fixed conversion price at $9.20
per share of common stock and (iii) amended, cancelled or exercised for shares of common stock via cashless exercise all March
2019 Warrants which previously included full-ratchet anti-dilution price protection and issued new warrants to purchase 423,669
shares of common stock at an exercise price of $10.17 per share. Pursuant to the Convertible Note Settlements, in January 2020
we also paid cash of approximately $2,600,000 to satisfy all default claims and litigation relating to our Senior Convertible Notes
and as repayment of all remaining principal on our June 2018 Notes and December 2018 Notes. Between March 23, 2020 and May 31,
2020 the holders of the remaining notes converted all of their note holdings into shares of common stock at $9.20 per share. For
further discussion of the Senior Convertible Notes, see &ldquo;Description of Our Capital Stock &ndash; Debt and Equity Offerings.&rdquo;</P>

<P STYLE="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><I>May 2020 Public Offering</I></P>

<P STYLE="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On May 20, 2020, we entered into an underwriting agreement with
A.G.P./Alliance Global Partners (&ldquo;A.G.P.&rdquo;), in connection with a public offering (the &ldquo;May 2020 Public Offering&rdquo;)
of an aggregate of (i) 1,898,850 shares of common stock, (ii) pre-funded warrants to purchase 323,310 shares of common stock
and (iii) warrants to purchase 1,277,580 shares of common stock, which included the partial exercise of A.G.P.&rsquo;s over-allotment
option to purchase 166,500 additional warrants. The May 2020 Public Offering closed on May 26, 2020 and we received net proceeds
of approximately $10.9 million after deducting underwriting discounts and commissions and estimated expenses payable by us associated
with the May 2020 Public Offering. On June 11, 2020 and July 7, 2020, we closed partial over-allotment options exercised by A.G.P.
to purchase, in the aggregate, 334,180 additional shares of common stock resulting in net proceeds of an aggregate of approximately
$1.25 million after deducting underwriting discounts and commissions and estimated expenses payable by us.</P>

<P STYLE="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I>Preferred Option</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In September 2016, our founding shareholders, Scott W. Absher,
our Chief Executive Officer, and Stephen Holmes (the &ldquo;Option Shareholders&rdquo;), were granted options to acquire our preferred
stock (the &ldquo;Preferred Options&rdquo;). The number of Preferred Options granted were based upon the number of shares held
by the Option Shareholders at that time.&nbsp; The Preferred Options are nontransferable and forfeited upon the sale of the related
founding shares of common stock.&nbsp; Upon the occurrence of the Vensure Asset Sale in January 2020, the Option Shareholders could
exercise each Preferred Option to purchase one share of our preferred stock for $0.0001 per share.&nbsp; On June 4, 2020, Mr. Absher
exercised 12,500,000 Preferred Options to purchase 12,500,000 shares of our preferred stock for $1,250.&nbsp; Immediately following
the exercise of the Preferred Options described above, Mr. Absher elected to convert the 12,500,000 shares of preferred stock into
12,500,000 shares of common stock, which are subject to a 24-month lock-up period during which such shares may not be traded. As
of the date of this prospectus, there are outstanding Preferred Options exercisable to purchase up to 11,925,520 shares of preferred
stock which are convertible into an equal number of shares of common stock. As stated above, the amount of the Preferred Options,
and the number of shares of preferred stock issuable upon exercise of such options, is based upon the number of shares of common
stock held by the Option Shareholders at the time the Preferred Options were issued. Accordingly, in order to confirm the original
intent of the granting of up to 50,000,000 Preferred Options to Messrs. Absher and Holmes, at some point in the future we intend
to adopt a second grant of Preferred Options granting an additional 12,500,000 Preferred Options to each of Messrs. Absher
and Holmes whereby each option permits the holder to acquire one share of our preferred stock for $0.0001 per share. Each share
of preferred stock will be convertible into common stock on a one-for-one basis. See &ldquo;Risk Factors&mdash; Purchasers in the
offering will suffer immediate and substantial dilution if our Option Shareholders exercise their Preferred Options&rdquo; for
a further discussion of the Preferred Options.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

</DIV>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I>COVID-19 Related
Considerations</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our business, results
of operations and financial condition have been, and may continue to be, materially adversely impacted by the recent outbreak of
respiratory illness caused by COVID-19. We do not, yet, know the impact that COVID-19 will have on our business in the medium to
long-term. As of the date of this prospectus, we have experienced the following COVID-19 impacts to our business:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">We have observed significant staffing reductions for our Southern California clients since the
state lockdown in mid-March and a related reduction in payroll billings from those clients. Several of our clients have closed
operations either temporarily or permanently and most have furloughed staff or reduced hours.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">We are working closely with our clients to assist them in obtaining additional capital, including
through the 2020 stimulus programs such as the Payroll Protection Plan. We observed a nearly 50% reduction in billed WSEs on April
30, 2020 as compared to March 1, 2020. As businesses in Southern California began to re-open and CARES Act funds began to be received
by our customers, billed WSEs decreased 20% on May 31, 2020 as compared to March 1, 2020. Since then, the State of California,
along with other regions where our clients are located, has re-implemented many lockdown measures in response to increases in COVID-19
cases. These new lockdown measures, to the extent they continue, are likely to have a material negative impact on our operating
results, based upon their negative impact on our clients&rsquo; businesses and operations.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">We have observed a significant increase in demand from potential customers, including franchise
restaurant customers, for the technology solutions we provide, which has resulted in a marked increase in our sales pipeline for
our delivery and scheduling application features. However, this increased demand has not yet translated to new customer billings
sufficient to offset the payroll billings reductions we have experienced that we believe to be attributable to the COVID-19 pandemic.
During the quarter ended May 31, 2020, we closed additional client business and began to bill additional client locations representing
a net increase of approximately 60 client locations billed, or approximately 23%, compared to the quarter ended February 29, 2020,
but our per-location monthly billings decreased by approximately 38% during the same period. We believe that these reductions are
due, in significant part, to the COVID-19 pandemic. We cannot predict to what extent, if any, this increase in potential customers
will result in additional signed contracts and increased revenues.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">We expect additional workers&rsquo; compensation claims to be made by furloughed employees,
                                                                                                              especially in light of the State of California&rsquo;s Executive Order N-62-20, which creates a rebuttable presumption for
                                                                                                              workers&rsquo; compensation claims that an employee&rsquo;s COVID-19 related illness arose out of the course of their
                                                                                                              employment if (i) such infection occurred between March 19 and July 5, 2020, and (ii) the employee was diagnosed with
                                                                                                              COVID-19 or tested positive within 14 days after performing work for the employer at a location other than the
                                                                                                              employee&rsquo;s home. While we have not observed direct additional expenses as a result of any such claims, we have
                                                                                                              increased our workers&rsquo; compensation reserve estimates for the quarter ended May 31, 2020 and
we continue to closely monitor all workers&rsquo; compensation claims made during the COVID-19 pandemic. While we believe that
the steps we have taken to date are sufficient to protect against any increased level of workers&rsquo; compensation claims related
to the COVID-19 pandemic, there can be no guarantee that this will be the case, or that our results of operations will not be materially,
negatively impacted should such an increase in claims materialize in the future.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

</DIV>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Our application development cycle has been delayed.&nbsp;&nbsp;Our internal development team, located
in Irvine, CA, was subject to lockdown measures for significantly all of the quarter ended May 31, 2020, and the work schedules
of our external project development teams in other locations were also negatively impacted by the COVID-19 pandemic.&nbsp;&nbsp;All
of these personnel were forced to work remotely, and travel was restricted, disrupting the normal development project cycles and
management review of our external teams. Our development teams typically have a high degree of direct person to person interaction
as part of the creative and problem-solving processes inherent in the development and integration of new technologies.&nbsp;&nbsp;Their
inability to engage in this type of interaction during the lockdown period has resulted in delays in the development, testing,
and deployment of our key development initiatives, and will continue to cause delays to the extent that lockdown directives continue
to be issued by governmental authorities.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">On July 13, 2020, the Governor of the State of California re-implemented additional COVID-19 related
lockdown directives in most counties, including those located in Southern California where most of our clients reside.&nbsp; These
orders will likely require that in-person dining be prohibited for at least one month.&nbsp; While we believe that the negative
impact of these recent orders will be felt most severely by those clients that rely more heavily upon in-person dining, we are
unable to evaluate fully&nbsp;the probable impact of this lockdown development on our overall customer base as of the date of this
prospectus. We believe it is likely, however, that new lockdown orders will have a material negative impact on our business and
operations to the extent that they continue in force.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Risks Associated with Our Business and
this Offering</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our business and our
ability to implement our business strategy are subject to numerous risks, as more fully described in the section of this prospectus
entitled &ldquo;Risk Factors&rdquo;. You should read these risks before you invest in our securities. We may be unable, for many
reasons, including those that are beyond our control, to implement our business strategy. In particular, risks associated with
our business include:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">We have incurred net losses in recent periods and require additional financing. If financing is
not available, we may be required to further downsize or discontinue operations.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">We assume the obligation to make wage, tax, and regulatory payments for WSEs, and, as a result,
are exposed to client credit risks.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Our business strategy depends upon our ability to receive future proceeds in connection with the
Vensure Asset Sale, which are contingent upon profits associated with our former clients that were transferred to Vensure.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">If you purchase our securities in this offering, you will incur immediate and substantial dilution.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">We will have broad discretion in the use of the net proceeds from this offering and may not use
them effectively.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">There is substantial doubt about our ability to continue as a going concern.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">We depend heavily on our Chief Executive Officer and director and the loss of his services could
harm our business.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">If we are unable to meet Nasdaq&rsquo;s continued listing requirements, we could be subject to
suspension and delisting, which could negatively impact us.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">The price of our common stock and warrants may be volatile.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Implications of Being an Emerging Growth
Company</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We qualify as an &ldquo;emerging
growth company&rdquo; as defined in the Jumpstart Our Business Startups Act of 2012 (the &ldquo;JOBS Act&rdquo;). An emerging growth
company may take advantage of certain reduced disclosure and other requirements that are otherwise generally applicable to public
companies. As a result, the information that we provide to shareholders may be different than the information you may receive from
other public companies in which you hold equity. For example, as long as we are an emerging growth company:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

</DIV>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">we are not required to engage an auditor to report on our internal controls over financial reporting
pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002 (the &ldquo;Sarbanes-Oxley Act&rdquo;);</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">we are not required to comply with any requirement that may be adopted by the Public Company Accounting
Oversight Board (the &ldquo;PCAOB&rdquo;), regarding mandatory audit firm rotation or a supplement to the auditor&rsquo;s report
providing additional information about the audit and the financial statements (i.e., an auditor&rsquo;s discussion and analysis);</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">we are not required to submit certain executive compensation matters to shareholder advisory votes,
such as &ldquo;say-on-pay,&rdquo; &ldquo;say-on-frequency&rdquo; and &ldquo;say-on-golden parachutes&rdquo;; and</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">we are not required to comply with certain disclosure requirements related to executive compensation,
such as the requirement to disclose the correlation between executive compensation and performance and the requirement to present
a comparison of our Chief Executive Officer&rsquo;s compensation to our median employee compensation.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We may take advantage
of these reduced disclosure and other requirements until the last day of our fiscal year following the fifth anniversary of the
completion of our initial public offering (&ldquo;IPO&rdquo;), or such earlier time that we are no longer an emerging growth company.
For example, if certain events occur before the end of such five-year period, including if we have more than $1.07 billion in annual
revenue, have more than $700 million in market value of our common stock held by non-affiliates or issue more than $1.0 billion
of non-convertible debt over a three-year period, we will cease to be an emerging growth company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As mentioned above,
the JOBS Act permits us, as an emerging growth company, to take advantage of an extended transition period to comply with new or
revised accounting standards applicable to public companies. We have elected not to opt out of the extended transition period which
means that when an accounting standard is issued or revised, and it has different application dates for public or private companies,
as an emerging growth company, we can adopt the new or revised standard at the time private companies adopt the new or revised
standard. This may make it difficult or impossible because of the potential differences in accounting standards used to compare
our financial statements with the financial statements of a public company that is not an emerging growth company or the financial
statements of an emerging growth company that has opted out of using the extended transition period.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Our Corporate Information</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We were incorporated
under the laws of the State of Wyoming on June 3, 2015. Our principal executive office is located at 1 Venture, Suite 150, Irvine,
CA 92618, and our telephone number is (888) 798-9100. Our website address is www.shiftpixy.com. Our website does not form a part
of this prospectus and listing of our website address is for informational purposes only.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

</DIV>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4pt; text-align: center"><A NAME="a_002"></A><B>THE OFFERING</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4pt; text-align: center">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="width: 35%; padding-bottom: 6pt"><FONT STYLE="font-size: 10pt">Common stock offered</FONT></TD>
    <TD STYLE="width: 1%; padding-bottom: 6pt">&nbsp;</TD>
    <TD STYLE="width: 64%; padding-bottom: 6pt; text-align: justify"><FONT STYLE="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT STYLE="background-color: white">&nbsp;shares.</FONT></FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 6pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 6pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 6pt; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; padding-bottom: 6pt"><FONT STYLE="font-size: 10pt">Pre-funded warrants offered</FONT></TD>
    <TD STYLE="vertical-align: bottom; padding-bottom: 6pt">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; padding-bottom: 6pt; text-align: justify"><FONT STYLE="font-size: 10pt">We are also offering to each purchaser whose purchase of shares of common stock in this offering would otherwise result in the purchaser, together with its affiliates and certain related parties, beneficially owning more than 4.99% of our outstanding common stock immediately following the consummation of this offering, the opportunity to purchase, if the purchaser so chooses, pre-funded warrants, in lieu of shares of common stock that would otherwise result in the purchaser's beneficial ownership exceeding 4.99% (or at the election of the purchaser, 9.99%) of our outstanding common stock. Each pre-funded warrant will be exercisable for one share of our common stock. The purchase price of each pre-funded warrant will be equal to the price per share at which the shares of common stock are being sold to the public in this offering, minus $0.001, and the exercise price of each pre-funded warrant will be $0.001 per share. The pre-funded warrants are exercisable immediately and may be exercised at any time until all of the pre-funded warrants are exercised in full. This offering also relates to the shares of common stock issuable upon exercise of any pre-funded warrants sold in this offering. For each pre-funded warrant we sell, the number of shares of common stock we are offering will be decreased on a one-for-one basis.</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 6pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 6pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 6pt; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; padding-bottom: 6pt"><FONT STYLE="font-size: 10pt">Purchase warrants offered</FONT></TD>
    <TD STYLE="vertical-align: bottom; padding-bottom: 6pt">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; padding-bottom: 6pt; text-align: justify"><FONT STYLE="font-size: 10pt">Each share of common stock and each pre-funded warrant is being sold together with a purchase warrant to purchase up to 0.5 shares of our common stock. Each purchase warrant will have an exercise price per share of not less than 110% of the public offering price, will be exercisable immediately and will expire on the fifth anniversary of the original issuance date. Each holder of purchase warrants will be prohibited from exercising its purchase warrant for shares of our common stock if, as a result of such exercise, the holder, together with its affiliates, would own more than 4.99% of the total number of shares of our common stock then issued and outstanding. However, any holder may increase such percentage to any other percentage not in excess of 9.99%. This offering also relates to the offering of the shares of common stock issuable upon the exercise of the purchase warrants.</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 6pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 6pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 6pt; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; padding-bottom: 6pt"><FONT STYLE="font-size: 10pt">Over-allotment option</FONT></TD>
    <TD STYLE="vertical-align: bottom; padding-bottom: 6pt">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; padding-bottom: 6pt; text-align: justify"><FONT STYLE="font-size: 10pt; background-color: white">The underwriter has a 45-day option to purchase up to an additional &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;shares of common stock and/or purchase warrants to purchase up to an aggregate of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; additional shares of common stock from us at the public offering price less underwriting discounts and commissions.</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 6pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 6pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 6pt; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; padding-bottom: 6pt"><FONT STYLE="font-size: 10pt">Common stock to be outstanding after this offering</FONT></TD>
    <TD STYLE="vertical-align: bottom; padding-bottom: 6pt">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; padding-bottom: 6pt; text-align: justify"><FONT STYLE="font-size: 10pt; background-color: white">&nbsp;&nbsp;&nbsp;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <FONT STYLE="font-size: 10pt; background-color: white">shares of common stock, assuming no exercise of the pre-funded warrants or purchase warrants (or &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of common stock if the underwriter exercises in full its option to purchase additional shares of common stock, assuming no exercise of the pre-funded warrants or purchase warrants).</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 6pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 6pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 6pt; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; padding-bottom: 6pt"><FONT STYLE="font-size: 10pt">Use of proceeds</FONT></TD>
    <TD STYLE="vertical-align: bottom; padding-bottom: 6pt">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="background-color: white">We
        estimate that the net proceeds to us from this offering from the sale of the shares of our common stock and the accompanying </FONT>purchase
        warrant<FONT STYLE="background-color: white">s will be approximately $&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;million, or approximately
        $&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; million if the </FONT>underwriter exercises its <FONT STYLE="background-color: white">option
        to purchase additional shares in full, excluding any proceeds that may be received upon the exercise of the </FONT>pre-funded <FONT STYLE="background-color: white">warrants
        and the </FONT>purchase warrant<FONT STYLE="background-color: white">s, after deducting underwriting discounts and commissions
        and offering expenses.</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="background-color: white">We
        intend to </FONT>use the net proceeds of this offering for general corporate purposes, including working capital, operating expenses
        and capital expenditures. See &ldquo;Use of Proceeds.&rdquo;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P></TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

</DIV>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<DIV STYLE="padding-right: 10pt; padding-left: 10pt; border: Black 1pt solid">

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR>
    <TD STYLE="vertical-align: top; padding-bottom: 6pt"><FONT STYLE="font-size: 10pt">Risk factors</FONT></TD>
    <TD STYLE="vertical-align: bottom; padding-bottom: 6pt">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; padding-bottom: 6pt; text-align: justify"><FONT STYLE="font-size: 10pt">Investing in our
    securities involves a high degree of risk.&nbsp;&nbsp;See &ldquo;Risk Factors&rdquo; beginning on page 9 of this prospectus
    for a discussion of factors to consider carefully before deciding to invest in shares of our common stock, purchase warrants
    or pre-funded warrants in this offering.</FONT></TD></TR>
<TR>
    <TD STYLE="vertical-align: top; padding-bottom: 6pt"><FONT STYLE="font-size: 10pt">Nasdaq symbol</FONT></TD>
    <TD STYLE="vertical-align: bottom; padding-bottom: 6pt">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; padding-bottom: 6pt; text-align: justify"><FONT STYLE="font-size: 10pt">Our common stock is listed on Nasdaq under the symbol &ldquo;PIXY.&rdquo; We do not intend to list the purchase warrants or pre-funded warrants on any securities exchange or nationally recognized trading system.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 4pt; text-align: center">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Unless otherwise indicated,
all information contained in this prospectus assumes no exercise by the underwriter of its over-allotment option, assumes no sale
of any pre-funded warrants in this offering, assumes no exercise of the purchase warrants, assumes no exercise of the warrants
to be issued to the underwriter <FONT STYLE="background-color: white">and accounts for </FONT>the <FONT STYLE="background-color: white">Reverse
Stock Split that became effective on December 16, 2019. The number of shares of our common stock that are and will be outstanding
immediately before and after this offering as shown above is based on </FONT>16,816,686 shares outstanding as of July 24, 2020.
The number of shares outstanding as of July 24, 2020, as used throughout this prospectus, unless otherwise indicated, excludes:&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">1,896,209 shares of common stock issuable upon the exercise of warrants to purchase shares of common stock that were exercisable and outstanding as of July 24, 2020, with a weighted-average exercise price of $8.42 per share;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">198,816 shares of common stock reserved for future issuance under our 2017 Stock Option and Share Issuance Plan (the &ldquo;2017 Plan&rdquo;);</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">43,126 shares of common stock issuable upon the exercise of options to purchase common stock issued pursuant to our 2017 Plan as of July 24, 2020, with a weighted-average exercise price of $101.31 per share;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">1,175,784 shares of common stock issuable upon the exercise of options to purchase common stock granted pursuant to our 2017 Plan on July 1, 2020, with a price of $5.40 per share, subject to shareholder approval;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">11,925,520 shares of common stock reserved for future issuance pursuant to Preferred Options that were granted to our shareholders of record on September 28, 2016 to purchase preferred stock for $0.0001 per share, with each share of preferred stock being convertible into common stock on a one-for-one basis; and</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">25,000,000 shares of common stock potentially issuable pursuant to options that are expected to be granted to Messrs. Absher and Holmes,
the issuance of which may be subject to various internal corporate, state, federal or regulatory approvals, following this offering to
purchase preferred stock for $0.0001 per share, with each share of preferred stock being convertible into common stock on a one-for-one
basis.</FONT></TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

</DIV>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B></B>&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><A NAME="b_001"></A><B>RISK FACTORS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I>An investment in
our common stock, pre-funded warrants or purchase warrants involves a high degree of risk. You should carefully consider the following
risks and all of the other information contained in this prospectus before deciding whether to invest in our common stock, pre-funded
warrants or purchase warrants including the risks and uncertainties described below and under the caption &ldquo;Risk Factors&rdquo;
in our most recently filed Annual Report on Form 10-K and Quarterly Report on Form 10-Q filed with the SEC, in each case as these
risk factors are amended or supplemented by subsequent Annual Reports on Form 10-K or Quarterly Reports on Form 10-Q. The risks
set forth below are those which we believe are the material risks that we face. The occurrence of any of such risks may materially
and adversely affect our business, financial condition, results of operations and future prospects. In such an event, the market
price of our common stock and the value of the pre-funded warrants and purchase warrants could decline, and you could lose part
or all of your investment.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Risks Related to this Offering and Ownership
of Our Common Stock and Warrants</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Purchasers in the offering will suffer
immediate dilution.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If you purchase common
stock in this offering, the value of your shares based on our actual book value will immediately be less than the offering price
you paid. This reduction in the value of your equity is known as dilution. At the assumed public offering price of $ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share,
purchasers of common stock in this offering will experience immediate dilution of approximately $ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share, assuming no exercise
of the Preferred Options. Based upon the pro forma as adjusted net tangible book value of our common stock at $ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share, your
shares may be worth less per share than the price you paid in the offering. See &ldquo;Dilution.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If the options, warrants and convertible securities we previously
granted are exercised, additional dilution will occur. As of July 24, 2020, options to purchase 43,126 shares of common stock at
a weighted-average&nbsp;exercise price of $101.31 per share were outstanding, options to purchase 1,175,784 shares of common stock
at a weighted-average&nbsp;exercise price of $5.40 per share subject to shareholder approval were outstanding, warrants to purchase
up to 1,896,209 shares of common stock at a weighted-average&nbsp;exercise price of $8.42 per share were outstanding, and Preferred
Options to purchase 11,925,520 shares of preferred stock at an exercise price of $0.0001 per share that are convertible into an
equal number of shares of common stock were outstanding. See &ldquo;Risk Factors &mdash; Purchasers in the offering will suffer
immediate and substantial dilution if our Option Shareholders exercise their Preferred Options&rdquo; for a discussion of the Preferred
Options.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Furthermore, if we
raise additional funding by issuing additional equity securities, the newly-issued shares will further dilute your percentage ownership
of our shares and may also reduce the value of your investment. The discussion above assumes no exercise of the purchase warrants
and no sale of pre-funded warrants, which, if sold, would reduce the number of shares of common stock that we are offering on a
one-for-one basis until such warrants are exercised.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Purchasers in the offering will suffer
immediate and substantial dilution if our Option Shareholders exercise their Preferred Options.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If the Preferred Options we previously granted to our Option
Shareholders are fully exercised and their preferred stock is converted into shares of common stock, purchasers in this offering
will suffer immediate and substantial dilution. As of the date of this prospectus, there were outstanding Preferred Options to
purchase up to 11,925,520 shares of preferred stock at an exercise price of $0.0001 per share that are convertible into an equal
number of shares of common stock. At the assumed public offering price of $&nbsp;&nbsp;&nbsp;&nbsp; per share, purchasers of common
stock in this offering will experience immediate and substantial dilution of approximately $ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, assuming the Option Shareholders exercise all of their outstanding Preferred Options and convert all of their preferred
stock into shares of common stock. In this case, based upon the pro forma as adjusted net tangible book value of our common stock
at $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; per share, your shares would be worth less per share than the price you paid in the offering.
Additionally, at some point in the future we intend to adopt a second grant of options granting an additional 12,500,000 options
to each of our founders, Scott W. Absher, our Chief Executive Officer, and Stephen Holmes, whereby each option permits the holder
to acquire one share of our preferred stock for $0.0001 per share. If those options are issued and the shares of preferred stock
underlying the options are converted into common stock, additional substantial dilution would occur.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>A majority of our common stock is
closely held by our founders which may limit a minority shareholder from influencing corporate governance.</I></B> <SUP></SUP></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Approximately 78.0%
of our issued and outstanding common stock is held by our founders, Scott W. Absher, our Chief Executive Officer, and Stephen Holmes.
Following this offering, Messrs. Absher and Holmes will hold approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;% of our issued
and outstanding common stock, assuming no exercise of the underwriter&rsquo;s option, no exercise of the purchase warrants or pre-funded
warrants and no exercise of the Preferred Option. Messrs. Absher and Holmes are the beneficial owners of approximately 44.2% and
42.2% of our outstanding voting securities, respectively, prior to the offering and&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; %
and &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%, respectively, of our outstanding voting securities after the offering, assuming
Mr. Holmes exercises all of his outstanding 11,790,000 Preferred Options and the preferred stock underlying his Preferred Options
is converted into an equal number of shares of our common stock. As majority shareholders, Messrs. Absher and Holmes can continue
to possess significant influence and can elect and can continue to elect a majority of our board of directors and authorize or
prevent proposed significant corporate transactions. Their ownership and control may also have the effect of delaying or preventing
a future change in control, impeding a merger, consolidation, takeover or other business combination or discourage a potential
acquirer from making a tender offer. Individual shareholders with a minority stake may have limited influence over shareholder
matters. See &ldquo;Risk Factors &mdash; Purchasers in the offering will suffer immediate and substantial dilution if our Option
Shareholders exercise their Preferred Options&rdquo; for a further discussion of the Preferred Options.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, as previously disclosed, in September 2016, our
founding shareholders, or Option Shareholders, were granted 24,634,550 options to acquire our preferred stock, or Preferred Options.
The number of Preferred Options granted was based upon the number of shares held by the Option Shareholders at that time.&nbsp;
The Preferred Options are nontransferable and forfeited upon the sale of the related founding shares of common stock.&nbsp; Upon
the occurrence of the Vensure Asset Sale in January 2020, the Option Shareholders could exercise each Preferred Option to purchase
one share of our preferred stock for $0.0001 per share.&nbsp; Through July 24, 2020, a total of 12,709,030 Preferred Options were
exercised and converted into common stock. On June 4, 2020, Scott W. Absher, our Chief Executive Officer, exercised 12,500,000
Preferred Options to purchase 12,500,000 shares of our preferred stock for an aggregate purchase price of $1,250.&nbsp; Immediately
following the exercise of the Preferred Options described above, Mr. Absher elected to convert the 12,500,000 shares of preferred
stock into 12,500,000 shares of common stock, which are subject to a 24-month lock-up period during which such shares may not be
traded. In July 2020, an additional 209,030 Preferred Options were exercised and converted into 209,030 shares of common stock,
which are unregistered and subject to a six-month lock up period during which such shares may not be traded on the open market.
As of the date of this prospectus, the outstanding Preferred Options are exercisable to purchase up to 11,925,520 shares of preferred
stock which are convertible into an equal number of shares of our common stock. As stated above, the amount of the Preferred Options,
and the number of shares of preferred stock issuable upon exercise of such options, is based upon the number of shares of common
stock held by the Option Shareholders at the time the Preferred Options were issued. Accordingly, in order to confirm the original
intent of the granting of up to 50,000,000 Preferred Options to Messrs. Absher and Holmes, at some point in the future we intend
to adopt a second grant of Preferred Options granting an additional 12,500,000 Preferred Options to each of Messrs. Absher and
Holmes whereby each option permits the holder to acquire one share of our preferred stock for $0.0001 per share. Each share of
preferred stock will be convertible into common stock on a one-for-one basis. See &ldquo;Risk Factors&mdash; Purchasers in the
offering will suffer immediate and substantial dilution if our Option Shareholders exercise their Preferred Options&rdquo; for
a further discussion of the Preferred Options.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We have a significant number of outstanding
warrants which may cause&nbsp;significant dilution&nbsp;to our shareholders, have a material adverse impact on the market price
of our common stock and make it more difficult for us to raise funds through future equity offerings.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As of&nbsp;July 24,
2020, we had 16,816,686 shares of common stock issued and outstanding. In addition, as of that date we had outstanding warrants
to acquire up to 1,896,209 shares of common stock. The issuance of shares of common stock upon the exercise of warrants would
dilute the percentage ownership interest of all shareholders, might dilute the book value per share of our common stock and would
increase the number of our publicly traded shares, which could depress the market price of our common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition to the
dilutive effects described above, the perceived risk of dilution as a result of the significant number of outstanding warrants
may cause our common shareholders to be more inclined to sell their shares, which would contribute to a downward movement in the
price of our common stock. Moreover, the perceived risk of dilution and the resulting downward pressure on our common stock price
could encourage investors to engage in short sales of our common stock, which could further contribute to price declines in our
common stock. The fact that our shareholders and warrant holders can sell substantial amounts of our common stock in the public
market, whether or not sales have occurred or are occurring could make it more difficult for us to raise additional funds through
the sale of equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate, or at
all.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>If we are unable to continue to meet
the listing requirements of Nasdaq, our common stock will be delisted.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our common stock currently trades on Nasdaq, where it is subject
to various listing requirements. During Fiscal 2020, prior to effecting the 1 for 40 reverse stock split in December 2019 and which
is described in this prospectus, we were notified by Nasdaq that we were not in compliance with certain of these listing requirements,
and that failure to correct these deficiencies would result in delisting. We were able to address Nasdaq&rsquo;s concerns, and
have been assured by Nasdaq that we are currently in full compliance with all of its listing requirements. If we are not able to
meet Nasdaq&rsquo;s listing standards in the future, we could be subject to suspension and delisting proceedings. A delisting of
our common stock and our inability to list on another national securities market could negatively impact us by: (i) reducing the
liquidity and market price of our common stock; (ii) reducing the number of investors willing to hold or acquire our common stock,
which could negatively impact our ability to raise equity financing; (iii) limiting our ability to use a registration statement
to offer and sell freely tradable securities, thereby preventing us from accessing the public capital markets; and (iv) impairing
our ability to provide equity incentives to our employees.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>There is no public market for the
purchase warrants or pre-funded warrants being offered in this offering.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>




<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">There is no established
public trading market for the purchase warrants or pre-funded warrants being offered in this offering, and we do not expect a market
to develop. In addition, we do not intend to apply to list the purchase warrants or pre-funded warrants on any securities exchange
or nationally recognized trading system, including Nasdaq. Without an active market, the liquidity of the purchase warrants and
pre-funded warrants will be limited.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Our board of directors and our shareholders
recently approved an amendment to our Articles of Incorporation to add conversion rights to our preferred stock that would be dilutive
to the purchasers and current holders of our common stock.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our board of directors
and our shareholders recently approved an amendment to the rights of our preferred stock to provide for its conversion into our
common stock on a one-for-one basis. The purchase price for such preferred stock was set at $0.0001 per share of preferred stock.
The conversion of the preferred stock to common stock had an immediate dilutive effect on our then current shareholders. On June
4, 2020, one of our Option Shareholders, Scott W. Absher, exercised 12,500,000 options into preferred stock, and subsequently converted
the preferred stock into an equal number of shares of our common stock. As of the date of this prospectus, one of our Option Shareholders,
Stephen Holmes, has Preferred Options which are exercisable to purchase up to 11,790,000 shares of our preferred stock, which are
convertible into an equal number of shares of common stock. See &ldquo;Risk Factors&mdash; Purchasers in the offering will suffer
immediate and substantial dilution if our Option Shareholders exercise their Preferred Options&rdquo; for a further discussion
of the Preferred Options.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Our share price may be volatile,
which could subject us to securities class action litigation and prevent you from being able to sell your shares at or above the
offering price.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our stock could be
subject to wide fluctuation in response to many risk factors listed in this section and others beyond our control, including:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Market acceptance and commercialization of our products;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Our being able to timely demonstrate achievement of milestones, including those related to revenue
generation, cost control, cost effective source supply and regulatory approvals;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Regulatory developments or enforcement actions in the United States and other countries with respect
to our products or our competitors&rsquo; products;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Failure to achieve pricing acceptable to the market;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Actual or anticipated fluctuations in our financial condition and operating results, or our continuing
to sustain operating losses;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Competition from existing products or new products that may emerge;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Announcements by us or our competitors of significant acquisitions, strategic partnerships, joint
ventures, collaborations or capital commitments;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Failure of securities analysts to maintain coverage of us, changes in financial estimates by securities
analysts who follow us, or our failure to meet these estimates or the expectations of investors;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Rumors and market speculation involving us or other companies in our industry;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">The financial projections we may provide to the public, any changes in those projections, or our
failure to meet those projections;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Actual or anticipated developments in our business, our competitors&rsquo; businesses or the competitive
landscape generally;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Litigation involving us, our industry, or both, or investigations by regulators into our operations
or those of our competitors;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Changes in accounting standards, policies, guidelines, interpretations or principles;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Announcement or expectation of additional financing efforts, particularly if our cash available
for operations significantly decreases;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Fluctuations in the valuation of companies perceived by investors to be comparable to us;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Share price and volume fluctuations attributable to inconsistent trading volume levels of our stock;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Additions or departures of key management personnel;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Disputes or other developments related to proprietary rights, including patents, litigation matters
and our ability to obtain patent protection for our technologies;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Sales of our common stock by us, our insiders, or our other shareholders;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Market conditions for stocks in general; and</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">General economic and market conditions unrelated to our performance.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Furthermore, the stock
markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity
securities of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance of
those companies. These broad market and industry fluctuations, as well as general economic, political, and market conditions such
as recessions, interest rate changes or international currency fluctuations, may negatively impact the market price of shares of
our common stock. In addition, such fluctuations could subject us to securities class action litigation, which could result in
substantial costs and divert our management&rsquo;s attention from other business concerns, potentially resulting in serious harm
to our business. Also, if the market price of shares of our common stock after this offering does not exceed the offering price,
you may not realize any return on your investment in us and may lose some or all of your investment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>If securities or industry analysts
do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could
decline.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The trading market
for our common stock is impacted by the research and reports that securities or industry analysts publish about us or our business.
We do not have any control over these analysts. We cannot assure that analysts will continue to cover us or provide favorable coverage.
If one or more of the analysts who cover us downgrade our stock or change their opinion of our stock, our share price would likely
decline. If one or more of these analysts cease coverage of us or fail to regularly publish reports on us, we could lose visibility
in the financial markets, which could cause our stock price or trading volume to decline.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We have broad discretion in the use
of the net proceeds from this offering and may not use them effectively.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We currently intend
to allocate the net proceeds that we will receive from this offering as described in this prospectus under the &ldquo;Use of Proceeds&rdquo;
section of this prospectus. However, our management will have broad discretion in the actual application of the net proceeds, and
we may elect to allocate proceeds differently from that described herein if we believe it would be in our best interest to do so.
Our shareholders may not agree with the manner in which our management chooses to allocate and spend the net proceeds. The failure
by our management to apply these funds effectively could have a material adverse effect on our business. Pending their use, we
may invest the net proceeds from this offering in a manner that does not produce income or that loses value.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Future sales, or the possibility
of future sales, of a substantial number of shares of our common stock could adversely affect the price of the shares and dilute
shareholders.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Future sales of a substantial
number of shares of our common stock, or the perception that such sales will occur, could cause a decline in the market price of
our common stock. This is particularly true if we sell our stock at a discount. In addition, in connection with this offering,
our directors and executive officers entered into lock-up agreements. If, after the end of such lock-up agreements, these shareholders
sell substantial amounts of shares of our common stock in the public market, or the market perceives that such sales may occur,
the market price of our common stock and our ability to raise capital through an issue of equity securities in the future could
be adversely affected.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, in the
future, we may issue additional shares of common stock or other equity or debt securities convertible into common stock in connection
with a financing, acquisition, litigation settlement, employee arrangements or otherwise. Any such issuance could result in substantial
dilution to our existing shareholders and could cause our common share price to decline.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Holders of the purchase warrants
and pre-funded warrants purchased in this offering will have no rights as common shareholders until such holders exercise their
purchase warrants or pre-funded warrants and acquire our common stock.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Until holders of purchase
warrants or pre-funded warrants acquire shares of our common stock upon exercise of the purchase warrants or pre-funded warrants,
holders of purchase warrants and pre-funded warrants will have no rights with respect to the shares of our common stock underlying
such purchase warrants or pre-funded warrants. Upon exercise of the purchase warrants and pre-funded warrants, the holders will
be entitled to exercise the rights of a common shareholder only as to matters for which the record date occurs after the exercise
date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We have not paid cash dividends in
the past and do not expect to pay dividends in the future. Any return on investment may be limited to the value of our common stock,
which may decrease in value.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have never paid
cash dividends on our common stock and do not anticipate doing so in the foreseeable future. The payment of dividends on our common
stock will depend on earnings, financial condition and other business and economic factors affecting us at such time as our board
of directors may consider relevant. If we do not pay dividends, our common stock may be less valuable because a return on your
investment will only occur if our stock price appreciates.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>If we do not maintain a current and
effective prospectus relating to the common stock issuable upon exercise of the purchase warrants or pre-funded warrants, public
holders will only be able to exercise such purchase warrants or pre-funded warrants on a &ldquo;cashless basis.&rdquo;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If we do not maintain
a current and effective prospectus relating to the shares of common stock issuable upon exercise of the purchase warrants or pre-funded
warrants at the time that holders wish to exercise such warrants, they will only be able to exercise them on a &ldquo;cashless
basis.&rdquo; As a result, the number of shares of common stock that holders will receive upon exercise of the purchase warrants
or pre-funded warrants will be fewer than it would have been had such holders exercised their purchase warrants or pre-funded for
cash. Under the terms of the purchase warrants and pre-funded warrants, we have agreed to use our best efforts to maintain a current
and effective prospectus relating to the shares of common stock issuable upon exercise of such warrants until the expiration of
such warrants. However, we cannot assure you that we will be able to do so. If we are unable to maintain a current and effective
prospectus, the potential &ldquo;upside&rdquo; of the holder&rsquo;s investment in our company may be reduced.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>The purchase warrants may not have
any value.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Each purchase warrant
will have an exercise price of not less than 110% of the last reported sale price of our common stock as of the close of the
trading day immediately preceding the pricing of this offering and will expire on the fifth anniversary of the date they first
become exercisable. In the event our common stock price does not exceed the exercise price of the purchase warrants during the
period when the warrants are exercisable, the purchase warrants may not have any value.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Provisions of the purchase warrants
or pre-funded warrants offered by this prospectus could discourage an acquisition of us by a third party.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Certain provisions
of the purchase warrants or pre-funded warrants offered by this prospectus could make it more difficult or expensive for a third
party to acquire us. The purchase warrants and pre-funded warrants prohibit us from engaging in certain transactions constituting
&ldquo;fundamental transactions&rdquo; unless, among other things, the surviving entity assumes our obligations under the pre-funded
warrants. Further, the pre-funded warrants provide that, in the event of certain transactions constituting &ldquo;fundamental transactions,&rdquo;
with some exception, holders of such warrants will have the right, at their option, to require us to repurchase such purchase warrants
or pre-funded warrants at a price described in such warrants. These and other provisions of the purchase warrants or pre-funded
warrants offered by this prospectus could prevent or deter a third party from acquiring us even where the acquisition could be
beneficial to you.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>The exercise price of the purchase
warrants or pre-funded warrants offered by this prospectus will not be adjusted for certain dilutive events.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The exercise price
of the purchase warrants or pre-funded warrants offered by this prospectus is subject to adjustment for certain events, including,
but not limited to, certain issuances of capital stock, options, convertible securities and other securities. However, the exercise
prices will not be adjusted for dilutive issuances of securities considered &ldquo;excluded securities&rdquo; and there may be
transactions or occurrences that may adversely affect the market price of our common stock or the market value of such purchase
warrants or pre-funded warrants without resulting in an adjustment of the exercise prices of such purchase warrants or pre-funded
warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We are an &ldquo;emerging growth
company&rdquo; as that term is used in the JOBS Act, and we intend to continue to take advantage of reduced disclosure and governance
requirements applicable to emerging growth companies, which could result in our common stock being less attractive to investors
and adversely affect the market price of our common stock or make it more difficult to raise capital as and when we need it.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>




<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are an &ldquo;emerging
growth company&rdquo; as that term is used in the JOBS Act, and we intend to continue to take advantage of certain exemptions from
various reporting requirements that are applicable to other public companies that are not emerging growth companies including,
but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley
Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, exemptions from
the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute
payments not previously approved, and exemptions from any rules that the Public Company Accounting Oversight Board may adopt requiring
mandatory audit firm rotation or a supplement to the auditor&rsquo;s report on the financial statements. We currently take advantage
of some, but not all, of the reduced regulatory and reporting requirements that are available to us under the JOBS Act, and intend
to continue to do so as long as we qualify as an &ldquo;emerging growth company.&rdquo; For example, so long as we qualify as an
&ldquo;emerging growth company,&rdquo; we may elect not to provide you with certain information, including certain financial information
and certain information regarding compensation of our executive officers, that we would have otherwise been required to provide
in filings we make with the SEC, which may make it more difficult for investors and securities analysts to evaluate us.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We cannot predict if
investors will find our common stock less attractive because we will rely on these exemptions. If some investors find our common
stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more
volatile. We may take advantage of these reporting exemptions until we are no longer an emerging growth company, which in certain
circumstances could be for up to five years. See &ldquo;Prospectus Summary &mdash; Implications of Being an Emerging Growth Company.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Because of the exemptions
from various reporting requirements provided to us as an &ldquo;emerging growth company,&rdquo; we may be less attractive to investors
and it may be difficult for us to raise additional capital as and when we need it. Investors may be unable to compare our business
with other companies in our industry if they believe that our financial accounting is not as transparent as other companies in
our industry. If we are unable to raise additional capital as and when we need it, our business, results of operations, financial
condition and cash flows, and future prospects may be materially and adversely affected.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Risks Relating to Our Business </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We have limited operating history,
which makes it difficult for us to evaluate our future business prospects and make decisions based on those estimates of our future
performance.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are an emerging business and are in
the process of developing our products and services. We have been in business since July 2015. Although we processed gross billings
of over $350 million for Fiscal 2019, (approximately 88% of which was attributable to clients that we sold the rights to in January
2020), it is still difficult, if not impossible, to forecast our future results based upon our limited historical operating data.
Because of the related uncertainties, we may be hindered in our ability to anticipate and timely adapt to increases or decreases
in sales, revenues or expenses. If we make poor budgetary decisions as a result of unreliable data, our gross billings in the future
may decline, which may result in a decline in our stock price.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">There is uncertainty
regarding our ability to implement our business plan and to grow our business to a greater extent than we can with our existing
financial resources without additional financing. Except from the proceeds of our May 2020 public offering and subsequent overallotments
($10.3 million net of costs and $1.2 million net of costs, respectively), our initial public offering ($11.2 million net of costs)
and our recent private placements of senior secured convertible notes to institutional investors raising $13 million of gross proceeds
($11.9 million net of costs), we have no binding agreements, commitments or understandings to secure additional financing at this
time. We have no binding agreements, commitments or understandings to acquire any other businesses or assets. Our long-term future
growth and success are dependent upon our ability to generate cash from operating activities. There is no assurance that we will
be able to generate sufficient cash from operations, to borrow additional funds or to raise additional equity capital. Our inability
to obtain additional cash could have a material adverse effect on our ability to fully implement our business plan as described
herein and grow our business to a greater extent than we can with our existing financial resources.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>The COVID 19 pandemic might create
additional liabilities, risks and exposures which could negatively impact our current business, growth prospects and cash flows,
and future profitability, while also requiring us to increase our workers&rsquo; compensation reserve to protect against additional
liabilities all of which could negatively impact our ability to raise additional capital.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our business has been
significantly impacted by the COVID-19 pandemic. Our employee billings per capita have decreased more than 20% from pre-pandemic
reporting periods. In particular, most of our clients are in the restaurant and hospitality business sector and concentrated in
Southern California. The vast majority of these clients have been negatively impacted by the lockdown measures imposed in the State
of California since March, which have required them to limit hours of operation, eliminate in-person dining, restrict food services
to takeout and delivery, and, in some cases, cease operations altogether. Although lockdown measures were relaxed somewhat throughout
Southern California beginning in May 2020, the Governor reinstated many of these restrictions on July 13, 2020, in response to
a surge in the number of COVID-19 cases reported throughout the state. As long as these directives remain in place, they are likely
to negatively impact our clients&rsquo; business and operations, which, in turn, will likely have a negative impact on our business
prospects and operating results.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>




<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Further, our workers&rsquo;
compensation policy limits our liability to $500,000. Accordingly, our profitability depends on collecting sufficient premium payments
to offset this potential liability to be profitable. In March 2020, the Governor of the State of California issued Executive Order
N-62-20, which creates a rebuttable presumption for workers&rsquo; compensation claims that an employee&rsquo;s COVID-19 related
illness arose out of the course of their employment if (i) such infection occurred between March 19 and July 5, 2020, and (ii)
the employee was diagnosed with COVID-19 or tested positive within 14 days after performing work for the employer at a location
other than the employee&rsquo;s home. While we have not observed direct additional expenses as a result of any such claims at present,
our workers&rsquo; compensation rates have increased significantly since the beginning of the pandemic. We have also increased
our workers&rsquo; compensation reserve estimates for the quarter ended May 31, 2020 and we continue to closely monitor all workers&rsquo;
compensation claims made during the COVID-19 pandemic. While we believe that the steps we have taken to date are sufficient to
protect against any increased level of workers&rsquo; compensation claims related to the pandemic, there can be no guarantee that
this will be the case, or that our premium collections will be sufficient to offset our liabilities and achieve profitability should
such an increase in claims materialize in the future.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We maintain limited self-insurance
for the workers&rsquo; compensation services that we provide to our clients. If we experience claims in excess of our collected
premiums, we might incur additional losses, higher costs, and reduced margins, resulting in a need for more liquidity.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are responsible
for and pay workers&rsquo; compensation costs for our shift workers. As noted above, we are currently self-insured for up to $500,000
per occurrence and we purchase reinsurance for claims in excess of $500,000. Our workers&rsquo; compensation billings are designed
to cover expected claims based on insurance annuity calculations. These calculations are based on our limited operating history
and claims experiences due to our limited operating history. At times, these costs have risen substantially as a result of increased
claims and claim trends, general economic conditions, changes in business mix, increases in healthcare costs, and government regulations.
Although we carry insurance and believe that we currently have reserves sufficient to insulate us against projected losses, any
unexpected changes in claim trends, including the severity and frequency of claims, actuarial estimates, and medical cost inflation,
could result in costs that increase significantly above current projections. If future claims-related liabilities increase due
to unforeseen circumstances, or if new laws, rules, or regulations are implemented, costs could increase significantly. There can
be no assurance that we will be able to increase the fees charged to clients in a timely manner and in a sufficient amount to cover
increased costs as a result of any changes in claims-related liabilities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Our business, results of operations
and financial condition have been and will likely continue to be materially adversely impacted in the event of a widespread public
health epidemic, including the&nbsp;recent COVID-19&nbsp;outbreak.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our business, results
of operations and financial condition have been, and will likely continue to be, materially adversely affected by any widespread
public health epidemics, such as the COVID-19 outbreak first identified in Wuhan, China in December 2019. On March 11, 2020, the
World Health Organization declared COVID-19 a pandemic disease. Potential impacts of the spread of COVID-19 include disruptions
or restrictions on our employees&rsquo; and WSEs&rsquo; ability to travel, and temporary closures of our clients&rsquo; facilities.
For example, many of our WSEs perform services in the restaurant and hospitality industries, which have experienced significant
declines in traffic since early March 2020. Various states and municipalities throughout the United States have since declared
a state of emergency and imposed substantial restrictions on movement, required restaurants, bars and hotels to close, and advised
people not to patronize restaurants or bars or otherwise engage in non-essential travel. In some areas, residents have been instructed
to shelter in place to reduce the spread of COVID-19, resulting in many restaurants either closing or limiting their operations
to take-out and delivery service. Similarly, travel and tourism across the globe have significantly decreased, causing a significant
number of temporary hotel closures and furloughed employees.&nbsp; Given that most of our clients are businesses in the hospitality
and restaurant industry, our results of operations are likely to continue to be negatively impacted as long as restrictions arising
from the COVID-19 pandemic continue.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Additionally, our headquarters
are located in Irvine, CA in Orange County, a region that has seen a recent rise of confirmed cases of COVID-19. We are continuing
to monitor and assess the effects of the COVID-19 outbreak on our commercial operations, including any potential impact on our
revenue in Fiscal 2020 and beyond. Nevertheless, we cannot at this time predict with any degree of certainty the precise impact
these adverse conditions will ultimately have on our operations due to a variety of unknown factors, including the ultimate geographic
spread of the virus, the severity of the disease, the duration of the outbreak, and the length of time that travel restrictions
and business closures imposed by the governments of impacted countries remain in place. Further, any future significant outbreak
of contagious diseases could result in a widespread health crisis that could adversely affect the economies and financial markets
of many countries, resulting in an economic downturn that could affect demand for our products and likely negatively impact our
operating results.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>There is substantial doubt as to
our ability to continue as a going concern. </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of May 31, 2020, we had cash of $10.8 million and a working
capital surplus of $3.4 million. During Fiscal 2019, we used approximately $2.1 million of cash in operations, consisting of $9.5
million used in our continuing operations, less $7.4 million that was provided by our discontinued operations. We also used an
additional $1.2 million on capitalized software and fixed asset purchases.&nbsp;On January 3, 2020, we received $9.7 million in
sale proceeds in connection with the Vensure Asset Sale, and expect to receive an average of approximately $0.2 million per month
for four years thereafter.&nbsp;Through February 29, 2020 we had received additional proceeds from working capital of $1.0 million
from the Vensure Asset Sale subsequent to closing. During the nine months ended May 31, 2020, we used approximately $10.5 million
of cash in operations and repaid $1.2 million of convertible notes after receiving $10.7 million a total of cash through that date
from the Vensure Asset Sale. The COVID-19 pandemic has also slowed our growth through decreased customer billings and increased
our risk profile on our workers&rsquo; compensation policies provided to our customers. These conditions raise substantial doubt
as to our ability to continue as going concern, and our independent registered public accounting firm has included an explanatory
going concern qualification in its audit report for Fiscal 2019. Management has prepared a liquidity plan to address the going
concern issue and, while we believe that these liquidity plan measures will be adequate to satisfy our requirements for at least
the next twelve months from the date of issuance of the May 31, 2020 financial statements, there is no assurance that our plan
will be successfully implemented. Failure to successfully implement the liquidity plan might have a material adverse effect on
our business, results of operations and financial condition, and might adversely affect our ability to continue as a going concern.
If we do not become consistently profitable, our accumulated deficit will grow larger, our cash balances will decline further,
and we will require additional financing to continue operations. Any such financing may not be accessible on acceptable terms,
if at all. If we cannot generate sufficient cash or obtain additional financing, we might be required to downsize our business
further or discontinue our operations altogether.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Our success depends on adoption of
our products and services by our various types of customers. If these potential customers do not accept and acquire our products
and services, then our revenue will be severely limited.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The major customer
groups to whom we believe our products and services will appeal, (i.e. both employers and employees who rely upon shift work),
may not embrace our products and services. Acceptance of our products and services will depend on several factors, including: cost,
ease of use, familiarity of use, convenience, timeliness, strategic partnerships, and reliability. If we fail to adequately meet
our customers&rsquo; needs and expectations, our product offerings may not be competitive and our ability to commence or continue
generating revenues could be reduced. We also cannot be sure that our business model will gain wide acceptance among all targeted
customer groups. If the market fails to continue to develop, or develops more slowly than we expect, our ability to continue generating
revenues could be reduced.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We assume the obligation to make
wage, tax, and regulatory payments for WSEs, and, as a result, are exposed to client credit risks.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Under the Contract
Service Agreement, we become a co-employer of WSEs and assume the obligations to pay their salaries, wages and related benefits
costs and payroll taxes. We assume such obligations as an agent, not as a principal, of the client. Our obligations include responsibility
for:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">payment of the salaries and wages for work performed by WSEs, regardless of whether the client
timely pays us the associated service fee; and</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">withholding and payment of federal and state payroll taxes with respect to wages and salaries reported
by us.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If a client does not
pay us, our ultimate liability for WSE payroll and benefits costs could have a material adverse effect on our financial condition
or results of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>If we are unable to effectively manage
growth and maintain low operating costs, our results of operations and financial condition may be adversely affected.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have experienced
rapid growth since our inception, and our plans contemplate significant expansion of our business. If we are unable to manage our
growth effectively, including having geographically dispersed offices and employees or to anticipate and manage our future growth
accurately, our business may be adversely affected. If we are unable to manage our expansion and growth effectively, we may be
unable to keep our operating costs low or effectively meet the requirements of an ever-growing, geographically dispersed client
base. Our business relies on data systems, billing systems and financial reporting and control systems, procedures and controls.
Our success in managing our expansion and growth in a cost-effective manner will require us to upgrade and improve these systems,
procedures and controls. If we are unable to adapt our systems and put adequate controls in place in a timely manner, our business
may be adversely affected. In addition, our growth may place significant demands on our management, and our overall operational
and financial resources. A failure on our part to meet any of the foregoing challenges inherent in our growth strategy may have
an adverse effect on our results of operations and financial condition.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Our targeted customer base is diverse,
and we face a challenge in adequately meeting each group&rsquo;s needs.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Because we serve both
employers and employees, we must work constantly to understand the needs, standards and requirements of each group and must devote
significant resources to developing products and services for their interests. If we do not accurately predict our customers&rsquo;
needs and expectations, we may expend valuable resources in developing products and services that do not achieve broad acceptance
across the markets, and we may fail to grow our business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>




<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We face intense competition across
all markets for our services, which may lead to lower revenue or operating margins. Competing forms of Gig Economy oriented staffing
management products and services may be more desirable to consumers or may make our products and services obsolete.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our competitors range
in size from diversified global companies with significant research and development resources to small, specialized firms whose
narrower service lines may let them be more effective in deploying technical, marketing, and financial resources. Barriers to entry
in many of our businesses are low and many of the areas in which we compete evolve rapidly with changing and disruptive technologies,
shifting user needs, and frequent introductions of new products and services. Our ability to remain competitive depends on our
success in making innovative products, devices, and services that appeal to customers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Companies compete with
us based on a growing variety of business models. The competitive pressures described above may cause decreased sales volumes,
price reductions, and/or increased operating costs, such as for research and development, marketing, and sales incentives. This
may lead to lower revenue, gross margins, and operating income.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">There are currently
several different competing Gig Economy oriented staffing management product and service technologies that are being marketed to
our potential customers. Further development of any of these technologies may lead to advancements in technology that will make
our products and services obsolete. Consumers may prefer alternative technologies and products and services. We cannot guarantee
that users of Gig Economy oriented staffing management products and services who will be using our products and services will continue
to grow within the industry as a whole. Any developments that contribute to the obsolescence of our products and services may substantially
impact our business, reducing our ability to generate or sustain revenues.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Providing specialized Gig Economy
oriented staffing management products and services is an emerging yet competitive business, and many of our competitors have greater
resources that may enable them to compete more effectively.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We will compete in
the same markets with many companies that offer not only staffing management products and services focused on the Gig Economy but
also more traditional staffing management products and services. There are limited barriers to entry. Price competition in the
industry, particularly from larger, more traditional industry model competitors, is intense, and pricing pressures from competitors
and clients are increasing. New competitors entering our markets may further increase pricing pressures.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have observed that
clients sometimes competitively bid new contracts, which is a trend that we expect to continue for the foreseeable future. Some
of our competitors have greater resources than we do, which may enable them to compete more effectively in this market. Our competitors
may devote their resources to developing and marketing products and services that will directly compete with our product lines,
and new, more efficient competitors may enter the market. If we are unable to successfully compete with existing companies and
new entrants to the market, it will have a negative impact on our business and financial condition.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We operate in an immature and rapidly
evolving industry and have a relatively new business model, which makes it difficult to evaluate our business and prospects.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The industry in which
we operate is characterized by rapidly changing regulatory requirements, evolving industry standards and shifting user and client
demands. Our business model is also evolving and is different from models used by other companies in our industry. As a result
of these factors, the success and future revenue and income potential of our business is uncertain. Any evaluation of our business
and our prospects must be considered in light of these risks and uncertainties, some of which relate to our ability to:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Expand employer and employee client relationships;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Increase the number of our employer clients and grow a WSE base;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Develop relationships with third-party vendors such as insurance companies;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Expand operations and implement and improve our operational, financial and management controls;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Raise capital at attractive costs, or at all;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Attract and retain qualified management, employees and independent service providers;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Successfully introduce new processes, technologies products and services, and upgrade our existing
processes, technologies, products and services;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Protect our proprietary processes and technologies and our intellectual property rights; and</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Respond to government regulations relating to the internet, personal data protection, email, software
technologies, cyber security and other regulated aspects of our business.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If we are unable to
successfully address the challenges posed by operating in an immature and rapidly evolving industry and having a relatively new
business model, our business could suffer.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We have claims and lawsuits against
us that may result in adverse outcomes</I>.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are subject to a
variety of claims and lawsuits. These claims arise from a wide variety of business practices, significant business transactions,
operational claims, and employment practices. Adverse outcomes in some or all of these claims may result in significant monetary
damages or injunctive relief that could adversely affect our ability to conduct our business. Such litigation and other claims
are subject to inherent uncertainties and management&rsquo;s view of these matters may change in the future. A material adverse
impact on our consolidated financial statements could occur for the period in which the effect of an unfavorable outcome becomes
probable and reasonably estimable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We have identified material weaknesses
in our internal control over financial reporting. If our internal control over financial reporting is not effective, we may not
be able to accurately report our financial results or file our periodic reports in a timely manner, which may cause adverse effects
on our business and may cause investors to lose confidence in our reported financial information and may lead to a decline in stock
price.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Effective internal
control over financial reporting is necessary in order to provide reliable financial reports in a timely manner. In connection
with the audit of our consolidated financial statements for Fiscal 2019, we concluded that there were material weaknesses in our
internal control over financial reporting relating to our IT environment, controls over cut-off procedures, a related party transaction,
accounting for certain litigation accruals, segregation of duties and corporate oversight functions. A material weakness is a deficiency,
or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that
a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If we are unable to
successfully remediate our material weaknesses or identify any future significant deficiencies or material weaknesses, the accuracy
and timing of our financial reporting may be adversely affected, a material misstatement in our consolidated financial statements
could occur, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports,
which may adversely affect our business and our stock price may decline as a result. In addition, even if we remediate our material
weaknesses, we will be required to expend significant time and resources to further improve our internal controls over financial
reporting, including by further expanding our finance and accounting staff to meet the demands that are placed upon us as a public
company, including the requirements of the Sarbanes-Oxley Act. If we fail to adequately staff our accounting and finance function
to remediate our material weaknesses, or fail to maintain adequate internal control over financial reporting, any new or recurring
material weaknesses could prevent us from concluding our internal control over financial reporting is effective and impair our
ability to prevent material misstatements in our consolidated financial statements, which could cause our business to suffer.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>If we are unable to secure or pay
for the insurance coverage required for our business operations, or if we lose any existing coverage, we may not be able to offer
some of our services and our revenues could be reduced.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We are required to obtain and maintain various types of insurance
coverage for our business, in particular health and workers&rsquo; compensation insurance related to our co-employment of WSEs.
Although we have contracts with all types of providers currently necessary for our business, if in the future we are unable to
secure the insurance coverage required for our business operations, or if we lose any existing coverage, we may not be able to
offer some of our services and our revenues could be reduced. In addition, any increases in the cost of insurance coverage we are
required to maintain could reduce our profitability (or increase our net losses).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We may be subject to penalties and
interest payable on taxes as a result of data entry into our software or manual error.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our input of data
in our tax processing software must be entered properly to process the data and payments correctly with regard to clients, co-employees
and applicable tax agencies. If we input incorrect data or input accurate data incorrectly, we could inadvertently overbill or
underbill our clients or overpay or underpay applicable taxes, resulting in the loss of net income and/or clients and/or the incurrence
of tax penalties and interest. Despite our efforts to reconcile taxes on a monthly basis, we may incur additional taxes, penalties
and interest for which we may or may not bill our clients.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Our ability to adjust and collect
service fees for increases in unemployment tax rates may be limited.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We record our
State Unemployment Tax (&ldquo;SUI&rdquo;) expense based on taxable wages and tax rates assigned by each state. SUI tax rates
vary by state and are determined, in part, based on prior years&rsquo; compensation experience in each state. Prior to the
receipt of final tax rate notices, we estimate our expected SUI tax rate in those states for which tax rate notices have not
yet been received for purposes of pricing. In a period of adverse economic conditions state unemployment funds may experience
a significant increase in the number of unemployment claims. Accordingly, SUI tax rates would likely increase substantially.
Some states have the ability under law to increase SUI tax rates retroactively to cover deficiencies in the unemployment
fund.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, taxes
under the Federal Unemployment Tax Act (&ldquo;FUTA&rdquo;) may be retroactively increased in certain states in the event the state
fails to timely repay federal unemployment loans. Employers in such states are experiencing higher FUTA tax rates as a result of
not repaying their unemployment loans from the federal government in a timely manner. The credit reduction is an additional tax
on the FUTA wage base for employers in states that continue to have outstanding federal unemployment insurance loans beginning
with the fifth year in which there is a balance due on the loan. States have the option to apply for a waiver before July 1st of
the year in which the credit reduction is applicable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Generally, our contractual
agreements allow us to incorporate such statutory tax increases into our service fees upon the effective date of the rate change.
However, our ability to fully adjust service fees in our billing systems and collect such increases over the remaining term of
the clients&rsquo; contracts could be limited, resulting in a potential tax increase not being fully recovered. As a result, such
increases could have a material adverse effect on our financial condition or results of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Risks Relating to Technology</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We collect, use, transmit and store
personal and business information with the use of data service vendors, and a security or privacy breach may damage or disrupt
our businesses, result in the disclosure of confidential information, damage our reputation, increase our costs or cause losses.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In connection with
our business, we collect, use, transmit and store with data services vendors large amounts of personal and business information
about our clients and shift employees, including payroll information, healthcare information, personal and limited business financial
data, social security numbers, bank account numbers, tax information and other sensitive personal and business information. In
addition, as we continue to grow the scale of our business, we will process and store with data services vendors an increasing
volume of personally identifiable information of our users. Our data services vendors include PrismHR, Amazon Web Services, Microsoft
OneDrive, ShareFile, Dropbox, Egnyte, Smartsheet, MasterTax, Microsoft Outlook, Microsoft Office 365, and RightSignature. We believe
these vendors implement industry standard or more stringent data security measures to protect the data that we transmit through
and/or store with them. Despite our efforts to protect customer data, perceptions that the collection, use, and storage of personal
information are not satisfactorily protected could inhibit sales and limit adoption of our services. In addition, the continued
occurrence of high-profile data breaches provides evidence of an external environment increasingly hostile to information security.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are focused on ensuring
that our operating environments safeguard and protect personal and business information, and we will devote significant resources
to maintaining and regularly updating our systems and processes. The cost to maintain these safeguards is significant and may increase
as we grow, which may limit our ability to employ our resources elsewhere and slow our ability to grow. Despite our efforts to
maintain security controls across our business, it is possible our security controls over personal data, our training of employees
and vendors on data security, and other practices we follow may not prevent the improper disclosure of customer data that we or
our vendors store and manage. In addition, attacks on information technology systems continue to grow in frequency, complexity
and sophistication, and we may be targeted by unauthorized parties using malicious tactics, code and viruses.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We engage third party
contractors who monitor our activities in a manner designed to prevent, detect and respond to data security incidents. However,
because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and
may be difficult to detect for long periods of time, we may be unable to anticipate these techniques or implement adequate preventive
measures. In addition, hardware, software, or applications we develop or procure from third-parties may contain defects in design
or manufacture or other problems that could unexpectedly compromise the confidentiality, integrity or availability of data or our
systems. Unauthorized parties may also attempt to gain access to our systems or facilities, or those of third-parties with whom
we do business, through fraud, trickery, or other methods of deceiving our employees, contractors, or temporary staff. As these
threats continue to evolve, we may be required to invest significant additional resources to modify and enhance our information
security and controls or to investigate and remediate any security vulnerabilities. In addition, while our operating environment
is designed to safeguard and protect personal and business information, we do not have the ability to monitor the implementation
of similar safeguards by our clients, vendors or their respective employees, and, in any event, third-parties may be able to circumvent
those security measures.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Any cyber-attack,
unauthorized intrusion, malicious software infiltration, network disruption, denial of service, corruption of data, theft of
non-public or other sensitive information, any similar act by a malevolent party, or inadvertent acts by our own employees,
could result in the disclosure or misuse of confidential or proprietary information, harm our reputation, and could have a
materially adverse effect on our business operations, or that of our clients, create financial liability, result in
regulatory sanction, or generate a loss of confidence in our ability to serve clients or cause current or potential clients
to choose another service provider, or subject us to liability under laws that protect personal data, resulting in increased
costs or loss of revenue. Although we believe that through our third-party contractors we maintain an adequate program of
information security and controls and any threats that we might have encountered to date have not materially impacted us, the
impact of a data security incident could have a materially adverse effect on our business, results of operations and
financial condition. In addition, any further security measures we may undertake to address further protections may cause
higher operating expenses.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are also subject
to various federal and state laws, rules and regulations relating to the collection, use, transmission and security of personal
and business information. In addition, the possession and use of personal information and data in conducting our business subjects
us to laws that may require notification to regulators, clients or employees in the event of a privacy breach and may impose liability
on us for privacy deficiencies, including but not limited to liability under laws that protect the privacy of personal information,
such as the Health Insurance Portability and Accountability Act of 1996 (&ldquo;HIPAA&rdquo;), and regulatory penalties. These
laws continue to develop, the number of jurisdictions adopting such laws continues to increase, and these laws may be inconsistent
from jurisdiction to jurisdiction. The future enactment of more restrictive laws, rules or regulations could have a materially
adverse impact on us through increased costs or restrictions on our businesses and noncompliance could result in regulatory penalties
and significant legal liability. In addition, enforcement actions and investigations by regulatory authorities related to data
security incidents and privacy violations continue to increase.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Some of the activities
in which our shift workers could become involved include health care information-related responsibilities that could invoke the
need for compliance with HIPAA as amended by the Health Information Technology for Economic and Clinical Health Act (the &ldquo;HITECH
Act&rdquo;). The United States Department of Health and Human Services issued regulations that establish uniform standards governing
the conduct of certain electronic health care transactions and protecting the privacy and security of protected health information
used or disclosed by health care providers and other covered entities. Three principal regulations with which we are required to
comply have been issued in final form under HIPAA: privacy regulations, security regulations, and standards for electronic transactions,
which establish standards for common health care transactions. The privacy regulations cover the use and disclosure of protected
health information by health care providers. They also set forth certain rights that an individual has with respect to his or her
protected health information maintained by a health care provider, including the right to access or amend certain records containing
protected health information or to request restrictions on the use or disclosure of protected health information. The security
regulations establish requirements for safeguarding the confidentiality, integrity, and availability of protected health information
that is electronically transmitted or electronically stored. The HITECH Act, among other things, establishes certain health information
security breach notification requirements. A covered entity must notify any individual whose protected health information is breached.
The HIPAA privacy and security regulations establish a uniform federal &ldquo;floor&rdquo; and do not supersede state laws that
are more stringent or provide individuals with greater rights with respect to the privacy or security of, and access to, their
records containing protected health information. These laws contain significant fines and other penalties for wrongful use or disclosure
of protected health information. Additionally, to the extent that we submit electronic health care claims and payment transactions
that do not comply with the electronic data transmission standards established under HIPAA and the HITECH Act, payments to us may
be delayed or denied.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We may be vulnerable to security
breaches that could disrupt our operations and adversely affect our business.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Despite security measures
and business continuity plans, our information technology networks and infrastructure may be vulnerable to damage, disruptions,
or shutdowns due to unauthorized access, computer viruses, cyber-attacks, distributed denial of service, and other security breaches.
An attack on or security breach of our network could result in interruption or cessation of access and services, our inability
to meet our access and service level commitments, and potentially compromise customer data transmitted over our network. We cannot
guarantee that our security measures will not be circumvented, resulting in network failures or interruptions that could impact
our network availability and have a material adverse effect on our business, financial condition, and results. We may be required
to expend significant resources to protect against such threats. If an actual or perceived breach of our security occurs, the market
perception of the effectiveness of our security measures could be harmed, and we could lose customers. Any such events could result
in legal claims or penalties, disruption in operations, misappropriation of sensitive data, damage to our reputation, and/or costly
response measures, which could adversely affect our business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>If we are unable to protect our proprietary
and technology rights our operations will be adversely affected.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our success will depend
in part on our ability to protect our proprietary rights and technologies, including those related to our products and services.
Protecting our intellectual property rights and combating unlicensed copying and use of our software and other intellectual property
is difficult. Except as otherwise noted herein, we have not obtained any formal patent, trademark or similar protection. Our failure
to adequately protect our proprietary rights may adversely affect our operations. Despite our efforts to protect our proprietary
rights, unauthorized parties may attempt to copy aspects of our services or to obtain and use trade secrets or other information
that we regard as proprietary. Based on the nature of our business, we may or may not be able to adequately protect our rights
through patent, copyright and trademark laws. Our means of protecting our proprietary rights in the United States or abroad may
not be <FONT STYLE="font-size: 10pt">adequate, and competitors may independently develop similar technologies. In addition, litigation
may be necessary in the future to:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Enforce
                                         intellectual property rights;</FONT></TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Protect
                                         our trade secrets;</FONT></TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>




<P STYLE="margin-top: 0; margin-bottom: 0"></P>

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<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Determine the validity and scope of the rights of others; or</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Defend against claims of infringement or invalidity.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Any such litigation
could result in substantial costs if we are held to have willfully infringed upon another party&rsquo;s intellectual property,
or to expend significant resources to develop non-infringing technology, and would divert the attention of management from the
implementation of our business strategy. Furthermore, the outcome of any litigation is inherently difficult to predict and we may
not prevail in any litigation in which we become involved.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Software products we use in our business
may contain defects which will make it more difficult for us to establish and maintain customers.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are currently using
PrismHR software for our payroll processing. We also use MasterTax to process our tax reports and filings, and a host of other
software products in the course of conducting our business. The mobile app component of our mobile application, along with the
client portal and the ShiftPixy Command Hub, constitute our proprietary software and contain components that are licensed from
third parties and that constitute public domain software. Our payroll processing software and other software products that we use
in our business, including our mobile application, we use in our business could contain undetected design faults and software errors,
or &ldquo;bugs&rdquo; that are discovered only after they has been installed and used by a significant number of customers. Any
such defect or error in new or existing software or applications could cause delays in delivering our technology or require design
modifications. These developments could adversely affect our competitive position and cause us to lose potential customers or opportunities.
Since our technologies are intended to be utilized to supply human resources related services, the effect of any such bugs or delays
will likely have a detrimental impact on us. In addition, given that our specialized human resources software and services have
yet to gain widespread acceptance in the market, any delays or other problems caused by software bugs would likely have a more
detrimental impact on our business than if we were a more established company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>If a contract relating to our mission
critical software that we use in our business is terminated or not renewed, our business could be seriously disrupted and our revenues
significantly reduced.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If a contract relating
to our mission-critical software services, such as that applicable to payroll and payroll tax processing, is terminated or not
renewed, and we do not have an effective replacement software, our business and revenues will suffer. Although there are other
software vendors we can use, it may take time to negotiate an agreement and make any replacement software operational. Accordingly,
if the software agreements that we use in our business are terminated or not renewed, our business could be seriously disrupted
and our revenues significantly reduced until we locate replacement software and make it operational.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Our systems may be subject to disruptions
that could have a materially adverse effect on our business and reputation.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our business is and
will continue to be highly dependent on our ability to process, on a daily basis, a large number of complicated transactions. We
rely heavily on our payroll, financial, accounting, and other data processing systems. We may not be successful in preventing the
loss of client data, service interruptions or disruptions to our operations from system failures. If any of these systems fail
to operate properly or become disabled even for a brief period of time, we could suffer financial loss, a disruption of our businesses,
liability to clients, regulatory intervention, or damage to our reputation, any of which could have a materially adverse effect
on our results of operation or financial condition.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Because we store data in the cloud
with providers such as Microsoft and Amazon, any disruptions in our ability to access this data or any breach of security concerning
this data in the cloud could have a materially adverse effect on our business and reputation.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our business is and
will continue to be highly dependent on data storage in the cloud with providers such as Microsoft and Amazon. These cloud storage
systems may fail to operate properly or become disabled. There could also be security breaches of our data stored in the cloud.
If there is loss of client data, service interruptions or disruptions to our operations related to our cloud data storage, even
for a brief period of time, we could suffer financial loss, a disruption of our business, liability to clients, regulatory intervention,
or damage to our reputation, any of which could have a materially adverse effect on our results of operation or financial condition.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We make significant investments in
our software that may not meet our expectations.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Developing new technologies
is complex. It can require long development and testing periods. Significant delays in new releases or significant problems in
creating new products or services could adversely affect our revenue.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Third parties may claim we infringe
their intellectual property rights.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>




<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">From time to time,
others claim we infringe their intellectual property rights. The number of these claims may grow because of constant technological
change in the markets in which we compete, the extensive patent coverage of existing technologies and the rapid rate of issuance
of new patents. To resolve these claims, we may enter into royalty and licensing agreements on terms that are less favorable than
currently available, stop selling or redesign affected products or services, or pay damages to satisfy indemnification commitments
to our customers. These outcomes may cause operating margins to decline. Besides money damages, equitable relief is available in
some jurisdictions that, if granted, could limit or eliminate our ability to import, market, or sell our products or services that
contain infringing technologies.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We may not be able to protect our
source code from copying in the event of an unauthorized disclosure of source code.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Source code, the detailed
program commands for our operating systems and other software programs, is critical to our business. We take significant measures
to protect the secrecy of large portions of our source code. If a significant portion of our source code leaks, we might lose future
trade secret protection for that source code. It may become easier for third parties to compete with our products by copying functionality,
which could adversely affect our revenue and operating margins. Unauthorized disclosure of source code also could increase the
security risks described in the next paragraph.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We may have outages, data losses,
and disruptions of our online services if we fail to maintain an adequate operations infrastructure.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our increasing user
traffic, growth in services, and the complexity of our services demand more computing power. We spend substantial amounts to build,
purchase, or lease data centers and equipment and to upgrade our technology and network infrastructure to handle more data. These
demands continue to increase as we grow our workforce. Maintaining, securing, and expanding this infrastructure is expensive and
complex. It requires that we maintain an internet connectivity infrastructure that is robust and reliable within competitive and
regulatory constraints that continue to evolve. Inefficiencies or operational failures, including temporary or permanent loss of
customer data or insufficient internet connectivity, could diminish the utility or functionality of our products, and adversely
impact the quality of our services and user experience, resulting in contractual liability, claims by users and other third parties,
regulatory actions, damage to our reputation, and loss of current and potential users, subscribers, and advertisers, each of which
could have a materially adverse impact on our operating results and financial condition.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Our software may experience quality
or supply problems</I>.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our software may experience
quality or reliability problems. The highly-sophisticated software we have been developing may contain bugs and other defects that
interfere with their intended operation. Any defects we do not detect and fix in pre-release testing could cause reduced sales
and revenue, damage to our reputation, repair or remediation costs, delays in the release of new products or versions, or legal
liability. Although our license agreements typically contain provisions that limit our exposure to liability, there is no assurance
these provisions will withstand legal challenge.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We intend to use open source blockchain
technology in our technology platform. This technology has been scrutinized by regulatory agencies and therefore we may be impacted
by unfavorable regulatory action in one or more jurisdictions.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We intend to use open
source blockchain technology as a secure repository for &ldquo;device reputation&rdquo; information acquired by our technology
platform. Blockchain technologies have been the subject of scrutiny by various regulatory bodies around the world. We could be
impacted by one or more regulatory inquiries or actions, including but not limited to restrictions on the use of blockchain technology,
which could impede or limit the use of this technology within our product offerings.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We use and leverage open source technology
in our technology platform which may create risks of security weaknesses.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Some parts of our technology
that we currently use, and that we intend to develop in the future, incorporates (or may incorporate in the future) open-source
technology, including the blockchain technology that we intend to use in our technology platform. There is a risk that the development
team, or other third parties may, intentionally or unintentionally, introduce weaknesses or bugs into the core infrastructure elements
of our technology solutions interfering with the use of such technology which, in turn, could have a material negative impact on
our business and operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Risks Relating to Management and Personnel</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We depend heavily on Scott W. Absher,
our Chief Executive Officer and a director. The loss of his services could harm our business.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our future business
and results of operations depend in significant part upon the continued contributions of Scott W. Absher, our Chief Executive Officer
and a director. If we lose his services or if he fails to perform in his current position, or if we are not able to attract and
retain skilled employees in addition to Mr. Absher, this could adversely affect the development and implementation of our business
plan and harm our business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>




<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Mr. Absher has limited experience
managing a public company, which may inhibit our ability to implement successfully our business plan.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Mr. Absher has limited
experience managing a public company, which is required to establish and maintain disclosure controls and procedures and internal
control over financial reporting. We are endeavoring to comply with all of the various rules and regulations applicable to a public
reporting company, including those promulgated by the Securities and Exchange Commission. However, if we cannot operate successfully
as a public company, your investment may be materially adversely affected.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>If we are not recognized as an employer
of WSEs under federal and state regulations, or we are deemed to be an insurance agent or third-party administrator, we and our
clients could be adversely impacted.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">While in our client
engagements we typically arrange for our clients to act as sponsor of employee benefit plans, we also sponsor the benefit plans
applicable to their employees. For us to sponsor employee benefit plan offerings for WSEs, we must qualify as an employer for certain
purposes under the Internal Revenue Code of 1986 (the &ldquo;Code&rdquo;) and the Employee Retirement Income Security Act of 1974,
as amended (&ldquo;ERISA&rdquo;). In addition, our status as an employer is important for purposes of ERISA&rsquo;s preemption
of certain state laws. The definition of employer under various laws is not uniform, and under both the Code and ERISA, the term
is defined in part by complex multi-factor tests.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Generally, these tests
are designed to evaluate whether an individual is an independent contractor or employee and they provide substantial weight to
whether a purported employer has the right to direct and control the details of an individual&rsquo;s work. Some factors that the
IRS has considered important in the past have included the employer&rsquo;s degree of behavioral control (the extent of instructions,
training and the nature of the work), the financial control and the economic aspects of the relationship, and the intent of the
parties, as evidenced by (i) the specific benefit, contract, termination and other similar arrangements between the parties, and
(ii) the &ldquo;on-going&rdquo; versus &ldquo;project-oriented&rdquo; nature of the work to be performed. However, a definitive
judicial interpretation of &ldquo;employer&rdquo; in the context of co-employer relationships such as those in which we engage
has not been established. For ERISA purposes, for example, courts have held that test factors relating to ability to control and
supervise an individual are less important, while the U.S. Department of Labor has issued guidance that certain entities in the
HR outsourcing industry do not qualify as common law employers for ERISA purposes. Moreover, when our app is fully functional,
the scope of our employer status will increase, changing the legal analysis. Although we believe that we qualify as an employer
of WSEs under ERISA, and the U.S. Department of Labor has not provided guidance otherwise, we are not able to predict the outcome
of any future regulatory challenge.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If we are not recognized
as an employer under the Code or ERISA, we may be required to change the method by which we report and remit payroll taxes to the
tax authorities and the method by which we provide, or discontinue providing, certain employee benefits to WSEs, which could have
a material adverse effect on our business and results of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We may also need to
qualify as an employer of WSEs under state regulations, which govern licensing, certification and registration requirements. Nearly
all states have enacted laws and regulations in this regard. While we believe that we qualify as an employer of WSEs under these
state regulations, these requirements vary from state to state and change frequently and if we are not able to satisfy existing
or future licensing requirements or other applicable regulations of any states, we may be prohibited from doing business in that
state.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Our business depends on our ability
to attract and retain talented employees.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our business is based
on successfully attracting and retaining talented employees. The market for highly skilled workers and leaders in our industry
is extremely competitive. If we are less successful in our recruiting efforts, or if we cannot retain key employees, our ability
to develop and deliver services successfully may be adversely affected. If we cannot hire additional qualified personnel, we may
continue to have internal control weaknesses. Effective succession planning is also important to our long-term success. Failure
to ensure effective transfer of knowledge and smooth transitions involving key employees could hinder our strategic planning and
execution. How employment-related laws are interpreted and applied to our workforce practices may result in increased operating
costs and less flexibility in how we meet our workforce needs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Lapses in our employee screening
process may harm our reputation or relationship with clients, or result in litigation, which may impact our financial condition.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our business model
is dependent on hiring employees who will provide high quality service for our clients. Lapses in our screening process may result
in employees being hired who do not meet the standard expected by our clients. This may hurt our relationship with our clients
or result in them placing their business elsewhere, which would negatively impact our ability to remain in business. Criminal behavior
by our employees resulting from a lapse in our screening process may subject us to litigation from our clients or government regulators,
which may also be costly and/or damage our reputation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>




<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We are in the business of providing
employees to clients, and there is a risk that we will be sued and/or held liable for claims resulting from actions by or against
our employees.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We act as a co-employer
of WSEs, who perform their jobs in the workplaces of our clients. Our ability to control the workplace environment of our clients
is extremely limited. Further, many WSEs have access to our clients&rsquo; information systems and confidential information. As
the co-employer of these WSEs, we incur a risk of liability arising from various workplace events, including claims of physical
injury, discrimination, harassment or failure to protect confidential personal information. Other inherent risks include possible
claims of errors and omissions; intentional misconduct; release, misuse or misappropriation of client intellectual property; employment
of illegal aliens; criminal activity; torts; or other claims. These claims can carry significant financial penalties and damages.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have not experienced
significant claims for damages or losses to date arising from the actions of WSEs. However, there is a risk that we will be subject
to such claims in the future and may be held liable even if our contribution to the injury is minimal or absent. We may also be
required to indemnify our clients against claims brought against them by or against WSEs. Even if we are successful in defending
against these claims, the costs of mounting our defense might be significant and damaging to us. We may incur reputational costs
and/or be subject to investigations by public agencies, which could result in associated negative publicity. We may also lose clients
as a result claims against us.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">To protect ourselves,
we carry a staffing liability program commercial insurance policy. We believe the level of insurance coverage we maintain is appropriate
for a company of our size and function. The policy provides coverage with respect to: (1) &ldquo;wrongful employment acts&rdquo;
committed against our &ldquo;employees&rdquo; pursuant to our agreement with that client; and (2) A &ldquo;staffing services worker&rsquo;s
acts&rdquo; committed while in the service of our client that result in a &ldquo;wrongful business environment.&rdquo; No insurance
policy is without risk. A claim against us may not be covered by this plan, such as wage and hour disputes, which are on the rise
nationally. The insurer may seek to disclaim liability or deny coverage for various reasons, or the amount of judgment entered
against us may exceed the policy limits. If we are unable to maintain adequate insurance coverage, we may be exposed to substantial
liabilities. Any claims for damages against us as a result of actions of WSEs could damage our reputation, increase our expenses
and reduce our profitability (or increase net losses) and revenues.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Catastrophic events or geopolitical
conditions may disrupt our business.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Monetary and fiscal
policies and political and economic conditions may substantially change. When there is a slowdown in the economy, employment levels
may decrease with a corresponding impact on our businesses.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Clients may react to
worsening conditions by reducing their spending on payroll and other outsourcing services or renegotiating their contracts with
us.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Worsening economic
conditions, including inflation, recession, or other changes in economic conditions, may cause businesses to rely less on vendors
in our business, which could adversely affect our revenue. If demand for our services declines, or business spending for such services
declines, our revenue will be adversely affected.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Challenging economic
conditions also may impair the ability of our customers to pay for products and services they have purchased. As a result, allowances
for doubtful accounts and write-offs of accounts receivable may increase.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are dependent upon
various large banks to execute Automated Clearing House and wire transfers as part of our client payroll and tax services. A systemic
shutdown of the banking industry would impede our ability to process funds on behalf of our payroll and tax services clients and
could have an adverse impact on our financial results and liquidity</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">A disruption or failure
of our systems or operations because of a major earthquake, weather event, cyber-attack, terrorist attack, fire, pandemic, or other
catastrophic event could cause delays in completing sales, providing services, or performing other critical functions. Our corporate
headquarters, a significant portion of our research and development activities, and certain other essential business operations
are located in the Irvine, California area, which is a seismically active region. A catastrophic event that results in the destruction
or disruption of any of our critical business or IT systems could harm our ability to conduct normal business operations. California
has also experienced destructive fires recently. As a result of these fires, power and utilities are occasionally shut off to parts
of the State. A fire or risk of fire may result in damage to our facilities, the temporary or permanent shut down of our or our
clients&rsquo; facilities, disruption to our power supply or utilities, or other disruptions that may harm our ability to conduct
business</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Abrupt political change
and terrorist activity may pose threats to our business and increase our operating costs. These conditions also may add uncertainty
to the timing and budget for technology investment decisions by our customers and may cause supply chain disruptions for hardware
manufacturers. Geopolitical change may result in changing regulatory requirements that could impact our operating strategies, hiring,
and profitability.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Risks Relating to Regulations and Compliance</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>




<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Failure to comply with, or changes
in, laws and regulations applicable to our business, particularly potential changes to the Patient Protection and Affordable Care
Act (the &ldquo;ACA&rdquo;), could have a materially adverse effect on our marketing plan as well as our reputation, results of
operations or financial condition, or have other adverse consequences.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our business is subject
to a wide range of complex laws and regulations. For example, many states regulate entities offering the employment related services
such as those offered by us directly or through our subsidiary and require licenses as a prerequisite to operation of such enterprises
in their respective jurisdictions. There can be no assurance that either we or our subsidiary, ReThink, will be successful in either
securing or maintaining a license or licenses in compliance with a particular state&rsquo;s laws and regulations. Further, many
states require that workers&rsquo; compensation policies offered by employment related firms such as ours be managed according
to strict rules and/or that unemployment insurance filings be administered according to strict rules.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Failure to comply with
such laws and regulations could result in the suspension or revocation of licenses or registrations, the limitation, suspension
or termination of services, and the imposition of consent orders or civil and criminal penalties, including fines, that could damage
our reputation and have a materially adverse effect on our results of operation or financial condition.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, changes
in laws or regulations, or changes in the interpretation of laws or regulations by a regulatory authority, may decrease our revenues
and earnings and may require us to change the manner in which we conduct some aspects of our business. For example, a change in
regulations either decreasing the amount of taxes to be withheld or allowing less time to remit taxes to government authorities
would adversely impact interest income from investing client funds before such funds are remitted to the applicable taxing authorities.
Changes in taxation regulations could adversely affect our effective tax rate and our net income. Changes in laws that govern the
co-employment arrangement between a professional employer organization (&ldquo;PEO&rdquo;) and its WSEs may require us to change
the manner in which we conduct some aspects of our business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Changes to the ACA,
as amended, related state laws, and the regulations adopted or to be adopted thereunder, have the potential to impact substantially
the way that employers provide health insurance to employees and the health insurance market for the small and mid-sized businesses
that constitute our business&rsquo;s clients and prospects. The repeal or replacement of the ACA, the elimination of employer mandates
and similar employer requirements currently imposed by the ACA, and other regulatory changes could in the future reduce our revenues.
Amendments to money transmitter statutes have required us to obtain licenses in some jurisdictions. The adoption of new money transmitter
statutes in other jurisdictions, changes in regulators&rsquo; interpretation of existing state and federal money transmitter or
money services business statutes or regulations, or disagreement by a regulatory authority with our interpretation of such existing
statutes or regulations, could require additional registration or licensing, limit certain business activities until they are appropriately
licensed, and expose us to financial penalties. These occurrences could also require changes to our compliance programs and to
the manner in which we conduct some aspects of our money movement business or client funds investment strategy, which could adversely
impact interest income from investing client funds before such funds are remitted.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Failure to secure any necessary registrations
or licensure could affect our ability to operate certain segments of our business in certain jurisdictions.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Some states require
licensure or registration of businesses offering PEO services. While some elements of our service offering overlap with PEO services,
our human capital platform is more in line with a traditional staffing model. However, if we need and are unable to secure registration
or licensure of such service offerings in a particular state, our ability to grow that segment of our business in such state would
be impaired and could affect our ability to increase our revenues and meet certain customer requirements in such states.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>We may be subject to Private Attorney
General&rsquo;s Act (&ldquo;PAGA&rdquo;) claims which we may require additional capital to defend.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our work force resides
mostly in the State of California. Employment laws in the State of California can be complex and undefined where a co-employment
or human capital platform relationship exists, both of which are contemplated in our current business and our future plans. PAGA
allows plaintiffs to bring class action-like lawsuits against employers that can result in substantial costs to defend and may
result in large fines for seemingly insignificant or inadvertent clerical errors. As we move more into these areas, the risk will
increase that such PAGA claims will be filed and litigated which may result in increased costs to us.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Laws related to the classification
of Gig Economy workers are changing, and we may be subject to state and local regulations impacting how we classify our workers.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24pt">A significant
portion of our business is located in the State of California which recently passed AB-5 relating to the classification of
certain gig workers as employees instead of independent contractors. Other states such as New York and New Jersey, two of our
potential markets, are also considering similar legislation. We anticipate that classification status will continue to be an
unsettled area of law for the foreseeable future. Changes in classification can result in a change to various requirements
associated with the payment of wages, tax withholding, and the provision of unemployment, health, and other traditional
employer-employee related benefits. While we currently classify all WSEs as employees, our business plans potentially include
the use of large numbers of independent contractors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24pt">If we are unable to utilize independent contractors, or the cost to use
independent contractors becomes more expensive, our future growth opportunities may be limited or reduced. Costs or delays
associated with revising our services to account for changes in the status of employees and independent contractors may have
a significant impact on our future growth. Changes to the law may impact the desirability or applicability of our business
model, which could impact our ability to continue as a going concern.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Changes in tax laws or regulations that are applied adversely
to us or our customers may have a material adverse effect on our business, cash flow, financial condition, or results of operations.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24pt">In response to the COVID-19 pandemic, the
CARES Act was signed into law in March 2020. The CARES Act modifies certain of the changes made by the Tax Cuts and Jobs Act of
2017 (the &ldquo;Tax Act&rdquo;). Changes in corporate tax rates, the realization of net deferred tax assets relating to our U.S.
operations, and the deductibility of expenses under the Tax Act, as amended by the CARES Act, or future tax reform legislation
could have a material impact on the value of our deferred tax assets, could result in significant one-time charges in the current
or future taxable years, and could increase our future U.S. tax expense. The foregoing items, as well as any other future changes
in tax laws, could have a material adverse effect on our business, cash flow, financial condition, or results of operations. In
addition, it is uncertain if and to what extent various states will conform to the Tax Act, as amended by the CARES Act, or any
newly enacted federal tax legislation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 24pt"><A NAME="b_002"></A><B>CAUTIONARY NOTE REGARDING
FORWARD-LOOKING STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 24pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">This
prospectus contains forward-looking statements within the meaning of the federal securities laws, which statements involve substantial
risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance.
In some cases, you can identify forward-looking statements because they contain words such as &ldquo;may,&rdquo; &ldquo;might,&rdquo;
&ldquo;will,&rdquo; &ldquo;should,&rdquo; &ldquo;expects,&rdquo; &ldquo;plans,&rdquo; &ldquo;anticipates,&rdquo; &ldquo;could,&rdquo;
&ldquo;intends,&rdquo; &ldquo;target,&rdquo; &ldquo;projects,&rdquo; &ldquo;contemplates,&rdquo; &ldquo;believes,&rdquo; &ldquo;estimates,&rdquo;
&ldquo;predicts,&rdquo; &ldquo;potential&rdquo; or &ldquo;continue&rdquo; 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 prospectus
include, but are not limited to, statements about:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">our future financial performance, including our revenue, costs of revenue and operating expenses;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">our ability to achieve and grow profitability;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">the sufficiency of our cash, cash equivalents and investments to meet our liquidity needs;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">our predictions about industry and market trends;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">our ability to successfully expand internationally;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">our ability to effectively manage our growth and future expenses;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">our estimated total addressable market;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">our ability to maintain, protect and enhance our intellectual property;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">our ability to comply with modified or new laws and regulations applying to our business;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">the attraction and retention of qualified employees and key personnel;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">the effect COVID-19 or other public health issues could have on our business and financial condition
and the economy in general;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">our ability to successfully defend litigation brought against us; and</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">our use of the net proceeds from this offering.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">We
caution you that the forward-looking statements highlighted above do not encompass all of the forward-looking statements made in
this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">We
have based the forward-looking statements contained in this prospectus 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 of this prospectus entitled &ldquo;Risk Factors&rdquo; and elsewhere in this prospectus. 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 prospectus.
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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">The
forward-looking statements made in this prospectus 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 in this prospectus to reflect events or circumstances after the date
of this prospectus 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><A NAME="b_003"></A><B>USE OF PROCEEDS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We estimate that the
net proceeds to us from this offering from the sale of the shares of our common stock and the accompanying purchase warrants will
be approximately $ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, or approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; if the underwriters exercise their option to purchase additional shares and purchase warrants
in full, at the assumed offering price of $ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, the closing price of our common stock as reported on Nasdaq on July&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; , 2020, and after
deducting underwriting discounts and commissions, and assuming no sale of any pre-funded warrants and excluding the proceeds, if
any, from the exercise of the purchase warrants issued in this offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">A $1.00 increase
(decrease) in the assumed public offering price of&#8201; $ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; per share would increase
(decrease) the expected net proceeds to us from this offering by approximately $ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, assuming that the number of shares of
common stock and accompanying purchase warrants offered by us, as set forth on the cover page of this prospectus, remains the
same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us,
and assuming no sale of any pre-funded warrants and excluding the proceeds, if any, from the exercise of the purchase
warrants issued pursuant to this offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Similarly, a one million
share increase (decrease) in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase
(decrease) the net proceeds to us by approximately $ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, assuming the assumed public offering price of $ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share of common stock
and accompanying purchase warrant remains the same, and after deducting estimated underwriting discounts and commissions and estimated
offering expenses payable by us, and assuming no sale of any pre-funded warrants and excluding the proceeds, if any, from the exercise
of the purchase warrants issued pursuant to this offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="background-color: white">We
are undertaking this offering in order to access the public capital markets and to increase our liquidity. We intend to use the
net proceeds we receive from this offering for general corporate purposes, including working capital, operating expenses and capital
expenditures.&nbsp;Our management will have broad discretion in the application of the net proceeds.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The amounts and timing
of our use of the net proceeds from this offering for general corporate purposes will depend on a number of factors, such as the
timing and progress of our research and development efforts and the timing and progress of any collaborative or strategic partnering
efforts. As of the date of this prospectus, we cannot specify with certainty all of the particular uses for the net proceeds to
us from this offering. Accordingly, our management will have broad discretion in the timing and application of these proceeds.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><A NAME="b_004"></A><B>DIVIDEND POLICY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="background-color: white">We</FONT>
have never declared dividends on our equity securities, and currently do not plan to declare dividends on shares of our common
stock in the foreseeable future. We expect to retain our future earnings, if any, for use in the operation and expansion of our
business. The payment of cash dividends in the future, if any, will be at the discretion of our board of directors and will depend
upon such factors as earnings levels, capital requirements, our overall financial condition and any other factors deemed relevant
by our board of directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Accordingly, you may
need to sell your shares of our common stock to realize a return on your investment, and you may not be able to sell your shares
at or above the price you paid for them. See &ldquo;Risk Factors &mdash; Risks Related to this Offering and Ownership of Our Common
Stock.&rdquo; We have not paid cash dividends in the past and do not expect to pay dividends in the future. Any return on investment
may be limited to the value of our common stock.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><A NAME="b_005"></A><B>CAPITALIZATION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following table
sets forth our cash and cash equivalents, as well as our capitalization, as of May 31, 2020 as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">on an actual basis;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">on a pro forma basis, as adjusted for the partial over-allotment options exercised on June 11,
2020 and July 7, 2020; and</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">on an as adjusted basis, giving further effect to the receipt of estimated net proceeds from the
sale of shares of common stock and accompanying purchase warrants in this offering, after deducting the estimated underwriting
discounts and commissions and estimated offering expenses payable by us, and assuming no sale of pre-funded warrants and excluding
the proceeds, if any, from the exercise of the purchase warrants issued in this offering.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>As of May 31, 2020 </B></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Unaudited Selected Condensed Balance Sheet Items</B></P></TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Actual</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 10pt"><B>Pro Forma Adjustments for the Equity Offering<SUP>(1)</SUP></B></FONT></TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Total Pro Forma Amounts</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 10pt"><B>Pro Forma <BR> Adjustments for this <BR> Offering<SUP>(2)(3)</SUP></B></FONT></TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 10pt"><B>Pro Forma <BR> as Adjusted for this <BR> Offering<SUP>(2)(3)</SUP></B></FONT></TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 35%; font-size: 10pt">Cash</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">10,835,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">1,244,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">12,079,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">10,500,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">22,579,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">All other assets</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">16,673,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">16,673,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">16,673,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">Total assets</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">27,508,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">1,244,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">28,752,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">10,500,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">39,252,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">Total liabilities</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">21,017,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">21,017,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">21,017,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-indent: -9pt; padding-left: 9pt">Preferred stock, par value $0.0001 per share &mdash; 50,000,000 shares authorized and no shares outstanding, actual;&nbsp;shares issued and outstanding, as adjusted</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">-</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 0"><P STYLE="font-size: 10pt; text-indent: -9pt; padding-left: 9pt">Common stock, par value $0.0001 per share, 750,000,000 shares
authorized, 28,491,866<SUP>(4)</SUP> shares deemed issued and outstanding, actual; shares issued and outstanding, as adjusted</P></TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left">Additional&nbsp;paid-in&nbsp;capital</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">117,730,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1,244,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">118,974,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">10,500,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">129,474,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">Accumulated deficit</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(111,239,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(111,239,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(111,239,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">Total shareholders&rsquo; equity</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">6,491,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">1,244,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">7,735,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">10,500,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">18,235,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">Total liabilities and shareholders&rsquo; equity</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">27,508,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">1,244,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">28,752,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">10,500,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">39,252,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">Total capitalization</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">40,000,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">41,244,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">41,244,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">51,744,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">51,744,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(1)</TD><TD STYLE="text-align: justify">On June 11, 2020 and July 7, 2020, we closed partial over-allotment options exercised by A.G.P. to purchase 250,340 additional
shares of common stock resulting in net proceeds of approximately $1.25 million after deducting underwriting discounts and commissions
and estimated expenses payable by us.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(2)</TD><TD STYLE="text-align: justify">The as adjusted information is illustrative only and following the completion of this offering will be adjusted based on the
actual price per share of common stock in this offering and other terms of this offering determined at pricing.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(3)</TD><TD STYLE="text-align: justify">Each $1.00 increase or decrease in the assumed offering price of $ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share would increase or decrease each of the as adjusted
cash, additional&nbsp;paid-in&nbsp;capital, total shareholders&rsquo; equity and total capitalization by approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; , assuming
that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, after deducting the
estimated underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease
the number of shares we are offering. An increase or decrease of 1.0&nbsp;million in the number of shares we are offering would
increase or decrease each of the as adjusted cash, additional&nbsp;paid-in&nbsp;capital, total shareholders&rsquo; equity and total
capitalization by approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; , assuming an offering price of $ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share after deducting the estimated underwriting discounts
and commissions and estimated offering expenses payable by us.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px; font-size: 10pt"><FONT STYLE="font-size: 10pt">(4)</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: justify"><FONT STYLE="font-size: 10pt">We have included the Preferred Options exercisable at $0.0001 per share and convertible into common stock on a one-for-one basis as shares deemed issued and outstanding as follows:</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="background-color: White; vertical-align: bottom">
    <TD STYLE="width: 48px">&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Shares of common stock outstanding as of May 31, 2020:</FONT></TD>
    <TD STYLE="width: 1px">&nbsp;</TD>
    <TD STYLE="width: 1px">&nbsp;</TD>
    <TD STYLE="width: 96px; text-align: right"><FONT STYLE="font-size: 10pt">3,857,316</FONT></TD>
    <TD STYLE="width: 1px">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Preferred Options exercised since May 31, 2020:</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">12,709,030</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="background-color: White; vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: justify"><FONT STYLE="font-size: 10pt">Preferred Options unexercised as of July 27, 2020:</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">11,925,520</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="background-color: White; vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Total shares of common stock deemed issued and outstanding as of May 31, 2020:</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">28,491,866</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">You should read this
information in conjunction with the information contained in &ldquo;Use of Proceeds&rdquo; and &ldquo;Management&rsquo;s Discussion
and Analysis of Financial Condition and Results of Operations&rdquo; and our financial statements and related notes in this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>




<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><A NAME="f_001"></A><B>DILUTION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">If you invest in our
securities in this offering, your ownership interest will be diluted immediately to the extent of the difference between the public
offering price per share of our common stock and pre-funded warrant and the as adjusted net tangible book value per share of our
common stock after this offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our historical net
tangible book value as of May 31, 2020 was $6,491,000, or $1.68 per share of common stock based on 3,857,316 shares of common stock
outstanding as of May 31, 2020. Historical net tangible book value per share is calculated by subtracting our total liabilities
from our total tangible assets, which is total assets less intangible assets, and dividing this amount by the number of shares
of common stock outstanding as of such date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our historical net
tangible book value, as adjusted, as of May 31, 2020 was $6,491,000, or $0.23 per share after adjusting for the 12,709,030 Preferred
Options that have been exercised and 11,925,520 Preferred Options that are unexercised.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our pro forma net tangible
book value, as adjusted, as of May 31, 2020, after giving effect to the partial over-allotment options exercised on June 11, 2020
and July 7, 2020 was approximately $7,735,000, or $0.27 per share of common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">After giving effect
to the sale by us of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of common stock and an accompanying purchase warrant in this offering at an assumed public offering
price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share, and assuming no sale of any pre-funded warrants in this offering, and after deducting the estimated underwriting
discounts and commissions and estimated offering expenses payable by us, and excluding the proceeds, if any, from the exercise
of the purchase warrants, our pro forma as-adjusted&nbsp;net tangible book value as of May 31, 2020 would have been approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, or $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;per share of common stock. This represents an immediate increase in the net tangible book value of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share to our existing shareholders and an immediate and substantial dilution in net tangible book value of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share to new
investors. The following table illustrates this hypothetical per share dilution:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 88%; text-align: justify"><FONT STYLE="font-size: 10pt">Offering price per share</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right; width: 9%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Historical net tangible book value per share as of May 31, 2020</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.68</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Decrease in net tangible book value per share for Preferred Options</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1.45</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Historical net tangible book value per share, as adjusted, as of May 31, 2020 for the Preferred Options</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">0.23</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Increase in net tangible book value per share attributable to pro forma adjustments</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;0.04</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 9pt; text-align: justify; text-indent: -9pt"><FONT STYLE="font-size: 10pt">Pro forma net tangible book value, as adjusted, per share as of May 31, 2020</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">0.27</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Increase in pro forma net tangible book value, as adjusted, per share attributable to this offering</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Pro forma as adjusted net tangible book value per share as of May 31, 2020, after giving effect to this offering and as adjusted for the partial over-allotment options exercised on June 11, 2020 and July 7, 2020 and the Preferred Options</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Dilution per share to new investors purchasing shares in this offering</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="background-color: white">The
information above and below assumes that no pre-funded warrants are issued in this offering. &nbsp;The information above assumes
that the underwriters do not exercise their over-allotment option. If the underwriters exercise their over-allotment option in
full, the pro forma as adjusted net tangible book value will increase to $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, representing an immediate increase to existing
stockholders of $<FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</FONT>per share and an immediate dilution of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; per share to new investors.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">A $0.25 increase (decrease)
in the assumed public offering price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; per share would result in an incremental increase (decrease) in our pro forma as
adjusted net tangible book value of approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; million or approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; per share, and would result in an incremental
increase (decrease) in the dilution to new investors of approximately $ per share, assuming that the number of shares of our common
stock sold by us remains the same and after deducting the underwriting discounts and commissions and estimated offering expenses
payable by us. A $0.50 increase (decrease) in the assumed public offering price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
per share would result in an incremental increase (decrease) in our pro forma as adjusted net tangible book value of approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; million or increase approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; per share, and would result in an incremental increase (decrease) in the dilution
to new investors of approximately $ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share, assuming that the number of shares of our common stock sold by us remains the same
and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We may also
increase or decrease the number of shares of common stock we are offering from the assumed number of shares of common stock
set forth above. An increase of 250,000 in the assumed number of shares of common stock sold by us in this offering would
result in an incremental increase in our pro forma as adjusted net tangible book value of approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; or
approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share, and would result in an incremental decrease in the dilution to new investors of approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; per share assuming that the assumed public offering price
of the common stock remains the same and after deducting the estimated underwriting discount and estimated offering expenses
payable by us. A decrease of 250,000 in the assumed number of shares of common stock sold by us in this offering would result
in an incremental decrease in our pro forma as adjusted net tangible book value of approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, or approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share, and would result in an incremental increase in the dilution to new investors of approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; per
share, assuming that the assumed public offering price of the common stock remains the same and after deducting the estimated
underwriting discount and estimated offering expenses payable by us. An increase of 500,000 in the assumed number of shares
of common stock sold by us in this offering would result in an incremental increase in our pro forma as adjusted net tangible
book value of approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; or an increase of approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; per share and would result in an incremental decrease
in the dilution to new investors of approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share, assuming that the assumed public offering price of the
common stock remains the same and after deducting the estimated underwriting discount and estimated offering expenses payable
by us. A decrease of 500,000 in the assumed number of shares of common stock sold by us in this offering would result in an
incremental decrease in our pro forma as adjusted net tangible book value of approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, or a decrease of
approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; per share, and would result in an incremental increase in the dilution to new investors of approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; per share, assuming that the assumed public offering price of the common stock remains the same and after deducting the
estimated underwriting discount and estimated offering expenses payable by us. The information discussed above is
illustrative only and will adjust based on the actual public offering price, the actual number of securities in this offering
and other terms of this offering determined at pricing. The information discussed above is illustrative only and will adjust
based on the actual public offering price, the actual number of securities in this offering and other terms of this offering
determined at pricing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The foregoing discussion
and table do not take into account further dilution to new investors that could occur upon the exercise of outstanding options
or warrants, including the pre-funded warrants having a per share exercise price less than the per share offering price to the
public in this offering, and the purchase warrants offered hereby. In addition, we may choose to raise additional capital due to
market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans.
To the extent that additional capital is raised through the sale of equity or convertible debt securities, the issuance of these
securities could result in further dilution to our stockholders.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The foregoing discussion and table are based on 16,816,686 shares
of common stock outstanding as of July 24, 2020 and 11,925,520 shares of common stock reserved for future issuance pursuant to
Preferred Options, and excludes the following securities:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">1,896,209 shares of common stock issuable upon the exercise of warrants to purchase shares of common stock that were exercisable and outstanding as of July 24, 2020, with a weighted-average exercise price of $8.42 per share;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 3%">&nbsp;</TD>
    <TD STYLE="width: 3%"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="width: 94%; text-align: justify"><FONT STYLE="font-size: 10pt">198,816 shares of common stock reserved for future issuance under our 2017 Plan;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">43,126 shares of common stock issuable upon the exercise of options to purchase common stock issued pursuant to our 2017 Plan as of July 24, 2020, with a weighted-average exercise price of $101.31 per share;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 3%">&nbsp;</TD>
    <TD STYLE="width: 3%"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="width: 94%; text-align: justify"><FONT STYLE="font-size: 10pt">1,175,784 shares of common stock issuable upon the exercise of options to purchase common stock granted pursuant to our 2017 Plan on July 1, 2020, with a price of $5.40 per share, subject to shareholder approval;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;&nbsp;&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">25,000,000 shares of common stock potentially issuable pursuant to options that are expected to be granted to Messrs. Absher and Holmes, the issuance of which may be subject to various internal corporate, state, federal or regulatory approvals, following this offering to purchase preferred stock for $0.0001 per share, with each share of preferred stock being convertible into common stock on a one-for-one basis.</FONT></TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><A NAME="f_002"></A><B>MANAGEMENT&rsquo;S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>RESULTS OF OPERATIONS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following management&rsquo;s
discussion and analysis should be read in conjunction with our historical financial statements and the related notes included in
this prospectus. Management&rsquo;s discussion and analysis contains forward-looking statements that involve risks and uncertainties,
including those we detail under &ldquo;Risk Factors,&rdquo; &ldquo;Cautionary Note Regarding Forward-Looking Statements&rdquo;
and elsewhere in this prospectus, such as statements of our plans, objectives, expectations and intentions. Any statements that
are not statements of historical fact are forward-looking statements. When used, the words &ldquo;anticipate,&rdquo; &ldquo;believe,&rdquo;
&ldquo;could,&rdquo; &ldquo;estimate,&rdquo; &ldquo;expect,&rdquo; &ldquo;intend,&rdquo; &ldquo;may,&rdquo; &ldquo;might,&rdquo;
&ldquo;plan,&rdquo; &ldquo;potential,&rdquo; &ldquo;predict,&rdquo; &ldquo;project,&rdquo; &ldquo;should,&rdquo; &ldquo;will,&rdquo;
&ldquo;would&rdquo; or the negative of those terms, or similar expressions, identify certain of these forward-looking statements.
These forward-looking statements are subject to risks and uncertainties that could cause actual results or events to differ materially
from those expressed or implied by the forward-looking statements in this prospectus. Our actual results and the timing of events
could differ materially from those anticipated in these forward-looking statements as a result of several factors. We do not undertake
any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Overview</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 3pt; text-align: justify; text-indent: 33pt">Our current
business, and the primary source of our revenues to date, has been under a traditional staffing services business model. 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, including the light industrial, services, and food and hospitality markets. We provide
human resources, employment compliance, insurance, payroll, and operational employment services solutions for our business clients
(&ldquo;clients&rdquo; or &ldquo;operators&rdquo;) and shift work or &ldquo;gig&rdquo; opportunities for WSEs ( or &ldquo;shifters&rdquo;).
As consideration for providing these services, we receive administrative or processing fees as a percentage of a client&rsquo;s
gross payroll, process and file payroll taxes and payroll tax returns, provide workers&rsquo; compensation insurance, and provide
employee benefits. We have built a substantial business on a recurring revenue model since our inception in 2015. For the fiscal
year ended August 31, 2019, including our discontinued operations related to the Vensure Asset Sale described below, we processed
over $350 million of payroll billings. Our business has significantly grown for each year since inception and we expect to continue
our track record of significant customer growth. However, we have experienced losses to date as we have invested in both our technology
solutions as well as the back-office operations required to service a large employee base under a traditional staffing model.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 3pt; text-align: justify; text-indent: 33pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are currently focused
on clients in the restaurant and hospitality industries, traditionally market segments with high employee turnover and low pay
rates. We believe that our focus on these industries will be better served by our Human Resources Information System (&ldquo;HRIS&rdquo;)
technology platform and related mobile application which provide payroll and human resources tracking for our clients and will
result in lower operating costs, improved customer experience and revenue growth acceleration. All of our clients enter into service
agreements with us or our wholly-owned subsidiary, ReThink.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 3pt; text-align: justify; text-indent: 33pt">Our revenues
for Fiscal 2019 and through the first nine months of Fiscal 2020 primarily 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 applicable taxation authority, and
workers&rsquo; compensation premiums billed to the client for which we facilitate workers&rsquo; compensation coverage. Our costs
of revenues consist of accrued and paid payroll taxes and our costs to provide the workers&rsquo; compensation coverage including
premiums and loss reserves. A significant portion of our assets and liabilities is for our workers&rsquo; compensation reserves.
Our cash balances related to these reserves are carried as assets and our estimates of projected workers&rsquo; compensation claims
are carried as liabilities. Since Fiscal 2019, we have provided a self-funded workers&rsquo; compensation policy for up to $500,000
and purchased reinsurance for claims in excess of $500,000. We actively monitor and manage our clients and WSE&rsquo;s workers&rsquo;
compensation claims which we believe allows us to provide a lower cost workers&rsquo; compensation option for our clients than
they would otherwise be able to purchase on their own.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 3pt; text-align: justify; text-indent: 33pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 3pt; text-align: justify; text-indent: 33pt">As of August 31, 2019, we had 246 clients with over 13,000 WSEs,
and processed payroll of over $350 million during Fiscal 2019, an increase of nearly 60% over Fiscal 2018. Of these WSEs, approximately
60% represent workers in the restaurant industry. In addition, as of August 31, 2019, there were an additional 12,000 inactive
WSEs in our HRIS technology platform who are available for gig opportunities. In January 2020, in connection with the Vensure Asset
Sale described below, we assigned client contracts representing approximately 70% of our billable clients, which comprised approximately
88% of our quarterly revenue as of November 30, 2019, and certain operating assets for $19.2 million in cash, of which $9.7 million
was received at closing and $9.5 million is due over the next four years, which was scheduled to commence in April 2020, subject
to certain conditions, including the performance of the assigned contracts and minimum working capital delivered. The payments
have been delayed due to issues from the novel coronavirus disease (&ldquo;COVID-19&rdquo;). For further discussion on the delayed
payment to us pursuant to the Vensure Asset Sale, see &ldquo; &ndash; Recent Developments &ndash; Vensure Asset Sale.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 3pt; text-align: justify; text-indent: 33pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Following the
Vensure Asset Sale, our client count, client site count, and billed WSE count decreased by approximately 88% from pre-
Vensure Asset Sale metrics. On a comparative basis from May 31, 2019 to February 29, 2020 (our last reporting period before
the COVID-19 pandemic materially impacted our business operations), our continuing and remaining client count increased from
35 to 83 customers, representing approximately 250 client locations, and our billed WSEs increased from an average of 1,600
to 3,100 at the end of February 2020. The quarter ended February 29, 2020 represented an annualized growth rate of over 100%
for both clients and WSEs since November 30, 2019.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The COVID-19 pandemic has had a significant impact upon and
delayed our expected growth, which we have observed through a decrease in our billed customers and WSEs beginning in mid-March
2020, when the State of California first implemented &ldquo;lockdown&rdquo; measures. Significantly, all of our February 29, 2020
billed WSEs worked for clients located in Southern California, and many of these clients were required to furlough or layoff employees
or, in some cases, completely close their operations. However, during the quarter ended May 31, 2020, we continued to close new
customer opportunities. The combination of our sales efforts and the opportunities our services provide to businesses impacted
by the COVID-19 pandemic resulted in additional business opportunities for new client location additions, but our WSE billings
per client location decreased as many clients were shut down, or reduced staffing during the quarter ended May 31, 2020. For the
month of May 2020, our billed client count decreased to 81 clients, but client locations increased by 24% to over 300 client locations
compared to February 2020. Monthly &ldquo;normalized&rdquo; gross client billings decreased 23% from February 2020 to May 2020
as a result of the reduced staffing levels. (&ldquo;Normalized&rdquo; gross billings represent actual billings adjusted for the
number of billable days in a given month, e.g., 29 billable days in February 2020, and 31 billable days in May 2020). As the Southern
California economy experienced modest recovery in June, we experienced continued client additions and some degree of gross billing
recovery. For the month of June 2020, our client count increased to 84 clients, with active billings representing 315 client locations
(an increase of 26% from February 2020 and equivalent to a 150% annualized client location growth rate), while gross client billings
exceeded &ldquo;normalized&rdquo; February 2020 billings. On July 13, 2020, the Governor of the State of California re-implemented
certain COVID-19 related lockdown restrictions in most of the counties in the state, including those located in Southern California
where most of our clients reside.&nbsp; These lockdown restrictions will likely require that in-person dining be prohibited for
at least one month.&nbsp; We believe that our business will be impacted based upon the negative effect on those clients that rely
more heavily upon in-person dining, but we have not had an opportunity to evaluate fully&nbsp;the probable impact of this lockdown
development on our overall customer base as of the date of this prospectus. For further discussion on the impact of COVID-19 on
our business, see &ldquo; &ndash; Recent Developments &ndash; COVID-19 Related Considerations.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Results of Operations</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Year Ended August 31, 2019 Compared to Year Ended August
31, 2018</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following table
summarizes the condensed consolidated results of our operations for the years ended August 31, 2019 and 2018. These figures include
the discontinued operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>For the Years Ended</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>August 31,</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>2019</B></P></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>August</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>31, 2018</B></P></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-indent: -0.125in; padding-left: 0.125in; width: 72%; padding-bottom: 1pt; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Revenues (gross billings of $39.3 million and $12.1 million less worksite employee payroll cost of $33.9 million and $10.3 million, respectively)</B></FONT></TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: black 1pt solid"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 11%; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">5,423,000</FONT></TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: black 1pt solid"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 11%; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">1,819,000</FONT></TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-bottom: 1pt; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Cost of revenue</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">4,594,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">1,488,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Gross profit</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">829,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">331,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt"><B>Operating expenses:</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-left: 11.25pt; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Salaries, wages and payroll taxes</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">4,670,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">2,941,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 11.25pt; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Stock-based compensation</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">632,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">363,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-left: 11.25pt; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Commissions</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">200,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">93,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 11.25pt; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Professional fees</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">3,918,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">2,078,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-left: 11.25pt; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Software development</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">1,209,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">3,828,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 11.25pt; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Marketing and advertising</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">1,208,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">547,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-left: 11.25pt; text-align: justify"><FONT STYLE="font-size: 10pt"><B>General and administrative</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">3,823,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">3,005,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt; padding-left: 11.25pt; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Depreciation and amortization</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">839,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">274,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-bottom: 1pt; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Operating expenses</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">16,499,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">13,129,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-bottom: 1pt; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Operating Loss</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(15,670,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(12,798,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt"><B>Other income (expense)</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt"><B>Interest expense</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(8,507,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(1,751,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt"><B>Loss on debt extinguishment</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(3,927,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt"><B>Change in fair value of derivative</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">2,569,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-bottom: 1pt; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Gain (Loss) associated with note defaults, net</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">811,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(3,500,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Total Other income (expense)</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(9,054,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(5,251,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-bottom: 1pt; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Loss from continuing operations</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(24,724,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(18,049,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>

<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-bottom: 1pt; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Total Income from discontinued operations, net of tax</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">5,997,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">1,226,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-bottom: 2.5pt; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Net Loss</B></FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">(18,727,000</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">(16,823,000</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<!-- Field: Page; Sequence: 4; Value: 31 -->
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We report our revenues as gross billings,
net of related direct labor costs for our Employee Administrative Services (&ldquo;EAS&rdquo;) clients and revenues without reduction
of labor costs for staffing services clients. For the years ended August 31, 2019 and 2018, revenues associated with staffing services
were insignificant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>2019</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>2018</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,238,255)">
    <TD STYLE="vertical-align: top; width: 72%; text-align: justify"><FONT STYLE="font-size: 10pt">Net Revenues (in millions)</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 11%; text-align: right"><FONT STYLE="font-size: 10pt">5.4</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 11%; text-align: right"><FONT STYLE="font-size: 10pt">1.8</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Increase, year over year (in millions)</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">3.6</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">1.2</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,238,255)">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">% Increase, year over year</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">198.1</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">%</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">199.7</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">%</FONT></TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,238,255)">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Cost of Revenues (in millions)</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">4.6</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">1.5</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Increase, year over year (in millions)</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">3.2</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">1.0</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,238,255)">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Increase, year over year</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">208.7</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">%</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">199.4</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">%</FONT></TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,238,255)">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Gross Profit (in millions)</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">0.8</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">0.3</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Increase, year over year (in millions)</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">0.5</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">0.2</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,238,255)">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Increase, year over year</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">150.4</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">%</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">200.9</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">%</FONT></TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Gross Profit % of Revenues</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">15.3</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">%</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">18.2</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">%</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our net revenue excludes
the payroll cost component of gross billings. With respect to employer payroll taxes, employee benefit programs, workers&rsquo;
compensation insurance, we believe that we are the primary obligor, have latitude in establishing price, selecting suppliers, and
determining the service specifications and, as such, the billings for those components are included as revenue. Revenues are recognized
ratably over the payroll period as WSEs perform their service at the client worksite.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Net Revenue</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our net revenue increase
of $3.6 million or 198.1% from $1.8 million in 2018 to $5.4 million in 2019 is primarily driven by the increase in business clients
and the workplace employees associated with those clients. Active worksite employees increased by 1,000 or 200% from 500 at the
end of 2018 to 1,500 at the end of 2019.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Cost of Revenue</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our cost of revenue
includes the costs of employer side taxes and workers&rsquo; compensation insurance coverage. Cost of revenues increased $3.1 million
or 208.7% from $1.5 million in 2018 to $4.6 million in 2019. The change in cost of revenues was due to the 198.1% increase in worksite
employees.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Gross Profit</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Gross profit increased
$0.5 million or 150.5% from $0.3 million in 2018 to $0.8 million in 2019. The increase is due to the combination of increased net
revenues and improvement in gross profit percentages. Gross profit percentage had a decrease of 2.9% from 18.2% of revenues for
the year ended August 31, 2018 to 15.3% for the year ended August 31, 2019 due to larger increase of cost of revenue compared to
net revenue as noted above.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Operating Expenses</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following table
presents certain information related to our operating expenses</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="10" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Year ended August 31</B>,</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>2019</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>2018</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>% Change</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>(in thousands)</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>(in thousands)</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,238,255)">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Salaries, wages and payroll taxes</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 0%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 0%; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 8%; text-align: right"><FONT STYLE="font-size: 10pt">4,670</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 0%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 0%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 0%; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 8%; text-align: right"><FONT STYLE="font-size: 10pt">2,941</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 0%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 0%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 0%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 8%; text-align: right"><FONT STYLE="font-size: 10pt">58.8</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 2%; text-align: justify"><FONT STYLE="font-size: 10pt">%</FONT></TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Share-based compensation</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">632</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">363</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">74.1</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">%</FONT></TD></TR>
<TR STYLE="background-color: rgb(204,238,255)">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Commissions</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">200</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">93</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">115.1</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">%</FONT></TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Professional fees</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">3,918</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">2,078</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">88.5</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">%</FONT></TD></TR>

<TR STYLE="background-color: rgb(204,238,255)">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">General and Administrative</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">3,823</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">3,005</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">27.2</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">%</FONT></TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Marketing and Advertising</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">1,208</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">547</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">120.8</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">%</FONT></TD></TR>
<TR STYLE="background-color: rgb(204,238,255)">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Software development</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">1,209</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">3,828</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">(68.4</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)%</FONT></TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Depreciation and amortization</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">839</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">274</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">206.2</FONT></TD>
    <TD STYLE="vertical-align: bottom; padding-bottom: 0.75pt; text-align: justify"><FONT STYLE="font-size: 10pt">%</FONT></TD></TR>
<TR STYLE="background-color: rgb(204,238,255)">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Total operating expenses</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">16,499</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">13,129</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">25.7</FONT></TD>
    <TD STYLE="vertical-align: bottom; padding-bottom: 2.25pt; text-align: justify"><FONT STYLE="font-size: 10pt">%</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Operating expenses
increased $3.4 million or 25.7% from $13.1 million in 2018 to $16.5 million in 2019. The components of operating expenses changed
as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Salaries, Wages and Payroll Taxes</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our salaries, wages
and payroll taxes consist of gross salaries, benefits, and payroll taxes associated with our executive management team and corporate
employees for the fiscal year ended August 31, 2019, increased by $1.7 million or 58.8% to $4.6 million from $2.9 million for the
fiscal year ended August 31, 2018. The increase is due to the increase in corporate employees including the addition of our technical
team hired to replace outside software developers at a higher average salary than previously hired corporate employees.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Share-Based Compensation</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Share-based compensation
increased by $0.3 million or 74.1% to $0.6 million for the fiscal year ended August 31, 2019. This increase was primarily due to
additional stock option awards granted to our corporate employees in 2018 and 2019 and share grants issued to our non-employee
board of directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Commissions </I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Commissions consist
of commissions payments made to third party brokers and inside sales personnel. Commissions increased by $0.1 million or 115.1%
to $0.2 million from $0.1 million in the fiscal year ended August 31, 2018. Commissions are primarily associated with compensation
to our sales force for sales as well as to our property and casualty agents. Commission expenses approximates 0.5% and 0.8% of
our gross billings for the years ended August 31, 2019, and 2018, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Professional Fees</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Professional fees consist
of legal fees, accounting and public company costs, board fees, and consulting fees. Professional fees for the year ended August
31, 2019, increased by $1.8 million or 88.5% to $3.9 million, from $2.1 million for the year ended August 31, 2018. The increase
is due to $1.1 million of increased legal fees and legal settlements, $0.3 million in increased sales and marketing related consulting,
$0.3 million increase for outsourced development related consulting costs, $0.3 million for increased administrative costs associated
with our Sunz workers&rsquo; compensation policy, and a $0.3 million reduction in public company related costs, primarily due to
reduced accounting and audit related costs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>General and Administrative Expenses</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our general and administrative
expenses consist of office rent and related overhead, software licenses, insurance, penalties, business taxes, travel and entertainment,
and other general business expenses. General and administrative expenses for the fiscal year ended August 31, 2019, increased by
$0.8 million or 27.2% to $3.8 million, from $3.0 million for the fiscal year ended August 31, 2018. The increase is due to $0.3
million in higher software license fees related to our mobile application, $0.2 million in increased accrued tax penalties, and
$0.3 million higher rent and overhead relating to our increased revenues, personnel, and the support required for the business
growth.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Marketing and Advertising</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our marketing and advertising
expenses consist of advertising, website costs, marketing promotions, corporate marketing, and tradeshow related costs. Marketing
and advertising costs increased by $0.7 million or 120.8% to $1.2 million in Fiscal 2019 from $0.5 million in the prior year. The
increase is due to increased marketing, improvements to our website, increased tradeshows and advertising, and increased costs
associated with marketing our mobile application.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Software Development</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our software
development expenses consist of outsourced research and development to third parties. Software development costs decreased
$2.6 million or 68.4% to $1.2 million for the fiscal year ended August 31, 2019 from $3.8 million in the prior year. The
decrease is due to $2.8 million lower expenses in 2019 related to work contracted to Kadima, with whom we are currently in
litigation over non-delivery of the software and represented the entire expense in 2018. In 2019, Kadima represented $1.0
million of the expense and we incurred $0.2 million for contracted offshore developers in India and South America to support
our U.S. based mobile application development.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Depreciation and Amortization</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Depreciation and amortization
increased by $0.6 million or 206.2% from our previous fiscal year. We capitalized $2.8 million of software development costs related
to the application development stage during the fiscal year ended August 31, 2018 and $0.9 million in 2019 for a total of $3.7
million in capitalized software development. The increase is due to increased amortization on that capitalized software.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Other expenses increased
from $5.3 million for the fiscal year ended August 31, 2018 to $6.8 million for the fiscal year ended August 31, 2019:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>For the Year Ended August 31,</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>2019</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>2018</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 72%; text-align: justify"><FONT STYLE="font-size: 10pt">Interest expense</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 11%; text-align: right"><FONT STYLE="font-size: 10pt">(8,507,000</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 11%; text-align: right"><FONT STYLE="font-size: 10pt">(1,751,000</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Loss on debt extinguishment</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(3,927,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Change in fair value of derivatives</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">2,569,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt; text-align: justify"><FONT STYLE="font-size: 10pt">Gain (Loss) associated with note defaults, net</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">811,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(3,500,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-bottom: 1pt; text-align: justify"><FONT STYLE="font-size: 10pt">Total Other income (expense)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(9,054,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(5,251,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Interest Expense</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Interest expense consists
of cash interest on interest bearing notes, financing charges for the excess of fair value over carrying amounts of notes issued
during any reporting period, amortization of recorded discount and associated deferred financing costs, and acceleration of discounts
and deferred financing costs due to early conversions on notes payable. Interest expense increased $6.7 million to $8.5 million
from $1.8 million in 2018. The increase is due to the increased interest expense and financing costs associated with the June 2018
Notes and the March 2019 Notes. The 2019 balances include: $2.6 million financing charge for the excess fair value over the carrying
amount of the June 2019 Notes, non-cash interest expense related to amortization of convertible notes discount of $5.6 million
and cash based interest of $0.9 million offset by the recovery of a $0.6 million interest accrual recorded into 2018 as part of
the registration rights penalties that was cured and reversed in December 2018. The 2018 balances include $0.6 million for the
accrual of the guaranteed twelve months of interest as part of the mandatory default clause of the debentures that was triggered
following the event of default, $0.9 million of non-cash interest related to the amortization of the debt discount and debt issuance
costs related to the June 2018 Notes, and $0.2 million is related to the cash basis coupon payments on the outstanding principal
amount of the convertible notes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Loss on Debt Extinguishment</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The balance in 2019
represents the additional loss required to be recorded for note conversions below the stated conversion rate and associated with
$8.4 million of principal conversions that were converted into common stock in Fiscal 2019. No such conversions occurred in 2018.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.35pt; text-align: justify"><I>Change in Fair Value of Derivative</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.35pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The balance in 2019
represents the reduction in fair value of the derivative liabilities recorded with the March 2019 Notes payable. No such derivative
existed in 2018. See also Note 8 to the Financial Statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.35pt; text-align: justify"><I>Gain (Loss) Associated with
Note default, Net</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.35pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For 2018, the loss
of $3.5 million relates to the accrual of penalties and liquidated damages associated with technical defaults under the registration
rights agreements relating to our 8% senior secured convertible notes. Those penalties were settled in Fiscal 2019 by the issuance
of $0.9 million of additional convertible notes in December 2018 resulting in a gain of $2.6 million recorded in Fiscal 2019. The
gain was offset by $1.8 million of accrued potential default damages related to our senior secured notes in default as of August
31, 2019.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.35pt; text-align: justify"><B><I>Loss from Continuing Operations</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.35pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As a result of the
explanations described above, the net loss from continuing operations for the fiscal year ended August 31, 2019 was $24.7 million
compared to a net loss of $18.0 million in the prior year representing an increase of $6.7 million or 37.0%.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Discontinued Operations</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Results for the discontinued
operations by period were as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;<B>For the Year Ended </B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>August 31, 2019</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>August 31, 2018</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-indent: -0.125in; padding-left: 0.125in; width: 72%"><FONT STYLE="font-size: 10pt">Revenues (gross billings of $313.3 million and $210.3 million less worksite employee payroll cost of $265.3 million and $177.2 million for the years ended respectively</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 11%; text-align: right"><FONT STYLE="font-size: 10pt">48,013,000</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 11%; text-align: right"><FONT STYLE="font-size: 10pt">33,139,000</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">Cost of revenue</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">36,452,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">27,970,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">Gross profit</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">11,561,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">5,169,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD><FONT STYLE="font-size: 10pt">Operating expenses:</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 12.1pt"><FONT STYLE="font-size: 10pt">Salaries, wages and payroll taxes</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">3,032,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">2,442,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-bottom: 1pt; padding-left: 12.1pt"><FONT STYLE="font-size: 10pt">Commissions</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">2,532,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">1,501,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt; padding-left: 24.2pt"><FONT STYLE="font-size: 10pt">Total operating expenses</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">5,564,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">3,943,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt; padding-left: 24.2pt"><FONT STYLE="font-size: 10pt">(Loss) income from discontinued operations, net of tax</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">5,997,000</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">1,226,000</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>(Loss) Income from Discontinued Operations</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">This represents the
operations for the clients transferred to Vensure pursuant to the Vensure Asset Sale, effective as of January 1, 2020, related
to the activity for the years ended August 31, 2019 and August 31, 2019.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our net revenue from
discontinued operations increase of $14.9 million or 44.9% increase from $33.1 million in 2018 to $48.0 million in 2019 is primarily
driven by the increase in business clients and the workplace employees associated with those clients. Active WSEs increased by
3,500 or 43.8% from 8,000 at the end of 2018 to 11,500 at the end of 2019.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Cost of Revenue</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our cost of revenue
includes the costs of employer side taxes and workers&rsquo; compensation insurance coverage. Cost of revenues increased $8.5 million
or 30.3% to $36.5 million in 2019 from $28.0 million in 2018.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The change in cost
of revenues was due to the net effect of the increase in WSEs net revenues, supported by the increase in WSEs offset by a reduction
in employer tax expenses of $0.8 million due to the combination of favorable rate exchanges and a non-recurring reversal of a tax
expense accrual made in Fiscal 2018 and reversed in Fiscal 2019 due to a tax reimbursement between the U.S. federal government
and the State of California.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Workers&rsquo; compensation
decreased due to the combination of our operational focus on loss reduction, the full implementation of the Sunz Insurance Company
(&ldquo;Sunz&rdquo;) workers&rsquo; compensation policy for 2019 and expense reduction due to a non-recurring return of premium
related to prior reporting periods. We implemented the Sunz policy in July, 2018, and therefore the cost reduction only impacted
our workers&rsquo; compensation cost for two out of twelve months in 2018 compared to a full year for 2019.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Gross Profit</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Gross profit from discontinued
operations increased $6.4 million or 123.7% to $11.6 million in 2019 from $5.2 million in 2018. The increase is due to the combination
of increased net revenues and improvement in gross profit percentages. Gross profit percentage improved 8.4% from 15.6% of revenues
for the fiscal year ended August 31, 2018 to 24.0% for the fiscal year ended August 31, 2019 due to the cost of revenue improvements
noted above and including the $0.8 million tax accrual and other cost savings and tax rate improvements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Operating Expenses</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Operating expenses
related to discontinued operations represent the salaries and commissions for our employees transferred to Vensure as a result
of the Vensure Asset Sale.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Salaries, Wages and Payroll Taxes</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Salaries consist of
gross salaries, benefits, and payroll taxes associated with the sales and support employees transferred to Vensure. Discontinued
salaries for the fiscal year ended August 31, 2019, increased by $0.6 million to $3.0 million from $2.4 million for the fiscal
year ended August 31, 2018. The increase is due to the increase in staff required to support the increase in business levels.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Commissions</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Commissions include
payments made to third party brokers and inside sales personnel for business activity that was transferred in the Vensure transaction.
Discontinued commissions increased by $1.0 million or 68.7% to $2.5 million, from $1.5 million for the fiscal year ended August
31, 2018. Commissions are primarily associated with compensation to our sales force for sales as well as to our property and casualty
agents and the increase is due to increased business levels. Commission expenses approximates 0.77% and 0.72% of our gross billings
for the fiscal years ended August 31, 2019, and 2018, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Income from Discontinued Operations</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Income from Discontinued
Operations represents the income from the business transferred to Vensure. The income increased 389.2% to $6.0 million from $1.2
million due to increased business activity as described above.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.35pt; text-align: justify"><I>Net Loss</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.35pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As a result of the
explanations described above, the net loss for the fiscal year ended August 31, 2019, was $18.7 million, representing a $24.7 million
loss from continuing operations, offset by $6.0 million income from discontinued operations and compared to a net loss of $16.8
million in the prior year representing a loss from discontinued operations of $18.0 million offset by income from discontinued
operations of $1.2 million.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Three Months and Nine Months Ended
May 31, 2020 Compared to the Three and Nine Months Ended May 31, 2019</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following table
summarizes the condensed consolidated results of our operations for the three and nine months ended May 31, 2020, and May 31,
2019, prior to the reclassification of discontinued operations.&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="white-space: nowrap; text-indent: -0.125in; padding-left: 0.125in"><B>&nbsp;</B></TD>
    <TD STYLE="white-space: nowrap"><B>&nbsp;</B></TD>
    <TD STYLE="white-space: nowrap"><B>&nbsp;</B></TD>
    <TD COLSPAN="5" STYLE="border-bottom: Black 1pt solid; white-space: nowrap; text-align: center"><B>For the Three Months Ended&nbsp;</B></TD>
    <TD STYLE="white-space: nowrap"><B>&nbsp;</B></TD>
    <TD STYLE="white-space: nowrap"><B>&nbsp;</B></TD>
    <TD STYLE="white-space: nowrap"><B>&nbsp;</B></TD>
    <TD COLSPAN="5" STYLE="border-bottom: Black 1pt solid; white-space: nowrap; text-align: center"><B>For the Nine Months
    Ended&nbsp;</B><B>&nbsp;</B></TD>
    <TD STYLE="white-space: nowrap"><B>&nbsp;</B></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0"></TD>
    <TD STYLE="padding-bottom: 1pt; text-align: center"><B>&nbsp;</B></TD>
    <TD STYLE="padding-bottom: 1pt; text-align: center"><B>&nbsp;</B></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>May 31,<BR>
    2020</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt; text-align: center"><B>&nbsp;</B></TD>
    <TD STYLE="padding-bottom: 1pt; text-align: center"><B>&nbsp;</B></TD>
    <TD STYLE="padding-bottom: 1pt; text-align: center"><B>&nbsp;</B></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: center"><B>May 31,<BR>
2019</B></TD>
    <TD STYLE="padding-bottom: 1pt; text-align: center"><B>&nbsp;</B></TD>
    <TD STYLE="padding-bottom: 1pt; text-align: center"><B>&nbsp;</B></TD>
    <TD STYLE="padding-bottom: 1pt; text-align: center"><B>&nbsp;</B></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: center"><B>May 31,<BR>
    2020</B></TD>
    <TD STYLE="padding-bottom: 1pt; text-align: center"><B>&nbsp;</B></TD>
    <TD STYLE="padding-bottom: 1pt; text-align: center"><B>&nbsp;</B></TD>
    <TD STYLE="padding-bottom: 1pt; text-align: center"><B>&nbsp;</B></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: center"><B>May 31,<BR>
2019</B></TD>
    <TD STYLE="padding-bottom: 1pt; text-align: center"><B>&nbsp;</B></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-indent: -0.125in; padding-left: 0.125in"><FONT STYLE="font-size: 10pt">Revenues (gross billings of $14.4 million and $11.9 million less worksite employee payroll cost of $12.4 million and $10.3 million, respectively for the three months ended; gross billings of $47.0 million and $25.9 million less worksite employee payroll cost of $40.3 million and $22.3 million, respectively for nine months ended)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">2,014,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">1,638,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">6,775,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">3,658,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">Cost of revenue</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">1,873,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">1,467,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">6,051,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">3,126,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">Gross profit</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">141,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">171,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">724,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">532,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD><FONT STYLE="font-size: 10pt">Operating expenses:</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 12.1pt"><FONT STYLE="font-size: 10pt">Salaries, wages, and payroll taxes</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">1,793,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">1,152,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">5,246,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">3,182,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-left: 12.1pt"><FONT STYLE="font-size: 10pt">Stock-based compensation &ndash; general and administrative</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">150,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(5,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">895,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">154,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 12.1pt"><FONT STYLE="font-size: 10pt">Commissions</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">27,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">64,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">137,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">130,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-left: 12.1pt"><FONT STYLE="font-size: 10pt">Professional fees</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">439,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">1,280,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">2,276,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">2,799,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 12.1pt"><FONT STYLE="font-size: 10pt">Software development</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">686,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">222,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">1,390,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">1,249,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-left: 12.1pt"><FONT STYLE="font-size: 10pt">Depreciation and amortization</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">545,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">222,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">1,025,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">603,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt; padding-left: 12.1pt"><FONT STYLE="font-size: 10pt">General and administrative</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">1,054,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">1,541,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">2,617,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">3,654,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-bottom: 1pt; padding-left: 24.2pt"><FONT STYLE="font-size: 10pt">Total operating expenses</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">4,694,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">4,476,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">13,586,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">11,771,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-bottom: 1pt; padding-left: 24.2pt"><FONT STYLE="font-size: 10pt">Operating Loss</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(4,553,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(4,304,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(12,862,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(11,239,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD><FONT STYLE="font-size: 10pt">Other (expense) income:</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 12.1pt"><FONT STYLE="font-size: 10pt">Interest expense</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(559,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(4,345,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(2,524,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(6,270,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-left: 12.1pt"><FONT STYLE="font-size: 10pt">Expense related to preferred option exchange</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(62,091,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(62,091,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 12.1pt"><FONT STYLE="font-size: 10pt">Expense related to modification of warrants</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(22,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-left: 12.1pt"><FONT STYLE="font-size: 10pt">Loss from debt conversion</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(2,842,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(3,500,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 12.1pt"><FONT STYLE="font-size: 10pt">Inducement loss</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(57,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(2,273,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(624,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(3,829,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-left: 12.1pt"><FONT STYLE="font-size: 10pt">Loss on debt extinguishment</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(1,592,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(1,592,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 12.1pt"><FONT STYLE="font-size: 10pt">Change in fair value derivative and warrant liability</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">6,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">4,748,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">1,777,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">4,748,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-left: 12.1pt"><FONT STYLE="font-size: 10pt">Loss on convertible note settlement</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">2,611,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt; padding-left: 12.1pt"><FONT STYLE="font-size: 10pt">Gain on convertible note penalties accrual</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">760,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(204,238,255)">
    <TD STYLE="width: 55%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 10%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 10%">&nbsp;</TD>
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 10%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>

<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt; padding-left: 24.2pt"><FONT STYLE="font-size: 10pt">Total other (expense) income \</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(67,135,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(1,870,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(67,816,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(2,740,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">Loss from continuing operations</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(71,688,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(6,174,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(80,678,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(13,979,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">Income (Loss) from discontinued operations</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-bottom: 1pt; text-indent: 22.5pt"><FONT STYLE="font-size: 10pt">Income (Loss) from discontinued operations</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(1,490,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">1,178,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(1,293,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">4,596,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt; text-indent: 22.5pt"><FONT STYLE="font-size: 10pt">Gain from asset sale</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">15,682,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">Total Income (Loss) from discontinued operations, net of tax</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(1,490,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">1,178,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">14,389,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">4,596,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-bottom: 2.5pt; padding-left: 24.2pt"><FONT STYLE="font-size: 10pt">Net Loss</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">(73,178,000</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">(4,996,000</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">(66,289,000</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">(9,383,000</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD><FONT STYLE="font-size: 10pt">Net Income (Loss) gain per share, Basic and diluted</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 10pt">Continuing operations</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(2.73</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(7.92</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(5.49</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(18.54</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD><FONT STYLE="font-size: 10pt">Discontinued operations</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating income (loss)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(0.06</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">1.51</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(0.09</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">6.10</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gain on sale of assets</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">1.07</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total discontinued operations</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(0.06</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">1.51</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">0.98</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">6.10</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD><FONT STYLE="font-size: 10pt">Net income (loss) per share of common stock &ndash; Basic and diluted</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">(2.79</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">(6.41</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">(4.51</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 10pt">)&nbsp;</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">(12.44</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Revenue</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Revenue for the three
months ended May 31, 2020, increased by $0.4 million, or 25.0%, to $2.0 million, compared to $1.6 million for the three months
ended May 31, 2019. Revenue for the nine months ended May 31, 2020 increased by $3.1 million, or 83.8%, to $6.8 million, compared
to $3.7 million for the nine months ended May 31, 2019.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Gross billings are
a non-GAAP measurement and are the metric in which we currently earn our revenue. Gross billings for the three months ended May
31, 2020, were earned from billings to clients to whom we provide staff or workforce management support. Gross billings for the
three months ended May 31, 2020, increased by $2.5 million, or 21.3%, to $14.4 million, compared to $11.9 million for the three
months ended May 31, 2019. Gross billings for the nine months ended May 31, 2020, increased by $21.1 million, or 81.5%, to $47.0
million from $25.9 million for the nine months ended May 31, 2019.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The gross payroll cost
of WSEs accounted for 86.0% and 86.2% of our gross billings for the three months ended May 31, 2020 and May 31, 2019, respectively.
As such, the mark-up components accounted for 14.0% and 13.8% of our gross billings for the three months ended May 31, 2020 and
May 31, 2019, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The gross payroll cost
of WSEs accounted for 85.6% and 85.9% of our gross billings for the nine months ended May 31, 2020 and May 31, 2019, respectively.
As such, the mark-up components accounted for 14.4% and 14.1% of our gross billings for the nine months ended May 31, 2020 and
May 31, 2019, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The increase in revenue
was primarily due to an increase in WSEs from a billed average of 1,650 employees in the three months ended May 31, 2019 to a billed
average of 2,700 employees in the three months ended May 31, 2020. Revenues are recognized ratably over the payroll period as WSEs
perform their service at the client worksite.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Cost of Revenues</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Cost of revenues mainly
includes the costs of employer-side taxes and workers&rsquo; compensation insurance coverage and employee benefits. Our cost of
revenues for the three months ended May 31, 2020, increased by $0.4 million, or 27.7%, to $1.9 million compared to $1.5 million
for the three months ended May 31, 2019. Our cost of revenues for the nine months ended May 31, 2020, increased by $2.9 million,
or 93.6%, to $6.1 million compared to $3.1 million in the nine months ended May 31, 2019.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The increase in cost
of revenue can be attributed to the additional WSEs we are servicing, which increased by 1,050 from a billed average of 1,650 employees
for the three months ended May 31, 2019, to a billed average of 2,700 employees for the three months ended May 31, 2020. Cost of
revenue for the three and nine months ended May 31, 2020 included $0.2 million in additional expense for workers&rsquo; compensation
reserves as a result of the COVID-19 loss reserve increase requirements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Gross Profit</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Gross profit
decreased 17.5% to $141,000 for the three months ended May 31, 2020 from $171,000 for the three months ended May 31, 2019.
The gross profit, as a percentage of revenues, decreased from 10.5% for the three months ended May 31, 2019, to 7.0% for the
three months ended May 31, 2020. Gross Profit increased 36.1% to $724,000 for the nine months ended May 31, 2020 from
$532,000 for the nine months ended May 31, 2019. The gross profit, as a percentage of revenues, decreased from 14.5% for the
nine months ended May 31, 2019, to 10.7% for the nine months ended May 31, 2020.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The changes to our
gross profit as a percent of revenue is attributable to changes in paid losses and the development of open workers&rsquo; compensation
claims during the period, primarily related to the increased reserve requirements as a result of the COVID-19 pandemic.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Operating Expenses</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following table
presents certain information related to our operating expenses (unaudited):</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>For the Three Months Ended</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;<B>For the Nine Months Ended </B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>May 31, 2020</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>May 31, 2019</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>May 31, 2020</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>May 31, 2019</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD><FONT STYLE="font-size: 10pt">Operating expenses:</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 48%; padding-left: 12.1pt"><FONT STYLE="font-size: 10pt">Salaries, wages, and payroll taxes</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">1,793,000</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">1,152,000</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">5,246,000</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">3,182,000</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-left: 12.1pt"><FONT STYLE="font-size: 10pt">Stock-based compensation &ndash; general and administrative</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">150,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(5,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">895,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">154,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 12.1pt"><FONT STYLE="font-size: 10pt">Commissions</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">27,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">64,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">137,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">130,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-left: 12.1pt"><FONT STYLE="font-size: 10pt">Professional fees</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">439,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">1,280,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">2,276,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">2,799,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 12.1pt"><FONT STYLE="font-size: 10pt">Software development</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">686,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">222,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">1,390,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">1,249,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-left: 12.1pt"><FONT STYLE="font-size: 10pt">Depreciation and amortization</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">545,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">222,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">1,025,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">603,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt; padding-left: 12.1pt"><FONT STYLE="font-size: 10pt">General and administrative</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">1,054,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">1,541,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">2,617,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">3,654,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-bottom: 1pt; padding-left: 24.2pt"><FONT STYLE="font-size: 10pt">Total operating expenses</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">4,694,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">4,476,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">13,586,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">11,771,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Operating expenses
for the three months ended May 31, 2020, increased by $0.2 million, or 4.9%, to $4.7 million compared to $4.5 million for the three
months ended May 31, 2019. The increase is due to increases in salaries of $0.6 million, stock-based compensation of $0.1 million
and product development costs of $0.5 million offset by decreases of $0.9 million in professional fees and $0.2 million of general
and administrative expenses.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Operating expenses
for the nine months ended May 31, 2020, increased by $1.8 million, or 15.4%, to $13.6 million compared to $11.8 million for the
nine months ended May 31, 2019. The increase is due to increases in salaries of $2.1 million, stock-based compensation of $0.7
million and product development of $0.1 million offset by $0.6 million decrease in professional fees and $0.6 million in general
and administrative expenses. The components of operating expenses changed as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Salaries, Wages and Payroll Taxes</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">These consist of gross
salaries, benefits, and payroll taxes associated with our executive management team and corporate employees. For the three months
ended May 31, 2020, salaries, wages and payroll taxes increased by $0.6 million, or 55.7%, to $1.8 million compared to $1.2 million
for the three months ended May 31, 2019. For the nine months ended May 31, 2020, salaries, wages and payroll taxes increased by
$2.1 million, or 64.8%, to $5.2 million compared to $3.2 million for the nine months ended May 31, 2019. The increase for both
periods is due to the increase in corporate employees, primarily consisting of the hiring of our internal research and development
team in the third and fourth quarters of Fiscal 2019.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Stock Based Compensation</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Stock based compensation
consists of expenses related to vested stock options granted to our employees. This compensation increased $0.2 million, or 3,257%,
for the three months ended May 31, 2020, from a $5,000 credit in the three months ended May 31, 2019, and increased $0.7 million,
or 483%, to $0.9 million for the nine months ended May 31, 2020, compared to $0.2 million for the nine months ended May 31, 2019.
The three month increase was due to a one-time credit in the May 2019 quarter and the nine month increase was due to one-time vesting
of all options granted to employees transferred under the Vensure Asset Sale.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Commissions</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Commissions consist
of commission payments made to third party brokers and inside sales personnel. Commissions for the three and nine months ended
May 31, 2020 and May 31, 2019 decreased less than $0.1 million for the three month period and remained consistent at $0.1 million
for the nine month period. Our sales model changed from a high commission external sales force for the clients transferred pursuant
to the Vensure Asset Sale to an inside sales force with much lower commission rates.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Professional Fees</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Professional fees
consist of legal fees, accounting and public company costs, board fees, and consulting fees. Professional fees for the three
months ended May 31, 2020, decreased by $0.9 million, or 69.6%, to $0.4 million, from $1.3 million for the three months ended
May 31, 2019. Professional fees for the nine months ended May 31, 2020, decreased by $0.6 million, or 20.5%, to $2.3 million,
from $2.8 million for the nine months ended May 31, 2019. The decrease is due to lower legal fees related to litigation
matters which were resolved in January 2020.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>External Software Development</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">External software development
consists of payments to third party contractors for licenses, software development, and IT related spending for the development
of our HRIS platform and mobile application. For the three months ended May 31, 2020, external software development increased by
$0.5 million, or 209.8%, to $0.7 million from $0.2 million. For the nine months ended May 31, 2020, external software development
decreased by $0.1 million, or 11.3%, to $1.4 million from $1.2 million. The increase is due to increased expenditures related to
the development of our mobile application and related HRIS platform.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Depreciation and Amortization</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Depreciation and amortization
expenses represent depreciation on our equipment and amortization on our capitalized internally developed or purchased software.
For the three months ended May 31, 2020, depreciation and amortization expenses increased by $0.3 million, or 145.5%, to $0.5 million.
For the nine months ended May 31, 2020, depreciation and amortization expenses increased by $0.4 million, or 70.8%, to $1.0 million.
The increase was due to higher software amortization, including a non-recurring write-off of $0.3 million in the May 31, 2020 quarter.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>General and Administrative</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">General and administrative
expenses consist of office rent and related overhead, marketing, insurance, penalties, business taxes, travel and entertainment,
depreciation and amortization and other general business expenses. General and administrative expenses for the three months ended
May 31, 2020, decreased by $0.5 million, or 46.3%, to $1.1 million from $1.5 million in the three months ended May 31, 2019, and
decreased $1.1 million, or 28.4%, to $2.6 million for the nine months ended May 31, 2020 from $3.7 million in the nine months ended
May 31, 2019. The decrease was due to a reduction in marketing expenses driven by a reversal of a $0.3 million accrual recorded
in the fiscal year ended August 31, 2017 (&ldquo;Fiscal 2017).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Other Income and Expenses</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>For the Three Months Ended</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;<B>For the Nine Months Ended </B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>May 31, 2020</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>May 31, 2019</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>May 31, 2020</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>May 31, 2019</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD><FONT STYLE="font-size: 10pt">Other (expense) income:</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 44%; padding-left: 12.1pt"><FONT STYLE="font-size: 10pt">Interest expense</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 11%; text-align: right"><FONT STYLE="font-size: 10pt">(559,000</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 11%; text-align: right"><FONT STYLE="font-size: 10pt">(4,345,000</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 11%; text-align: right"><FONT STYLE="font-size: 10pt">(2,524,000</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 11%; text-align: right"><FONT STYLE="font-size: 10pt">(6,270,000</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-left: 12.1pt"><FONT STYLE="font-size: 10pt">Expense related to preferred option exchange</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(62,091,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(62,091,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 12.1pt"><FONT STYLE="font-size: 10pt">Expense related to modification of warrants</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(22,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&nbsp;-</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-left: 12.1pt"><FONT STYLE="font-size: 10pt">Loss from debt conversion</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(2,842,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(3,500,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 12.1pt"><FONT STYLE="font-size: 10pt">Inducement loss from debt conversion</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(57,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(2,273,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(624,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(3,829,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-left: 12.1pt"><FONT STYLE="font-size: 10pt">&nbsp;Loss on debt extinguishment</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(1,592,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(1,592,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 12.1pt"><FONT STYLE="font-size: 10pt">Gain on change in fair value derivative and warrant liability</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">6,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">4,748,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">1,777,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">4,748,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-left: 12.1pt"><FONT STYLE="font-size: 10pt">Gain on convertible note settlement</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">2,611,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt; padding-left: 12.1pt"><FONT STYLE="font-size: 10pt">Gain on convertible note penalties accrual</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">760,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-bottom: 1pt; padding-left: 24.2pt"><FONT STYLE="font-size: 10pt">Total other income (expense)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(67,135,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(1,870,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(67,816,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(2,740,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Interest Expense</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Interest expense represents
cash interest paid and non-cash expense resulting from the amortization of our note discount and deferred financing fees on our
convertible notes payable. Interest expense decreased $3.8 million, or 87.1%, to $0.5 million and decreased $3.7 million, or 59.7%,
to $2.5 million for the three and nine months ended May 31, 2020, respectively, from the prior year periods. The changes are due
to differences in the amortization of the different series of convertible notes outstanding.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Expense Related to Preferred Options</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Expenses related to
preferred options represents a non-recurring charge reflecting the fair value estimate of the preferred share options issued to
the Option Shareholders that were deemed to be exercisable in January 2020, and became exchangeable for our common stock on a one-for-one
basis pursuant to the amendment to our Articles of Incorporation filed with the Secretary of State of the State of Wyoming on March
25, 2020.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Expenses Related to Modification of
Warrants</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Expenses related to
modification of warrants represents the difference in fair value for the June 2018 Note Warrants which had their exercise price
reduced from $70 per share to $40 per share in December 2019.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Loss from Debt Conversion</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Loss from debt conversion
represents the acceleration of the pro-rated remaining note discount and deferred financing fees associated with March 2019 Notes,
as exchanged in either December 2019 or March 2020, that were either converted or repaid in cash during the three and nine months
ended May 31, 2020.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Inducement Loss</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Inducement loss represents
the difference in fair value on the date of note conversion between the closing market price and the conversion price per share,
and decreased $2.2 million, or 97.5%, and $3.2 million, or 83.7%, for the three and nine months ended May 31, 2020, respectively
from the prior year periods. The change was caused by lower conversion amounts and conversions closer to market price for the 2020
periods.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Loss on Debt Extinguishment</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Loss on debt extinguishment represents $0.5 million for the
fair value of the common stock issued in exchange for the March 2019 Warrants cancelled in the March 2020 note amendment and exchange,
and $1.0 million for the acceleration of the debt discount and deferred financing fees associated with the remaining March 2019
exchange or December 2019 exchange. These notes were amended in March 2020 and accounted for as debt extinguishment. No such transactions
existed for the three and nine months ended May 31, 2019.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Change in Fair Value Derivative and
Warrant Liability</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Change in fair value
derivative and warrant liability represents the mark to market of our derivative liabilities created by the March 2019 Notes beneficial
conversion feature and related detachable warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Gain on Convertible Note Settlement</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">This represents the
recovery of previously accrued convertible note penalties related to the June 2018 default. For the three and nine months ended
May 31, 2019, we recorded $3.5 million of penalty accrual as a result of claims by the noteholders as of August 31, 2018 and November
30, 2018. We satisfied this liability with the issuance of $889,000 of additional convertible notes in December 2018 and recorded
a penalty recovery of $2,611,000 for the nine months ended May 31, 2019.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Gain on Convertible Note Penalties Accrual</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Gain on convertible
note penalties accrual represents the recovery of previously accrued convertible note penalties related to the June 2019 default.
For the nine months ended May 31, 2020, we recorded a $1.8 million penalty accrual for litigation damages and default interest
as of August 31, 2019 and November 30, 2019. We settled all note related litigation, as described above and in Note 5 to the financial
statements, in January 2020, which resulted in a gain due to the release of $760,000 for excess damages accrued liabilities in
excess of paid claims.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Loss from Continuing Operations</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As a result of the
explanations described above, the loss from continuing operations was $71.7 million for the three months ended May 31, 2020, compared
to a net operating loss of $6.2 million for the three months ended May 31, 2019, and a loss of $80.7 million for the nine months
ended May 31, 2020 compared to a loss of $14.0 million for the nine months ended May 31, 2019. The increase is due to the non-recurring
charges related to our recapitalization including expenses related to the Preferred Options and convertible notes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Discontinued Operations</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Results for the discontinued operations
by period were as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">For the Three Months Ended</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 10pt">&nbsp;<B>For the Nine Months Ended </B></FONT></TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>May 31,</B></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>2020</B></P></TD><TD STYLE="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>May 31,</B></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>2019</B></P></TD><TD STYLE="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>May 31, </B></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>2020</B></P></TD><TD STYLE="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>May 31,</B></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>2019</B></P></TD><TD STYLE="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 48%; font-size: 10pt; text-align: left">Revenues (gross billings of $0 and $82.3 million less worksite employee payroll cost of $0 million and $69.7 million, respectively for the three months ended; gross billings of $120.0 million and $221.7 million less worksite employee payroll cost of $103.3 million and $187.3 million, respectively for Nine Months ended)</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">&mdash;</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">12,666,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">17,138,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">34,354,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-bottom: 1pt">Cost of revenue</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">1,490,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">10,125,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">17,025,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">25,567,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">Gross profit (loss)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(1,490,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">2,541,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">113,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">8,787,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left">Operating expenses:</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 0.125in; font-size: 10pt; text-align: left">Salaries, wages and payroll taxes</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&mdash;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">662,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">658,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2,414,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-left: 0.125in; font-size: 10pt; padding-bottom: 1pt">Commissions</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">701,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">748,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">1,777,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 0.25in; font-size: 10pt; text-align: left; padding-bottom: 1pt">Total operating expenses</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">1,363,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">1,406,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">4,191,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">(Loss) income from discontinued operations, net of tax</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">(1,490,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">1,178,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">(1,293,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">4,596,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">Gain from asset sale</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">15,682,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">Total Income from discontinued operations, net of tax</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">(1,490,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">1,178,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">14,389,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">4,596,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>(Loss) Income from Discontinued Operations</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">This represents the
operations for the clients transferred to Vensure pursuant to the Vensure Asset Sale, effective as of January 1, 2020. As such,
the operating activities represent zero months and four months of billings, revenues, cost of revenues and operating expenses for
the three and nine months ended May 31, 2020 and billings, revenues, cost of revenues and operating expenses for the three and
nine months ended May 31, 2019. For the three and nine months ended May 31, 2020&#8239;we recorded an additional expense of $1.5
million due to a change in the estimated loss reserves required for the retained workers compensation claims due to higher loss
reserve requirements set by our actuary contractors, in part due to the COVID-19 pandemic. Although claims in this workers compensation
pool typically would not qualify for a COVID-19 related liability, the rate increase for reserve requirements increased and changed
our loss estimates. We will continue to evaluate these claims and the related claims reserve rates in the next fiscal quarter.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Revenues</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Revenues decreased
$12.7 million to $0, and decreased $17.2 million to $17.1 million, for the three and nine months ended May 31, 2020, compared to
the three and nine months ended May 31, 2019. The decrease is consistent with the change in billing months recorded.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Cost of Revenue</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Cost of revenue decreased
$8.6 million to $1.5 million and decreased $8.5 million to $17.0 million for the three and nine months ended May 31, 2020, compared
to the three and nine months ended May 31, 2019. The changes reflect the net effect of the revenue decreases offset by the $1.5
million additional workers compensation reserve accrual recorded for the residual workers compensation claim liability estimates
associated with the existing WSEs being transferred under the Asset Sale.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Gross Profit (loss)</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Gross profit (loss)<I>&nbsp;</I>changes
are the result of the combined gross profit decrease from decreased revenues in addition to the $1.5 million additional workers
compensation expense accrual recorded in the three and nine months ended May 31, 2020.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Operating Expenses</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Operating expenses
represent the salaries and commissions for our employees transferred to Vensure as a result of the Vensure Asset Sale.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>




<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Gain from Asset Sale</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Gain from asset sale&nbsp;of
$0 and $15.7 million for the three and nine months ended May 31, 2020, respectively, represents the net present value of the proceeds
received or receivable from the Vensure Asset Sale, as reduced by the net financial assets transferred. The terms of the transaction
consisted of a total of $19.2 million of cash proceeds including $9.7 million upon closing and $9.5 million paid over 4 years beginning
in April 2020. The gain represents the $19.2 million, reduced by the $1.5 million of financial assets to be provided, and further
reduced by a $1.8 million discount recorded to long term portion of the four-year note receivable. We believe, based upon&#8239;our
evaluation, that&#8239;we will be able to utilize existing tax NOL&rsquo;s to offset any material tax liabilities generated by
the Vensure Asset Sale.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Income (loss) on Discontinued Operations</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Income (loss) on discontinued
operations represents the gain or loss on discontinued operations for each period, adjusted for the $15.7 million gain from asset
sale for the nine months ended May 31, 2020, as described above.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Net Income (loss)</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Net income (loss)&nbsp;increased
to net loss of $73.2 million from a net loss of $5.0 million for the three months ended May 31, 2020 and May 31, 2019, respectively.
Net income (loss) increased to a net loss of $66.3 million from a net loss of $9.4 million for the nine months ended May 31, 2020
and May 31, 2019, respectively. For the periods reported, net income was impacted primarily by the changes in discontinued operations
and the changes in other expenses related to the convertible note related expenses of approximately $5.0 million for the three
months end, and by the one-time charge for the expense related to the preferred options of $62.1 million.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Liquidity and Capital Resources</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Going Concern</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of May 31, 2020,
we had cash of $10.8 million and a working capital surplus of $3.4 million. During the nine months ended May 31, 2020, we used
approximately $10.6 million of cash from our continuing operations and repaid $1.2 million of convertible notes, after receiving
$9.5 million of cash from the Vensure Asset Sale, and closed an underwritten public offering, receiving $10.3 million, net of offering
costs. We have incurred recurring losses resulting in an accumulated deficit of $111.2 million as of May 31, 2020. The recurring
losses and cash used in operations raise substantial doubt as to our ability to continue as going concern within one year from
issuance date of the financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Historically, our principal source of financing
has come through the sale of our common stock and issuance of convertible notes. We successfully completed an IPO on Nasdaq on
June 29, 2017, raising a total of $12 million ($10.9 million net of costs). In June 2018, we completed a private placement of 8%
senior secured convertible notes to institutional investors raising $9 million of gross proceeds ($8.4 million net of costs). In
March 2019, we completed a private placement of senior secured notes to institutional investors raising $3.75 million ($3.3 million
net of costs). Between September 1, 2019 and May 22, 2020 all convertible notes outstanding as of August 31, 2019 were repaid or
converted into equity. On May 26, 2020, we successfully completed an underwritten public offering raising a total of $12 million
($10.3 million net of costs) and closed an additional $1.35 million ($1.25 million net of costs) between June 1, 2020 and July
7, 2020 pursuant to the underwriter&rsquo;s overallotment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our plans and expectations for the next
12 months include raising additional capital to help fund expansion of our operations, including the continued development and
support of our IT and HR platform. We engaged an investment banking firm to assist us in (i) preparing information materials, (ii)
advising us concerning the structure, price and conditions and (iii) organizing the marketing efforts with potential investors
in connection with a financing transaction.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In January 2020, pursuant
to the Vensure Asset Sale, we assigned approximately 88% of our customer contracts in exchange for $9.7 million in cash at closing
and received an additional $1.0 million of cash, net of $0.9 million of cash transferred, and expect to receive an additional $7.5
million over the four years following the transaction close, subject to certain closing conditions. We transferred $1.6 million
of working capital, including $0.9 million of cash, and the business transfer represented approximately $6.0 million of our annualized
gross profit.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We continue to experience
significant growth in the number of WSEs, which we believe will generate additional administrative fees that will offset the current
level of operational cash burn. We retained the high growth business which increased over 100% of billings and revenue growth.
We also retained the rights to monetize the existing pool of WSEs and have begun to roll out our delivery and scheduling applications
to our customers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our management believes, but cannot be certain, that our current
cash position, along with our revenue growth and the financing from potential institutional investors, will be sufficient to fund
our operations for at least a year from the date of the issuance of the financial statements contained elsewhere in this prospectus.
We expect to benefit from certain tax holiday and loan programs created by the CARES Act in response to the COVID-19 economic crisis.
If these sources do not provide the capital necessary to fund our operations during the next twelve months from the date of issuance
of the financial statements contained elsewhere in this prospectus, we may need to curtail certain aspects of our operations or
expansion activities, consider the sale of additional assets, or consider other means of financing. We can give no assurance that
we will be successful in implementing our business plan and obtaining financing on terms advantageous to us, or that any such additional
financing will be available to us. These condensed consolidated financial statements do not include any adjustments for this uncertainty</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Cash Flows</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following table
sets forth a summary of changes in cash flows for the nine months ended May 31, 2020 and 2019:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: justify">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">For the Nine Months Ended<BR> <BR> May 31,</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: justify">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2020</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2019</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 74%; font-size: 10pt; text-align: justify">Net cash used in operating activities</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">(10,518,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">)</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">(1,623,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify">Net cash provided by (used in) investing activities</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">10,667,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(581,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 1pt">Net cash provided by financing activities</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">9,125,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">3,489,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 2.5pt">Change in cash</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">9,274,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">1,285,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of May 31, 2020,
we had cash of $10.8 million and a working capital surplus of $3.4 million.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">During the nine months
ended May 31, 2020, we used approximately $10.5 million of cash in our operations of which $10.6 million was used in continuing
operations and $0.1 million was provided by discontinued operations. Cash used in continuing operations consisted of a net loss
of $80.7 million, reduced by working capital changes of $0.7 million and non-cash charges of $69.4 million including $62.1 million
in expenses related to Preferred Options, $8.0 million of non-cash expenses related to our convertible notes, $1.0 million of depreciation
and offset by a $1.8 million gain on derivative liability valuation. The working capital changes were primarily workers&rsquo;
compensation related.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">During the nine months
ended May 31, 2019, we used $1.6 million of cash in our operations of which $8.8 million was used in continuing operations and
$7.2 million was provided by discontinued operations. Cash used in continuing operations consisted of a net loss of $14.0 million
reduced by $1.0 million of working capital changes, $4.1 million of net non-cash charges consisting primarily of $7.9 million of
expenses related to our convertible notes including inducement loss, interest amortization, and deferred financing charges, $0.6
million of depreciation, and offset by a $4.7 million gain on derivative liability valuation. The working capital changes primarily
reflect increases in accrued liabilities net of changes in workers&rsquo; compensation liabilities and accounts receivable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The cash provided by
investing activities for the nine months ended May 31, 2020 primarily reflects proceeds from the Vensure Asset Sale. Cash used
by investing activities for the nine months ended May 31, 2019, primarily reflects purchases of assets related to our mobile application
launch.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For the nine months
ended May 31, 2020, cash from financing activities of $9.1 million resulted primarily from the receipt of $12.2 million in gross
proceeds ($10.3 million net of original issue discount and closing costs) from the May 2020 underwritten public offering offset
by $1.2 million repayment of convertible notes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For the nine months
ended May 31, 2019, cash from financing activities of $3.5 million resulted primarily from $3.75 million in gross proceeds ($3.3
million net of original issue discount and closing costs) from the issuance of the March 2019 Notes, exercise of warrants for common
stock of $0.7 million, and $0.4 million repayment of the Senior Convertible Notes in cash.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following table
sets forth a summary of changes in cash flows for the twelve months ended August 31, 2019 and 2018:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: justify">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">For the Year Ended<BR> <BR> August 31,</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: justify">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2019</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2018</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 74%; font-size: 10pt; text-align: justify">Net cash used in operating activities</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">(2,086,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">)</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">(9,538,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify">Net cash used in investing activities</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(1,492,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(3,019,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 1pt">Net cash provided by financing activities</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">3,489,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">8,310,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 2.5pt">Change in cash</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">(89,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">(4,247,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">)</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of August 31,
2019, we had cash and cash equivalents of $1.6 million and a working capital deficiency of $15.9 million. During Fiscal 2019,
we used approximately $2.1 million of cash in our operations, of which $12.1 million was used in continuing operations and
$10.0 million was provided by discontinued operations. Cash used in continuing operations consisted of a net loss of $24.7
million, reduced by net non-cash charges of $10.6 million and working capital changes of $2.0 million. Cash provided by
discontinued operations consisted of income of $6.0 million and $4.0 million in working capital changes. The working capital
changes were primarily in accounts payable and accrued payroll. During the year our workers&rsquo; compensation cash reserves
increased by $4.4 million and our accrued workers&rsquo; compensation liabilities increased by $4.7 million. A significant
portion of our continued operations cash spending for 2019 was attributable to approximately $4.0 million of expensed
development and marketing costs associated with the development of our mobile application.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">During Fiscal 2018,
we used approximately $9.5 million of cash consisting of $11.4 million used in continuing operations and $1.9 million provided
by discontinued operations. Cash used in continuing operations consisted of a continuing operations loss of $18.0 million, reduced
by net non-cash charges of $5.1 million and working capital changes of $7.1 million, primarily in accrued payroll. Cash used in
discontinued operations consisted of $1.2 million income from discontinued operations and working capital changes of $0.7 million.
During the year our workers&rsquo; compensation cash reserves increased by $1.5 million and our accrued workers&rsquo; compensation
liabilities increased by $1.2 million. A significant portion of our operating cash spending for 2018 was attributable to approximately
$4.7 million of expensed development and marketing costs associated with the development of our mobile application.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The cash used in investing
activities was primarily due to the capitalization of the mobile application development costs performed by outside software consultants
for both 2019 and 2018.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For Fiscal 2019, cash
from financing activities of $3.5 million was primarily due to $3.75 million in gross proceeds ($3.3 million net of original issue
discount and closing costs) from the issuance of the March 2019 Notes, exercise of warrants for common stock of $0.7 million, and
$0.4 million repayment of the Senior Convertible Notes in cash.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Non-GAAP Financial Measures</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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. It is not meant to be considered
in isolation, superior to, or as a substitute for the directly comparable financial measures presented in accordance with GAAP.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We report our revenues
as gross billings, net of related direct labor costs, for our EAS clients and revenues without reduction of labor costs for staffing
services clients. For the years ended August 31, 2019 and 2018, we had no revenues associated with staffing services or generated
through our technology services. Gross billings represent billings to our business clients and include WSE gross wages, employer
payroll taxes, and workers&rsquo; compensation premiums, as well as administrative fees for our value-added services and other
charges for workforce management support. Gross billings are a non-GAAP measurement and represent a key operating metric for management
along with number of WSEs and number of clients. Gross billings and the number of active WSEs represent the primary drivers of
our business operations. Active WSEs are defined as employees in our HRIS ecosystem that have provided services for at least one
of our client customers for any reported period. Our primary profitability metrics are gross profit, gross profit per WSE, and
gross profit percentage of gross billings.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: justify">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>May 31,</B></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>2020</B></P></TD><TD STYLE="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>May 31,</B></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>2019</B></P></TD><TD STYLE="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 74%; font-size: 10pt; text-align: justify">Active worksite employees (unaudited)</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">2,700</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">1,600</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Reconciliation of GAAP to Non-GAAP Measure</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Three Months Ended,</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Nine Months Ended,</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">May 31, 2020</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">May 31, 2019</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">May 31, 2020</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">May 31, 2019</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 48%; font-size: 10pt; text-align: left">Gross Billings</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">14,425,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">11,894,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">47,028,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">25,940,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">Less: Adjustment to gross billings</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">12,411,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">10,256,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">40,253,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">22,282,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; font-weight: bold">Revenues</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">2,014,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">1,638,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">6,775,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">3,658,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Non-GAAP Adjusted Net Income</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We incurred
significant non-recurring expenses during the quarter ended May 31, 2020 of approximately $67.1 million related to the
combined expenses of the preferred option expense and the recapitalization charges related to our convertible notes that were
fully converted as of May 31, 2020. The expenses recorded are highly dependent on the input variables used for the fair value
estimates for the valuation of the Preferred Options and the derivative instruments consisting of the value of the detachable
warrants and the value of the beneficial conversion features embedded in the convertible notes. During the quarter ended May
31, 2020, we eliminated all of our convertible notes and related derivative liabilities. Significantly all of the expense
related to these &ldquo;below the line&rdquo; non-recurring items recorded in other expenses were related to our
recapitalization efforts and as such resulted in a corresponding significant increase to additional paid in capital, for a
negligible impact to our net equity position. We believe that providing an adjusted net income figure excluding the May 31,
2020 quarter non-recurring items is meaningful to our investors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For the three months
ended May 31, 2020, excluding those non-recurring items recorded in other expenses totaling $67.1 million, our adjusted net loss
for the three months ended May 31, 2020 was $6.1 million, consisting of an adjusted continuing operating loss (excluding non-recurring
items) of $4.6 million, and a loss from discontinued operations of $1.5 million.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For the nine months
ended May 31, 2020, excluding the $67.1 million of non-recurring other expense described above, our adjusted net income was $0.8
million consisting of an adjusted continuing operating loss (excluding non-recurring items) of $13.6 million and a gain on discontinued
operations of $14.4 million.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Material Commitments</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Off-Balance Sheet Arrangements</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We did not have during
the periods presented, and we do not currently have, any off-balance sheet arrangements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Share Repurchase Plan</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On July 9, 2019, our
board of directors authorized the repurchase of up to 10 million shares of our outstanding common stock as market conditions warrant
over a period of 18 months. We have not implemented the share repurchase plan to date and have not repurchased any shares of stock
under the plan.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Critical Accounting Policies and
Significant Judgment and Estimates</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our management&rsquo;s
discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which
have been prepared in accordance with GAAP. The preparation of our consolidated financial statements requires us to make estimates
and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosure of contingent
assets and liabilities. On an ongoing basis, we evaluate our estimates based on historical experience and make various assumptions,
which management believes to be reasonable under the circumstances, which form the basis for judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under
different assumptions or conditions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The notes to our audited
consolidated financial statements contain a summary of our significant accounting policies. We consider the following accounting
policies critical to the understanding of the results of our operations:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Use of Estimates</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The preparation of
financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates
include:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Valuation expense related to preferred stock options;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Liability for legal contingencies;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Useful lives of property and equipment;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Assumptions made in valuing equity instruments;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Assumptions made in valuing embedded derivatives and freestanding equity-linked instrument classified
as liabilities;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Deferred income taxes and related valuation allowance; and</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Projected development of workers&rsquo; compensation claims.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Revenue and Direct Cost Recognition</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We provide an array
of human resources and business solutions designed to help improve business performance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our revenues are primarily
attributable to fees for providing staffing solutions and EAS/human capital management services. We recognize revenues when all
of the following criteria are met: (i) persuasive evidence of an arrangement exists; (ii) the services have been rendered to the
customer; (iii) the sales price is fixed or determinable; and (iv) collectability is reasonably assured. We enter into contracts
with our clients for EAS based on a stated rate and price in the contract. Contracts generally have a term of 12 months but are
cancellable at any time by either party with 30 days&rsquo; notice. Contract performance obligations are satisfied as services
are rendered, and the time period between invoicing and when the performance obligations are satisfied is not significant. We do
not have significant financing components or significant payment terms for its customers and consequently has no material credit
losses. Payments for our services are typically made in advance of, or at the time that the services are provided.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We account for our
revenues in accordance with Accounting Standards Codification (&ldquo;ASC&rdquo;) 605-45, <I>Revenue Recognition, Principal Agent
Considerations</I>. Our EAS solutions revenue is primarily derived from our gross billings, which are based on (i) the payroll
cost of WSEs and (ii) a mark-up computed as a percentage of payroll costs for payroll taxes and workers&rsquo; compensation premiums.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Gross billings are
invoiced to each client concurrently with each periodic payroll of WSEs which coincides with the services provided and which is
typically a fixed percentage of the payroll processed. Revenues, which exclude the payroll cost component of gross billings and
therefore consist solely of markup are recognized ratably over the payroll period as WSEs perform their service at the client worksite.
Revenues that have been recognized but not invoiced are included in unbilled accounts receivable on our consolidated balance sheets
and were $1,137,000 and $310,000 for the years ended August 31, 2019 and August 31, 2018, respectively, and $270,000 as of May
31, 2020.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Consistent with our
revenue recognition policy, our direct costs do not include the payroll cost of WSEs. Our cost of revenue associated with our revenue
generating activities are primarily comprised of all other costs related to WSEs, such as the employer portion of payroll-related
taxes, employee benefit plan premiums and workers&rsquo; compensation insurance costs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have evaluated our
revenue recognition policies in conjunction with our future expected business which may be migrating to a staffing business model.
For Fiscal 2018 and 2019, and for Fiscal 2020 to date, we determined that we did not have any revenues which should have been evaluated
under a staffing business model. Such a staffing business model would have included the payroll costs in revenues with a corresponding
increase to cost of revenues for payroll costs associated with staffing services.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We reviewed the costs
associated with acquiring our customers under ASC 340-40 <I>Other Assets and Deferred Costs</I> and determined that no such costs
should be capitalized. Costs relating to our customers are typically commissions paid as a percentage of some of our revenue components
and are expensed as they are incurred because the terms of our contracts generally are cancellable by either party with a 30-day
notice. These costs are recorded in commissions in our Consolidated Statement of Operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Fixed Assets</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Fixed assets are recorded
at cost, less accumulated depreciation and amortization. Expenditures for major additions and improvements are capitalized and
minor replacements, maintenance, and repairs are charged to expense as incurred. When fixed assets are retired or otherwise disposed
of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results
of operations for the respective period. Leasehold improvements are being amortized over the shorter of the useful life or the
initial lease term.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Fixed assets are recorded
at cost and are depreciated over the estimated useful lives of the related assets using the straight-line method. The estimated
useful lives for purposes of computing depreciation for equipment is five years and for furniture and fixtures is five to seven
years. The amortization of leasehold improvements and the depreciation of equipment and furniture is included in depreciation expense
on the consolidated statements of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.35pt; text-align: justify"><B><I>Computer Software Development</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.35pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Software development
costs relate primarily to software coding, systems interfaces and testing of our proprietary employer information systems and are
accounted for in accordance with ASC 350-40, Internal Use Software.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>




<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Internal software development
costs are capitalized from the time the internal use software is considered probable of completion until the software is ready
for use. Business analysis, system evaluation and software maintenance costs are expensed as incurred. The capitalized computer
software development costs are reported under the section fixed assets, net in the consolidated balance sheets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We determined that
there were no material internal software development costs for Fiscal 2018 or Fiscal 2019. All capitalized software recorded was
purchased from third party vendors. Capitalized software development costs are amortized using the straight-line method over the
estimated useful life of the software, generally five years.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The amortization of
these assets is included in depreciation expense on the consolidated statements of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Impairment and Disposal of Long-Lived
Assets</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We periodically evaluate
our long-lived assets for impairment in accordance with ASC 360-10, <I>Property, Plant, and Equipment</I>. ASC 360-10 requires
that an impairment loss be recognized for assets to be disposed of or held-for-use when the carrying amount of an asset is deemed
to not be recoverable. If events or circumstances were to indicate that any of our long-lived assets might be impaired, we would
assess recoverability based on the estimated undiscounted future cash flows to be generated from the applicable asset. In addition,
we may record an impairment loss to the extent that the carrying value of the asset exceeded the fair value of the asset. Fair
value is generally determined using an estimate of discounted future net cash flows from operating activities or upon disposal
of the asset. During Fiscal 2019 we conducted an impairment analysis of our capitalized software and determined that there was
no impairment loss required.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Workers&rsquo; Compensation</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Everest Program</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Up to July 2018, a
portion of our workers&rsquo; compensation risk was covered by a retrospective rated policy, which calculates the final policy
premium based on our loss experience during the term of the policy and the stipulated formula set forth in the policy. We fund
the policy premium based on standard premium rates on a monthly basis and based on the gross payroll applicable to workers covered
by the policy. During the policy term and thereafter, periodic adjustments may involve either a return of previously paid premiums
or a payment of additional premiums by us or a combination of both. If our losses under that policy exceed the expected losses
under that policy, then we could receive a demand for additional premium payments.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We utilize a third-party
to estimate our loss development rate, which is based primarily upon the nature of WSEs&rsquo; job responsibilities, the location
of WSEs, the historical frequency and severity of workers&rsquo; compensation claims, and an estimate of future cost trends. Each
reporting period, changes in the assumptions resulting from changes in actual claims experience and other trends are incorporated
into our workers&rsquo; compensation claims cost estimates. As of August 31, 2019, we classified $0.1 million in short term accrued
workers&rsquo; compensation and $0.1 million in long-term accrued workers&rsquo; compensation in our consolidated balance sheets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Sunz Program</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Since July 2018, our
workers&rsquo; compensation program for WSEs has been provided through an arrangement with United Wisconsin Insurance Company and
administered by Sunz. Under this program, we have financial responsibility for the first $0.5 million of claims per occurrence.
We provide and maintain a loss fund that will be used to pay claims and claim related expenses. The workers&rsquo; compensation
insurance carrier established monthly funding requirements comprised of premium costs and funds to be set aside for payment of
future claims (&ldquo;claim loss funds&rdquo;). The level of claim loss funds is primarily based upon anticipated WSE payroll levels
and expected workers&rsquo; compensation loss rates, as determined by the insurance carrier. Monies funded into the program for
incurred claims expected to be paid within one year are recorded as Deposit - workers&rsquo; compensation, a short-term asset,
while the remainder of claim funds are included in deposits- workers&rsquo; compensation, a long-term asset in our consolidated
balance sheets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of August 31, 2019,
we had $0.2 million in &ldquo;deposit &ndash; workers&rsquo; compensation&rdquo;, classified as a short-term asset and $0.8 million,
classified as a long-term asset.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our estimate of incurred
claim costs expected to be paid within one year is included in short-term liabilities, while our estimate of incurred claim costs
expected to be paid beyond one year is included in long-term liabilities on our consolidated balance sheets. As of August 31, 2019,
we had short term accrued workers&rsquo; compensation costs of $0.2 million and long-term accrued workers&rsquo; compensation costs
of $0.5 million.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Because we bear
the financial responsibility for claims up to the level noted above, such claims, which are the primary component of our
workers&rsquo; compensation costs, are recorded in the period incurred. Workers&rsquo; compensation insurance includes
ongoing health care and indemnity coverage whereby claims are paid over numerous years following the date of injury.
Accordingly, the accrual of related incurred costs in each reporting period includes estimates, which takes into account the
ongoing development of claims and therefore requires a significant level of judgment. In estimating ultimate loss rates, we
utilize historical loss experience, exposure data, and actuarial judgment, together with a range of inputs which are
primarily based upon the WSE&rsquo;s job responsibilities, their location, the historical frequency and severity of
workers&rsquo; compensation claims, and an estimate of future cost trends. For each reporting period, changes in the
actuarial assumptions resulting from changes in actual claims experience and other trends are incorporated into our
workers&rsquo; compensation claims cost estimates. The estimated incurred claims are based upon: (i) the level of claims
processed during each quarter; (ii) estimated completion rates based upon recent claim development patterns under the plan;
and (iii) the number of participants in the plan.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Debt Issuance Costs and Debt Discount</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Debt issuance costs
and debt discounts are being amortized over the lives of the related financings on a basis that approximates the effective interest
method. Costs and discounts are presented as a reduction of the related debt in the accompanying balance sheets. Portions attributable
to notes converted into equity are accelerated to interest expense upon conversion.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Beneficial Conversion Features</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The intrinsic value
of a beneficial conversion feature (&ldquo;BCF&rdquo;) inherent to a convertible note payable, which is not bifurcated and accounted
for separately from the convertible note payable and may not be settled in cash upon conversion, is treated as a discount to the
convertible note payable. This discount is amortized over the period from the date of issuance to the stated maturity using the
straight-line method which approximates the effective interest method. If the note payable is retired prior to the end of the contractual
term, the unamortized discount is expensed in the period of retirement to interest expense. In general, the BCF is measured by
comparing the effective conversion price, after considering the relative fair value of detachable instruments included in the financing
transaction, if any, to the fair value of the common stock at the commitment date to be received upon conversion.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Derivative Financial Instruments</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">When a company issues
debt that contains a conversion feature, it first evaluates whether the conversion feature meets the requirement to be treated
as a derivative: a) the settlement amount is determined by one or more underlying factors, typically the price of our stock, b)
the settlement amount is determined by one or more notional amounts or payments provisions or both, generally the number of shares
upon conversion; c) no initial net investment, which typically excludes the amount borrowed; and d) net settlement provision, which
in the case of convertible debt generally means the stock received upon conversion can be readily sold for cash. There are certain
scope exceptions from derivative treatment, but these typically exclude conversion features that provide for a variable number
of shares. When we issue warrants to purchase our common stock, we evaluate whether they meet the requirements to be treated as
derivative. Generally, warrants would be treated as a derivative if the provisions of the warrants agreements create uncertainty
as to a) the number of shares to be issued upon exercise, or b) whether shares may be issued upon exercise. If the conversion feature
within convertible debt or warrants meet the requirements to be treated as a derivative, we estimate the fair value of the derivative
liability using the lattice-based option valuation model upon the date of issuance. If the fair value of the derivative liability
is higher than the face value of the convertible debt, the excess is immediately recognized as interest expense. Otherwise, the
fair value of the derivative is recorded as a liability with an offsetting amount recorded as a debt discount, which offsets the
carrying amount of the debt. The derivative liability is revalued at the end of each reporting period and any change in fair value
is recorded as a change in fair value in the consolidated statement of operations. The debt discount is amortized through interest
expense over the life of the debt. Derivative instrument liabilities and the host debt agreements are classified on the consolidated
balance sheets as current or non-current based on whether settlement of the derivative instrument could be required within twelve
months of the consolidated balance sheet date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The accounting treatment
of derivative financial instruments requires that we record the embedded conversion option and warrants at their fair values as
of the inception date of the agreement and at fair value as of each subsequent balance sheet date. Any change in fair value is
recorded as non-operating, non-cash income or expense for each reporting period at each balance sheet date. We reassess the classification
of our derivative instruments at each balance sheet date. If the classification changes as a result of events during the period,
the contract is reclassified as of the date of the event that caused the reclassification.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Share-Based Compensation</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">At May 31, 2020 and
May 31, 2019, we had one stock-based compensation plan under which we may issue both share and stock option awards. We account
for this plan under the recognition and measurement principles of ASC 718, Compensation- Stock Compensation, which requires all
share-based payments to employees, including grants of employee stock options, to be recognized in the consolidated statements
of operations on their fair values. Share grants are valued at the closing market price on the date of issuance which approximates
fair value.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For option grants,
the grant date fair value is determined using the Black-Scholes-Merton (&ldquo;Black-Scholes&rdquo;) pricing model. Our option
grants are typically issued with vesting depending on a term of service. For all employee stock options granted, we recognize expense
over the requisite service period over the employee&rsquo;s requisite service period (generally the vesting period of the equity
grant).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>




<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our option pricing
model requires the input of highly subjective assumptions, including the expected stock price volatility and expected term. The
expected volatility is based on our historical volatility since our IPO. Any changes in these highly subjective assumptions significantly
impact stock-based compensation expense.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Following the adoption
of Accounting Standards Update ASU 2016-09, we elected to account for forfeitures as they occur. Any compensation cost previously
recognized for an unvested award that is forfeited because of a failure to satisfy a service condition is reversed in the period
of the forfeiture.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Off-Balance Sheet Arrangements</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We did not have during
the periods presented, and we do not currently have, any off-balance sheet arrangements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Contingencies</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Certain conditions
may exist as of the date the financial statements are issued, which may result in a loss to us, but which will only be resolved
when one or more future events occur or fail to occur. Our management, in consultation with our legal counsel, as appropriate,
assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies
related to legal proceedings that are pending against us or unasserted claims that may result in such proceedings, we, in consultation
with legal counsel, evaluate the perceived merits of any legal proceedings or unasserted claims, as well as the perceived merits
of the amount of relief sought or expected to be sought therein. If the assessment of a contingency indicates it is probable that
a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued
in our financial statements. If the assessment indicates a potentially material loss contingency is not probable, but is reasonably
possible, or is probable, but cannot be estimated, then the nature of the contingent liability, together with an estimate of the
range of possible loss, if determinable and material, would be disclosed. Loss contingencies considered remote are generally not
disclosed unless they involve guarantees, in which case the guarantees would be disclosed.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.35pt; text-align: justify"><B>Emerging Growth Reporting
Requirements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.35pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are a public reporting
company under the Securities Exchange Act of 1934, as amended (the &ldquo;Exchange Act&rdquo;). We are required to publicly report
on an ongoing basis as an &ldquo;emerging growth company&rdquo; (as defined in the JOBS Act) under the reporting rules set forth
under the Exchange Act. For so long as we remain an &ldquo;emerging growth company&rdquo;, we may take advantage of certain exemptions
from various reporting requirements that are applicable to other Exchange Act reporting companies that are not &ldquo;emerging
growth companies&rdquo;, including but not limited to:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley
Act;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">taking advantage of extensions of time to comply with certain new or revised financial accounting
standards;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">being permitted to comply with reduced disclosure obligations regarding executive compensation
in our periodic reports and proxy statements; and</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">being exempt from the requirement to hold a non-binding advisory vote on executive compensation
and shareholder approval of any golden parachute payments not previously approved.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We expect to take advantage
of these reporting exemptions until we are no longer an emerging growth company. We would remain an &ldquo;emerging growth company&rdquo;
for up to five years, although if the market value of our common stock that is held by non-affiliates exceeds $700 million as of
any June 30 before that time, we would cease to be an &ldquo;emerging growth company&rdquo; as of the following December 31.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>




<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><A NAME="g_001"></A><B>BUSINESS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Business Overview</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 3pt; text-align: justify; text-indent: 33pt">Our current
business, and the primary source of our revenues to date, has been under a traditional staffing services business model. 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, including the light industrial, services, and food and hospitality markets. We provide
human resources, employment compliance, insurance, payroll, and operational employment services solutions for our business clients
(&ldquo;clients&rdquo; or &ldquo;operators&rdquo;) and shift work or &ldquo;gig&rdquo; opportunities for WSEs or shifters. As consideration
for providing these services, we receive administrative or processing fees as a percentage of a client&rsquo;s gross payroll, process
and file payroll taxes and payroll tax returns, provide workers&rsquo; compensation insurance, and provide employee benefits. We
have built a substantial business on a recurring revenue model since our inception in 2015. For Fiscal 2019, including our discontinued
operations related to the Vensure Asset Sale described below, we processed over $350 million of payroll billings. Our business
has significantly grown for each year since inception and we expect to continue our track record of significant customer growth.
However, we have experienced losses to date as we have invested in both our technology solutions as well as the back-office operations
required to service a large employee base under a traditional staffing model.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 3pt; text-align: justify; text-indent: 33pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are currently focused
on clients in the restaurant and hospitality industries, traditionally market segments with high employee turnover and low pay
rates. We believe that our focus on these industries will be better served by our HRIS technology platform and related mobile application
which provide payroll and human resources tracking for our clients and will result in lower operating costs, improved customer
experience and revenue growth acceleration. All of our clients enter into service agreements with us or our wholly-owned subsidiary,
ReThink.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 3pt; text-align: justify; text-indent: 33pt">Our revenues
for Fiscal 2019 and through the first nine months of Fiscal 2020 primarily 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 applicable taxation authority, and
workers&rsquo; compensation premiums billed to the client for which we facilitate workers&rsquo; compensation coverage. Our costs
of revenues consist of accrued and paid payroll taxes and our costs to provide the workers&rsquo; compensation coverage including
premiums and loss reserves. A significant portion of our assets and liabilities is for our workers&rsquo; compensation reserves.
Our cash balances related to these reserves are carried as assets and our estimates of projected workers&rsquo; compensation claims
are carried as liabilities. Since Fiscal 2019, we have provided a self-funded workers&rsquo; compensation policy for up to $500,000
and purchased reinsurance for claims in excess of $500,000. We actively monitor and manage our clients and WSE&rsquo;s workers&rsquo;
compensation claims which we believe allows us to provide a lower cost workers&rsquo; compensation option for our clients than
they would otherwise be able to purchase on their own.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 3pt; text-align: justify; text-indent: 33pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 3pt; text-align: justify; text-indent: 33pt">As of August 31, 2019, we had 246 clients with over 13,000 WSEs,
and processed payroll of over $350 million during Fiscal 2019, an increase of nearly 60% over Fiscal 2018. Of these WSEs, approximately
60% represent workers in the restaurant industry. In addition, as of August 31, 2019, there were an additional 12,000 inactive
WSEs in our HRIS technology platform who are available for gig opportunities. In January 2020, in connection with the Vensure Asset
Sale described below, we assigned client contracts representing approximately 70% of our billable clients, which comprised approximately
88% of our quarterly revenue as of November 30, 2019, and certain operating assets for $19.2 million in cash, of which $9.7 million
was received at closing and $9.5 million is due over the next four years, which was scheduled to commence in April 2020, subject
to certain conditions, including the performance of the assigned contracts and minimum working capital delivered. The payments
have been delayed due to issues from the novel coronavirus disease (&ldquo;COVID-19&rdquo;). For further discussion on the delayed
payment to us pursuant to the Vensure Asset Sale, see &ldquo; &ndash; Recent Developments &ndash; Vensure Asset Sale.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 3pt; text-align: justify; text-indent: 33pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Following the Vensure
Asset Sale, our client count, client site count, and billed WSE count decreased by approximately 88% from pre- Vensure Asset Sale
metrics. On a comparative basis from May 31, 2019 to February 29, 2020 (our last reporting period before the COVID-19 pandemic
materially impacted our business operations), our continuing and remaining client count increased from 35 to 83 customers, representing
approximately 250 client locations, and our billed WSEs increased from an average of 1,600 to 3,100 at the end of February 2020.
The quarter ended February 29, 2020 represented an annualized growth rate of over 100% for both clients and WSEs since November
30, 2019.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The COVID-19 pandemic has had a significant impact upon and
delayed our expected growth, which we have observed through a decrease in our billed customers and WSEs beginning in mid-March
2020, when the State of California first implemented &ldquo;lockdown&rdquo; measures. Significantly, all of our February 29, 2020
billed WSEs worked for clients located in Southern California, and many of these clients were required to furlough or layoff employees
or, in some cases, completely close their operations. However, during the quarter ended May 31, 2020, we continued to close new
customer opportunities. The combination of our sales efforts and the opportunities our services provide to businesses impacted
by the COVID-19 pandemic resulted in additional business opportunities for new client location additions, but our WSE billings
per client location decreased as many clients were shut down, or reduced staffing during the quarter ended May 31, 2020. For the
month of May 2020, our billed client count decreased to 81 clients, but client locations increased by 24% to over 300 client locations
compared to February 2020. Monthly &ldquo;normalized&rdquo; gross client billings decreased 23% from February 2020 to May 2020
as a result of the reduced staffing levels. (&ldquo;Normalized&rdquo; gross billings represent actual billings adjusted for the
number of billable days in a given month, e.g., 29 billable days in February 2020, and 31 billable days in May 2020. As the Southern
California economy experienced modest recovery in June, we experienced continued client additions and some degree of gross billing
recovery. For the month of June 2020, our client count increased to 84 clients, with active billings representing 315 client locations
(an increase of 26% from February 2020 and equivalent to a 150% annualized client location growth rate), while gross client billings
exceeded &ldquo;normalized&rdquo; February 2020 billings. On July 13, 2020, the Governor of the State of California re-implemented
certain COVID-19 related lockdown restrictions in most of the counties in the state, including those located in Southern California
where most of our clients reside.&nbsp; These lockdown restrictions will likely require that in-person dining be prohibited for
at least one month.&nbsp; We believe that our business will be impacted based upon the negative effect on those clients that rely
more heavily upon in-person dining, but we have not had an opportunity to evaluate fully&nbsp;the probable impact of this lockdown
development on our overall customer base as of the date of this prospectus. For further discussion on the impact of COVID-19 on
our business, see &ldquo; &ndash; Recent Developments &ndash; COVID-19 Related Considerations.&rdquo;</P>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>


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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We believe that our
customer value proposition is to provide the combination of overall net cost savings to the client as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Payroll tax compliance and management services</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Governmental HR compliance such as for ACA compliance requirements</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Reduced client workers&rsquo; compensation premiums or enhanced coverage</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Access to an employee pool of potential applicants to reduce turnover costs</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Offset by increased administrative fee cost to the client payable to us</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our founders and management
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 businesses face. Our next goal, currently underway, is to match the needs of small businesses with paying &ldquo;gigs&rdquo;
with a fully compliant and lower cost staffing solution. For this, we need to acquire a significant number of WSEs to provide our
clients with a variety of solutions for their unique staffing needs and to facilitate the employment relationship.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Managing, recruiting,
and scheduling a large number of low wage employees can be both difficult and expensive. The acquisition and recruiting of such
an employee population is highly labor intensive and costly in part due to high onboarding and maintenance costs such as tax information
capture or I-9 verification. Early in our history, we evaluated these costs and determined that proper process flows, automated
with blockchain and cloud technology and coupled with access to lower cost workers&rsquo; compensation policies resulting from
economies of scale could result in a profitable and low-cost scalable business model. Over the past four years, we have invested
heavily in a robust, cloud-based HRIS platform in order to:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">reduce WSE management costs,</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">automate new WSE and client onboarding, and</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">provide additional value-add services for our business clients resulting in additional revenue
streams to us.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Beginning in 2017,
we began to develop our HRIS database and front-end desktop and mobile phone application to facilitate easier WSE and client onboarding
processes as well as for additional client functionality and the opportunity for WSEs to find shift work. Beginning in March 2019,
we brought the development of our mobile application in house and launched in 2019. As of August 31, 2019, the initial launch was
completed and we began to provide some of the HRIS and application services to select legacy customers on a test basis. We are
continuing to implement additional HRIS functionality in delivery, gig intermediation services, and scheduling through our mobile
phone application. We see these technology based services as multiple potential revenue drivers with limited additional costs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our cloud-based HRIS
platform captures, holds, and processes HR and payroll information for the clients and WSEs through an easy to use customized front
end interface coupled with a secure, remotely hosted database. The HRIS system can be accessed by either a desktop computer or
an easy to use electronic mobile application designed with HR workflows in mind. Once fully implemented, we expect to reduce the
time, expense, and error rate for onboarding our client employees into our HRIS ecosystem. Once onboarded, the client employees
are included as our WSEs and who are available for shift work within our business ecosystem. This allows our HRIS platform to serve
as a gig marketplace for WSEs and allows for client businesses to better manage their staffing needs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>




<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Our Services</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR>
    <TD STYLE="vertical-align: top; width: 49%; padding-bottom: 6pt; text-align: justify"><FONT STYLE="font-size: 10pt">Our core business is to provide regular payroll processing services to clients under an EAS model in addition to individual services, such as payroll tax compliance, workers&rsquo; compensation insurance, and employee HR compliance management.&nbsp;&nbsp;In addition, in November, 2019, we launched our employee onboarding function and employee scheduling functions to our customers in the mobile application.&nbsp;&nbsp;Beginning later in calendar 2020, with the full commercial launch of our mobile application software, we expect to provide additional services including &ldquo;white label&rdquo; food delivery functionality.</FONT></TD>
    <TD STYLE="width: 2%; padding-bottom: 6pt">&nbsp;</TD>
    <TD STYLE="width: 49%">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Figure 1</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt"><IMG SRC="tm2025554d1_s1img002.jpg" ALT="" STYLE="height: 222px; width: 394px"></FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our core EAS are typically provided to our clients for one-year
renewable terms. As of the date of this prospectus, we have not had any material revenues or billings generated within our HRIS
from additional services. We expect that our future service offerings, including technology-based services provided through our
HRIS system and mobile application, will provide for additional revenue streams and support cost reductions for existing and future
clients. We expect that our future services will be offered through &ldquo;a la carte&rdquo; pricing via customizable on-line contracts.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The new Gig Economy
has created legal issues regarding the classification of workers as independent contractors or employees. In addition, the rising
trend of predictive scheduling creates logistical issues for our clients regarding worker&rsquo;s schedules. We provide solutions
to businesses struggling with these compliance issues primarily by absorbing our clients&rsquo; workers, whom we refer to as WSEs
but are also referred to as &ldquo;shift workers,&rdquo; &ldquo;shifters,&rdquo; &ldquo;gig workers,&rdquo; or &ldquo;assigned
employees.&rdquo; WSEs are included under our corporate employee umbrella and we handle certain employment-related compliance responsibilities
for our clients as part of our services. This arrangement benefits WSEs by providing additional work opportunities through access
to our clients. WSEs further benefit from employee status benefits through our benefit plan offerings, including minimum essential
health insurance coverage plans and 401(k) plans, as well as enjoying the protections of workers&rsquo; compensation coverage.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Technological Solution</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR>
    <TD STYLE="vertical-align: top; width: 49%; padding-bottom: 6pt; text-align: justify"><FONT STYLE="font-size: 10pt">At the heart of our employment service solutions is a secure, cloud-based HRIS database accessible by a desktop or mobile device through which our WSEs will be able to find available shift work at our client locations.&nbsp;&nbsp;This solution solves a problem of finding available shift work for both the WSEs seeking additional work and clients looking to fill open shifts.&nbsp;&nbsp;For new WSEs, the mobile application includes an easy to use WSE onboarding functionality which we believe will increase our pool of WSEs that will provide a deep bench of worker talent for our business clients.&nbsp;&nbsp;The onboarding feature of our software enables us to capture all application process related data regarding our assigned employees and to introduce employees to and integrate them into the ShiftPixy Ecosystem.&nbsp;&nbsp;The mobile application features a chatbot that leverages artificial intelligence to aid in gathering the data from workers via a series of questions designed to capture all required information, including customer specific and governmental information.&nbsp;&nbsp;Final onboarding steps requiring signatures can also be prepared from the HRIS onboarding module.</FONT></TD>
    <TD STYLE="width: 2%; padding-bottom: 6pt">&nbsp;</TD>
    <TD STYLE="vertical-align: top; width: 49%">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Figure 2</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt"><IMG SRC="tm2025554d1_s1img003.jpg" ALT="" STYLE="height: 301px; width: 323px"></FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P></TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0"></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In 2019, we implemented
additional functionality to provide a scheduling component of our software, which enables each client worksite to schedule workers
and to identify shift gaps that need to be filled. We utilize artificial intelligence to maintain schedules and fulfillment, using
an active methodology to engage and move people to action. We began using this functionality at the end of Fiscal 2019 on a test
basis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The final phase of
our initial platform, deployed in late Fiscal 2019 on a test basis, consists of our &ldquo;shift intermediation&rdquo; functionality,
which is designed to enable our WSEs to receive information regarding and to accept available shift work opportunities. The intermediation
functionality becomes useful only to the extent that we have meaningful numbers of WSEs and client shift opportunities in the same
geographic region. We reached geographical concentration in Southern California during Fiscal 2019 and we activated these key features
in August 2019 to a limited group of customers on a test basis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our goal is to have
a mature and robust hosted cloud-based HRIS platform coupled with a seamless and technically sophisticated mobile application that
will act as both a revenue generation system as well as a &ldquo;viral&rdquo; customer acquisition engine through the combination
of the scheduling, delivery, and intermediation features and interactions. We believe that once a critical mass of clients and
WSEs is achieved, additional shift opportunities will be created in the food service and hospitality industries. Our approach to
achieving this critical mass is to market our services to restaurant owners and franchisees, focusing on specific brands and geographical
locations. We expect critical mass to be a function of both geography, such as in Southern California for viral adoption by WSEs
and clients, or by adoption within franchise brands.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Markets and Marketing</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our market focus was
chosen based on our understanding of the issues and challenges facing &ldquo;Quick Service Restaurants&rdquo; (&ldquo;QSRs&rdquo;),
including fast food franchises and local restaurants. We have chosen to invest in two key features of our mobile application to
this end consisting of: i) scheduling functionality, which is designed to enhance the client&rsquo;s experience through scheduling
of employees and reducing the impact of turnover and ii) delivery functionality, which is designed to increase revenues through
delivery fulfillment and bring &ldquo;in house&rdquo; delivery fulfillment, thereby reducing delivery costs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR>
    <TD STYLE="vertical-align: top; width: 49%; padding-bottom: 6pt; text-align: justify"><FONT STYLE="font-size: 10pt">One of the most recent developments in the food and hospitality industry is the rapid rise of third-party restaurant delivery providers such as Uber Eats, GrubHub, and DoorDash.&nbsp;&nbsp;These providers have successfully increased QSR revenue in many local markets by providing food delivery to a wide-scale audience using contract delivery drivers.&nbsp;&nbsp;We have observed two significant issues with our clients and third-party delivery providers which is increasingly being reported in the news media.&nbsp;&nbsp;The first issue is the large revenue share typically being paid to third-party delivery providers as delivery fees.&nbsp;&nbsp;These additional costs erode the profit for the QSRs from additional sales made through the delivery channel.&nbsp;&nbsp;The second issue is that our QSR customers have encountered logistical problems with food deliveries - late deliveries, cold food, missing accessories, and unfriendly delivery people.&nbsp;&nbsp;This has caused significant &ldquo;brand erosion&rdquo; and has caused these clients to reconsider third-party delivery.</FONT></TD>
    <TD STYLE="width: 2%; padding-bottom: 6pt">&nbsp;</TD>
    <TD STYLE="width: 49%">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Figure 3</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt"><IMG SRC="tm2025554d1_s1img004.jpg" ALT="" STYLE="height: 180px; width: 369px"></FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We provide a solution
to the third-party delivery issues. We designed our HRIS platform to manage food deliveries by the QSRs using internal personnel
and a customized &ldquo;white label&rdquo; mobile application. Our recently released delivery feature links this &ldquo;white label&rdquo;
delivery ordering system to our delivery solution, thereby freeing the QSR to have their own brand showcasing an ordering mobile
application but retaining similar back-office delivery technology including scheduling, ordering, and delivery status pushed to
a customer&rsquo;s smart phone. Our technology and approach to human capital management provides a unique window into the daily
demands of QSR operators and the ability to extend our technology and engagement to enable this self-delivery proposition. Our
new driver management layer for operators in the ShiftPixy Ecosystem will now allow clients to use their own team members to deliver
a positive customer experience. Our mobile application now provides the HR compliance, management and insurance solutions necessary
to support a delivery option and created a turnkey self-delivery opportunity for the individual QSR operator. Our solution saves
delivery costs to the QSR client and allows them to retain the customer information and quality control over the food delivery.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The first phase of
this component of our platform is the driver onboarding, which was completed in 2019. The enhanced features will also &ldquo;micro
meter&rdquo; the essential commercial insurance coverages required by our operator clients on a delivery-by-delivery basis (workers&rsquo;
compensation and auto coverages) which has been a significant barrier for some QSRs to provide their own delivery services. We
began using the &ldquo;delivery features&rdquo; of our mobile application for selected customers on a trial basis in the fourth
quarter of Fiscal 2019 and expect to fully deploy the solution in calendar 2020.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>




<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">A significant problem for small businesses, particularly in
the food service industry, such as QSRs, involves compliance with employment related regulations imposed by federal, state and
local governments. Requirements associated with workers&rsquo; compensation insurance, and other traditional employment compliance
issues, including the employer mandate provisions of the ACA, create compliance challenges and increased costs. The compliance
challenges are often complicated by &ldquo;workaround&rdquo; solutions that many employers resort to in order to avoid characterizing
employees as &ldquo;full-time&rdquo; and requires increased compliance to avoid fines and penalties. As of the date of this prospectus,
the United States Congress has considered but not passed an amendment to replace the ACA, with the exception that the individual
mandate provision of the ACA was removed in 2017. Despite the removal of the individual mandate, employers still face regulatory
issues and overhead costs for which we believe our services are a cost-effective solution.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Other regulation is
prevalent at the state and local levels. Recently in California, where most of our WSEs reside, legislation was passed that more
clearly defines gig workers for companies such as Lyft or Uber as employees rather than their previous classification as independent
contractors. We believe that legislation such as this is a direct response to a considerable loss of tax revenue from the gig companies&rsquo;
contract employees, and that there is an increasing likelihood that workers in other states will have to be treated as employees
within the next few years. The effective date for the California legislation is January, 2020. Both Lyft and Uber are filing appeals
to avoid these reclassifications. Our business model provides a solution to this regulatory change by absorbing workers for these
types of gig economy companies as our employees, eliminating any risk of litigation, fines and other worker misclassification problems
for these types of gig economy companies to the extent they become our clients.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Figure 4</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt"><IMG SRC="tm2025554d1_s1img005.jpg" ALT="" STYLE="height: 277px; width: 530px"></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The worldwide trend
toward a gig economy is a result of the market adoption of smart phones and mobile telephones and remote office workers moving
away from the traditional office or factory workplace. For our target WSE audience, as of February 2019, over 92% of 18-30-year-old
workers have, or use, a smart phone. This development has created opportunities for companies catering to the use of these devices.
We have designed our mobile application to utilize the smart phone adoption to create an easy to use on-boarding tool for potential
employees. The migration towards a gig economy trend is also significant, and according to a 2016 study conducted by Ardent partners,
nearly 42% of the world&rsquo;s total workforce is now considered &lsquo;non-employee,&rsquo; which includes contingent/contract
workers, temporary staff, gig workers, freelancers, professional services, and independent contractors. Our initial focus in the
marketing of our product to the larger gig economy is to small and medium sized businesses with high worker turnover such as the
restaurant and hospitality industries who have high turnover and often contract with independent contractor workers to perform
less than full-time gig engagements, primarily in the form of shift work.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Figure 5</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt"><IMG SRC="tm2025554d1_s1img006.jpg" ALT="" STYLE="height: 389px; width: 650px"></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our headquarters is
currently situated in Irvine, California, from which it can reach the California market.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We believe we will
experience business and revenue growth in the gig economy from the following factors:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify"><B><I>Large Potential Market</I></B>. Current statistics show that there are over 14.7 million
employees working in our current target market--the restaurant and hospitality industries representing over $300 billion of annual
revenues. Compared to the total workforce in all industries, workers in the restaurant industry have a notably higher percentage
of part-time workers. At our current monetization rate per employee, this represents an annual revenue opportunity of over $9 billion
per year for the United States. Our intention is to expand both our geographic footprint and our service offerings into other industries,
particularly where part-time work is a significant component of the applicable labor force, including the retail and health care
sectors.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify"><B><I>Rapid Rise of Independent Workers</I></B>. The number of independent workers, totaling approximately
41 million in 2018, is expected to increase to 40% of the private, non-farm U.S. workforce by 2021. As of early 2019, approximately
48% of the U.S. workforce has worked as an independent employee as either part time or on a contract basis.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify"><B><I>Technology Affecting and Attitudes towards Employment Related Engagements</I></B>. Gig-economy
platforms have changed the way part-time workers can identify and connect to work opportunities, and Millennials and others have
embraced such technologies as a means to secure short-term employment related engagements. The significant increase in the adoption
of smart phone devices has provided the &ldquo;last mile&rdquo; platform to enable technology solutions such as ours to provide
a gig economy platform. Most importantly, as of February 2019, and estimated 92% off our target audience of 18-35 year old workers
regularly used a smart phone.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify"><B><I>New ShiftPixy Mobile App is Designed to Provide Additional Benefits to Employers and Shift
Workers. </I></B>Millennials represent approximately 40% of the independent workforce who are over the age of 21 and who work 15
hours or more each week. Mindful that most of our shifters will be Millennials who connect with the outside world primarily through
a mobile device, we are poised to significantly expand our business through our mobile app. Our mobile app is a proprietary application
downloaded to mobile devices, allowing our shifters to access shift work opportunities at all of our clients, not just their current
restaurant or hospitality provider, and with an added feature, anticipated to be available later in calendar 2020, also allowing
shift employees not working at our clients to access shift work opportunities at all of our clients.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Figure 6</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt"><IMG SRC="tm2025554d1_s1img007.jpg" ALT="" STYLE="height: 334px; width: 650px"></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>The ShiftPixy Ecosystem Solution</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">We have developed an
HRIS Ecosystem comprised of a closed proprietary operating and processing information system that provides a tool for businesses
needing staffing flexibility to schedule existing employees and to post open schedule slots to be filled by an available pool of
shift workers (the &ldquo;ShiftPixy Ecosystem&rdquo;). The ShiftPixy Ecosystem provides the following benefits to our clients:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">1.&nbsp;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt"><B><I>Compliance</I>:</B>&nbsp;We assume a substantial portion of responsibility for a business&rsquo;s employment regulatory compliance issues by having all client shifter employees become employees of us. As the co-employer of the WSEs, we can assist our clients with the staffing of their shift employee requirements by providing a qualified pool of potential applicants as shift workers. The individual WSE is a legal employee of ours and we thereby provide employment regulatory compliance reporting, taking this burden away from our clients. The client&rsquo;s management time spent on compliance issues is substantially reduced and allows client management to focus on their business.</FONT></TD></TR>
<TR>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 4%; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 4%; text-align: justify"><FONT STYLE="font-size: 10pt">2.</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt"><B><I>Operational improvements</I></B>: Our service can reduce the impact of high turnover, which is a consistent problem across the restaurant industry and a significant issue to our clients. Our service provides pre-screened applicants for permanent positions as well as access to the ShiftPixy Ecosystem population of potential shift workers. The flexibility inherent in the Ecosystem approach can better tailor the staffing needs of a client to the talent pool available.</FONT></TD></TR>
<TR>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">3.</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt"><B><I>Cost Savings</I></B>: The payroll and related costs associated with WSEs such as workers&rsquo; compensation and benefits are consolidated and charged, in effect, in conjunction with the shifters&rsquo; applicable rates of pay, allowing the clients to fund the employment related costs as the services are used--thereby avoiding various lump sum employment-related cost impositions. Cost savings for our clients can vary but they experience cost reductions in reduced overhead costs related to HR compliance, payroll processing, and elimination of non-compliance fines and related penalties. Clients also experience reduced turnover and the related costs. We exploit economies of scale in purchasing employer related solutions such as workers&rsquo; compensation and other benefits and can provide a WSE to a business at a lower cost than the business can otherwise typically staff a particular position.</FONT></TD></TR>
<TR>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">4.</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt"><B><I>Improved human resources management</I>:</B>&nbsp;By having access to our entire part-time workforce, a client business is enabled to scale up or down more rapidly, making it easier to contain and manage operational costs. The two largest costs for a restaurant are food and labor. We charge a fixed percentage on wages that allows the client business to budget and plan more effectively without the full weight associated with the threats of penalties or missteps in dealing with employment law compliance related issues.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 27pt">As of November 30, 2019, we served an aggregate of 252 clients,
with an aggregate of approximately 13,000 employees. None of these clients represented more than 10% of our revenues for Fiscal
2019. Effective January 1, 2020, we assigned client contracts representing approximately 70% of our billable clients which comprised
approximately 88% of our quarterly revenue as of November 30, 2019 and certain operating assets as part of the Vensure Asset Sale.
As of June 30, 2020, our retained customer base was an aggregate of 84 clients with an aggregate of approximately 3,200 billed
WSEs and approximately 35,000 additional unbilled WSEs retained in our HRIS system. None of these clients represents more than
10% of our revenues for any reporting period in Fiscal 2020.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Competition</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have two primary
sources of competition. Competitors to our gig business model include businesses such as ShiftGig, Instawork, Snag, Jobletics and
other comparable businesses that seek to arrange short-term work assignments for both employees and independent contractors. Competitors
to our HRIS system include businesses such as Kelly Services, ManpowerGroup, and Barrett Business Services which provide human
resource software solutions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We believe our service
offering competes effectively based on our strategy of combining an ecosystem of employment services with the individualized ability
to link trained workers to specific shift-work opportunities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Governmental Regulation</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our business operates
in an environment that is affected by numerous federal, state and local laws and regulations relating to labor and employment matters,
benefit plans and income and employment taxes. Moreover, because our client engagements involve some form of co-employer relationship
with regard to the employees who provide services in employment to our clients, the application of such laws to these non-traditional
employer relationships can become complex. Nearly all states have adopted laws or regulations regarding the licensure, registration
or certifications of organizations that engage in co-employer relationships. While our model is currently not included in such
regulations, we may become subject to such laws and regulations when we enter into co- employer relationships with regard to employees
providing services in the jurisdictions where such laws and regulations apply.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Additionally, government
agencies have since declared a state of emergency in the U.S., and some have restricted movement, required restaurant, bar and
hotel closures, and advised people not to visit restaurants or bars and otherwise restrict non-essential travel. In some jurisdictions,
people have been instructed to shelter in place to reduce the spread of COVID-19, in response to which restaurants have temporarily
closed and have shifted operations at others to provide only take-out and delivery service. See &ldquo;Prospectus Summary &mdash;
Recent Developments &mdash; COVID-19 Related Considerations.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following summarizes what we believe
are the most important legal and regulatory aspects of our business:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Federal Regulations</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Employer Status</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We sponsor certain
employee benefit plan offerings as the &ldquo;employer&rdquo; of our shift workers under the Code and ERISA. The multiple definitions
of &ldquo;employer&rdquo; under both the Code and ERISA are not clear and most are defined in part by complex multi-factor tests
under common law. We believe that we qualify as an &ldquo;employer&rdquo; of our shift workers under both the Code and ERISA, as
well as various state regulations, but this status could be subject to challenge by various regulators. For additional information
on employer status and its impact on our business and results of operations, refer to the section entitled &ldquo;Risk Factors,&rdquo;
under the heading &ldquo;If we are not recognized as an employer of WSEs under federal and state regulations, or we are deemed
to be an insurance agent or third-party administrator, we and our clients could be adversely impacted.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Affordable Care Act and Health Care
Reform</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The ACA was signed
into law in March 2010. The ACA implemented substantial health care reforms with staggered effective dates continuing through 2020,
and many provisions in the Act require the issuance of additional guidance from applicable federal government agencies and the
states. There could be significant changes to the ACA and health care in general, including the potential modification, amendment
or repeal of the ACA. For additional information on the ACA and its impact on our business and results of operations, refer to
the section entitled &ldquo;Risk Factors,&rdquo; under the heading, &ldquo;Failure to comply with, or changes in, laws and regulations
applicable to our business, particularly potential changes to the ACA, could have a materially adverse effect on our marketing
plan as well as our reputation, results of operations or financial condition, or have other adverse consequences.&rdquo; As of
the date of this prospectus, the ACA has not been formally amended or repealed; however, the Tax Cuts and Jobs Act of 2017 effectively
eliminates the individual mandate provisions of the ACA, beginning in 2019.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Health Insurance Portability and Accountability
Act</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Maintaining the
security of information regarding our employees is important to us as we sponsor employee benefit plans and may have access
to personal health information of our employees. The manner in which we manage protected health information (PHI) is subject
to HIPAA, and the HITECH Act. HIPAA contains substantial restrictions and health data privacy, security and breach
notification requirements with respect to the use and disclosure of PHI. Further, under the HITECH Act there are steep
penalties and fines for HIPAA violations. Our health plans are covered entities under HIPAA, and we are therefore required to
comply with HIPAA&rsquo;s portability, privacy, and security requirements. For additional information regarding the
information we collect, how we maintain the confidentiality of our clients&rsquo; and employees&rsquo; confidential
information and the potential impact to our business if we fail to protect the confidentiality of such data, refer to the
section entitled &ldquo;Risk Factors,&rdquo; under the heading, &ldquo;We collect, use, transmit and store personal and
business information with the use of data service vendors, and a security or privacy breach may damage or disrupt our
businesses, result in the disclosure of confidential information, damage our reputation, increase our costs or cause
losses.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>State Regulations</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Nearly all states have
adopted provisions for licensing, registration, certification or other formal recognition of co-employers. Such laws vary from
state to state but generally provide for monitoring or ensuring the fiscal responsibility of a co-employer, and in some cases codify
and clarify the co-employment relationship for unemployment, workers&rsquo; compensation and other purposes under state laws. The
scope of the laws and regulations of states is such that it encompasses our activities. In addition, many state laws require guarantees
by us of the activities of our subsidiary, ReThink, and in some states we may seek licensure, registration or certification, as
applicable, together with our subsidiary, ReThink, because the financials for both organizations are consolidated. We believe we
are in compliance in all material respects with the requirements in the states wherein we are conducting business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We must also comply
with state unemployment tax requirements where our clients are located. State unemployment taxes are based on taxable wages and
tax rates assigned by each state. The tax rates vary by state and are determined, in part, based on our prior years&rsquo; compensation
and unemployment claims experience in each state. Certain rates are also determined, in part, by each client&rsquo;s own compensation
and unemployment claims experience. In addition, states have the ability under law to increase unemployment tax rates, including
retroactively, to cover deficiencies in the unemployment tax funds.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, we are
subject to Federal and state laws and regulations regarding privacy and information security. California recently enacted legislation,
the California Consumer Privacy Act of 2018, (the &ldquo;CCPA&rdquo;) that went into effect on January 1, 2020. The CCPA affords
consumers expanded privacy protections, including rights to access, to require deletion of their personal information, to opt out
of certain personal information sharing, and to receive detailed information about how their personal information is used. The
CCPA also provides for civil penalties for violations, as well as a private right of action for data breaches that may increase
data breach litigation. There are also a number of other pending U.S. state privacy laws that contain similar, but potentially
stricter and conflicting, obligations to the CCPA. These laws, if enacted, may require material alteration of our internal procedures
and could potentially limit the ability of data providers or our customers to provide certain personal information to us that is
necessary for our business operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Intellectual Property</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have registered
five trademarks, consisting of two names (ShiftPixy and ZiPixy) and three logos (the Pixy image, the Pixy wings image and wings/name
logo). In addition, we have patents pending for certain features of our mobile application in the United States, Australia, Brazil,
European Union, India, Japan, Korea and Hong Kong. We have other intellectual property and related rights as well, particularly
in connection with our software. We believe that our intellectual property is of considerable importance to our business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Employees</B><SUP></SUP></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of May 31, 2020, we employed 46 people on a full-time basis
in our corporate offices, and we served approximately 2,700 active, paid WSEs with an additional 35,000 inactive WSEs carried within
our HRIS platform. Effective as of January 1, 2020, we assigned client contracts representing approximately 70% of our billable
clients which comprised approximately 88% of our quarterly revenue as of November 30, 2019 as part of the Vensure Asset Sale and
transferred 21 of our 64 corporate employees. We retained all WSEs in our HRIS system. Our billed WSE count decreased from the
February 2020 quarter due to the COVID-19 pandemic. The billed WSE count increased to approximately 3,200 in June 2020 as the Southern
California economy opened.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Legal Proceedings</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Kadima Litigation</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Company is in a dispute with its former software developer,
Kadima Ventures (&ldquo;Kadima&rdquo;), over incomplete but paid for software development work. In May 2016, the Company entered
into a contract with Kadima for the development and deployment of user features that were proposed by Kadima for an original build
cost of $2.2 million to complete. This proposal was later revised upward to approximately $7.2 million to add certain features
to the original proposal. As of the date of this prospectus, the Company has paid approximately $11 million to Kadima, but has
never been provided access to the majority of the promised software. Kadima refused to continue development work, denied access
to developed software, and refuses to surrender to the Company any software that it has developed unless the Company pays an additional
$12.0 million above the $11.0 million already paid. In addition to the non-delivery of the paid for user features, Kadima asserts
that it is owed additional funds to turn over the work completed. In April 2019, Kadima filed a complaint against the Company in
the Superior Court of the State of Arizona, Maricopa County, alleging claims for breach of contract, promissory estoppel and unjust
enrichment, and seeking damages in excess of $11.0 million. The Company vigorously disputes and denies each of Kadima&rsquo;s claims,
including that it owes any sums to Kadima, and further believes that it is entitled, at a minimum, to a refund of a substantial
portion of the sums that it has already paid, along with the release of the software modules currently being withheld. In June,
2020 the Company engaged in mediation discussions with Kadima in an attempt to resolve the matter, which were unsuccessful. On
July 14, 2020 the Company filed an answer to Kadima&rsquo;s complaint, which denied Kadima&rsquo;s claims and asserted counter-claims
for breach of contract and fraud.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Splond Litigation</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On April 8, 2019, claimant,
Corey Splond, filed a class action lawsuit, on behalf of himself and other similarly situated individuals, in the Eighth Judicial
District Court for the State of Nevada, Clark County, naming the Company and its client as defendants, and alleging violations
of certain wage and hour laws. This lawsuit is in the initial stages, and the Company denies any liability. Even if the plaintiff
ultimately prevails, the potential damages recoverable will depend substantially upon whether the Court determines in the future
that this lawsuit may appropriately be maintained as a class action. &nbsp;Further, in the event that the Court ultimately enters
a judgment in favor of plaintiff, the Company believes that it would be contractually entitled to be indemnified by its client
against at least a portion of any damage award.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In addition, from time
to time, we may become involved in various claims and legal proceedings. We are not currently a party to any legal proceedings
that, in the opinion of our management, are likely to have a material adverse effect on our business. Regardless of outcome, litigation
can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Our Corporate Information</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We were incorporated
under the laws of the State of Wyoming on June 3, 2015. Our principal executive office is located at 1 Venture, Suite 150, Irvine,
CA 92618, and our telephone number is (888) 798-9100. Our website address is www.shiftpixy.com. Our website does not form a part
of this prospectus and listing of our website address is for informational purposes only.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&nbsp;</P>

<P STYLE="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B><A NAME="a_003"></A>MANAGEMENT</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Executive Officers and Directors</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our board of directors
elects our executive officers annually, at a meeting following the annual meeting of shareholders. Our board of directors can also
elect persons to fill any executive officer vacancies. Each officer holds such office until his successor is elected and qualified,
or until his or her death, earlier resignation or removal. The following table sets forth information regarding our executive officers
and directors as of July 24, 2020:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Name</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Position</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Age</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="width: 33%; text-align: justify"><FONT STYLE="font-size: 10pt">Scott W. Absher</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">President, Chief Executive Officer and Director</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 10%; text-align: center"><FONT STYLE="font-size: 10pt">60</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Kenneth W. Weaver<SUP>(1) (2) (3)</SUP></FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Independent Director</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">66</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Domonic J. Carney</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Chief Financial Officer</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">54</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Whitney White<SUP>(1) (2) (3)</SUP></FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Independent Director</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">45</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Christopher Sebes</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Independent Director</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">66</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Amanda Murphy</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Director</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">36</FONT></TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(1)</TD><TD>Member of the Audit Committee.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(2)</TD><TD>Member of the Compensation Committee.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(3)</TD><TD>Member of the Nominations Committee.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Executive Officers </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Scott W. Absher</I></B>&nbsp;has
served as our President, Chief Executive Officer and director since our formation in June 2015. Since February 2010 he has also
been President of Struxurety, a business insurance advisory company. As a member of our board of directors, Mr. Absher contributes
significant industry-specific experience and expertise to our insurance products and services and has a deep understanding of all
aspects of our business, products and markets, as well substantial experience developing corporate strategy, assessing emerging
industry trends, and managing business operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Domonic Carney</I></B>
has served as our Chief Financial Officer since August 4, 2019. Mr. Carney began his career at Deloitte &amp; Touche where he audited
high tech startups in Palo Alto, CA. Mr. Carney brings substantial experience in small, high-growth companies as well as over fifteen
years of C-Level experience in micro-cap public companies. Between 1994 and 2001, Mr. Carney worked for various high tech startups
in Silicon Valley, CA including software development, internet, and Internet Service Providers in increasing levels of responsibility.
From 2001 until 2004, Mr. Carney was the Finance Director in San Diego, CA providing Finance support for the Western half of the
US Operations of Danka Office Imaging. From 2005 to 2012, Mr. Carney served as the Chief Financial Officer for Composite Technology
Corporation (CPTC-OTC), an energy equipment and technology company that grew from pre-revenue to over $75 million a year between
2005 and 2008. Between 2012 and 2014, Mr. Carney provided C-Level finance and accounting consulting services to manufacturing,
health care, energy, and technology companies in San Diego and Irvine, CA. From 2014 until 2019 Mr. Carney served as the Chief
Financial Officer for Ener-Core, Inc. (ENCR-OTC), an energy technology company located in Irvine, CA. Mr. Carney holds a Masters
in Accounting degree from Northeastern University, a Bachelors of Arts in Economics from Dartmouth College, and is licensed as
a Certified Public Accountant (inactive status) in the State of California.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Independent Directors</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Kenneth W. Weaver
</I></B>has served as an independent director since December 5, 2016. Mr. Weaver currently serves as the chairman of the Audit
Committee and is also a member of the Compensation Committee and the Nominations Committee. Since April, 2012, Mr. Weaver has been
the sole proprietor of Ken Weaver Consulting, providing operations consulting for TVV Capital, a Nashville Private Equity firm.
Before his service with TVV, Mr. Weaver spent over 30 years with Bridgestone Corporation, having served in various responsible
leadership roles, including as President, Bridgestone North American Tire Commercial Sales, Chief Financial Officer, Bridgestone
Americas and Chairman, CEO and President, Firestone Diversified Products. Mr. Weaver earned both his bachelor&rsquo;s degree in
business and his Master of Business Administration degree from Pennsylvania State University. Mr. Weaver&rsquo;s substantial financial
background qualifies him as an audit committee financial expert under applicable rules.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Whitney
White </I></B>has served as an independent director since September 28, 2017. Mr. White serves as the chairman of the
Compensation Committee and the Nominations Committee, and is also a member of the Audit Committee. Since April, 2017, Mr.
White has been Chief Operating Officer and Chief Technology Officer of Prime Trust, LLC, a Nevada chartered trust company.
Before his service with Prime Trust, Mr. White spent 17 years with W.R. Hambrecht + Co., LLC, an investment banking, advisory
and brokerage firm that was the underwriter of our recently completed Regulation A offering. At W.R. Hambrecht + Co., LLC,
Mr. White served in various executive roles, including Chief Technology Officer and as Managing Director, Equity Capital
Markets. Mr. White earned a bachelor&rsquo;s degree in computer science &amp; psychology from Hamilton College, a Master of
Business Administration degree in finance and accounting from Columbia University&rsquo;s Graduate School of Business, and a
Master of Business Administration degree in technology and entrepreneurship from the University of California
Berkeley&rsquo;s Hass School of Business. Mr. White holds a Series 79 license as an Investment Banking Representative, a
Series 24 license as a General Securities Principal, and a Series 7 license as a General Securities Representative. As a
member of our board of directors, Mr. White contributes the benefits of decades of leadership and management experience
building and advising early stage, technology-driven companies. Based on his investment banking experience, Mr. White has
significant corporate finance and governance expertise. As an experienced senior technologist, Mr. White provides years of
experience applying technology to enhance traditional business processes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Christopher Sebes</I></B>
has served as an independent director since February 7, 2020. From August 2004 to July 2014, he served as the CEO of XPIENT Solutions,
a full-service, global provider of solutions for food ordering, digital menus, drive-thru management, kitchen management, inventory,
labor and scheduling analytics. From November 2014 to July 2019, Mr. Sebes served as the President of Xenial, Inc., a cloud-based
restaurant and retail management platform. Since August, 2019, Mr. Sebes has been a partner and member of the board of directors
of Results Thru Strategy, Inc., a strategic advisory firm specializing in restaurants, hotels, and technology companies serving
those industries. Since September 2019, he has also served as a member of the board of advisors of Valyant AI which has developed
a proprietary conversational AI platform that integrates with existing mobile, web, call ahead, kiosk and drive through platforms.
Mr. Sebes received his degree in Hotel and Restaurant Management from the University of Portsmouth (Hampshire, United Kingdom)
in 1975. Mr. Sebes brings to our board of directors his innovative thought leadership and extensive knowledge of restaurant industry
technology both in the United States and abroad.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Non-Independent Directors</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Amanda Murphy</I></B>
has served as a director since February 10, 2020. Prior to her election to our board of directors, Ms. Murphy served and continues
to serve as our Director of Operations and has been vital to our success and growth in that position. Ms. Murphy has been active
in the operations side of the staffing industry at a senior level since 2007. Ms. Murphy received her certificate in HR Management
from California State University &ndash; Long Beach in 2007. Ms. Murphy also studied law at Taylor University in Selango, Malaysia.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Family Relationships</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">There are no family
relationships between any of our current officers or directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Board of Directors</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Composition of Our Board of Directors</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our directors are elected
at our annual meeting of the shareholders. In addition, directors may be elected to fill vacancies and newly created directorships
by our board of directors. Each director holds the office until the next annual meeting of shareholders and until his or her successor
shall have been elected and qualified; provided, however, that directors can be elected for a term not to exceed five (5) years.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of July 24, 2020,
our board of directors consisted of six members. Each director serves until the next annual meeting of the shareholders and until
his or successor is elected and duly qualified, or until his or her earlier death, resignation or removal.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have no formal policy
regarding board diversity. In selecting board candidates, we seek individuals who will further the interests of our shareholders
through an established record of professional accomplishment, the ability to contribute positively to our collaborative culture,
knowledge of our business and understanding of our prospective markets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Committees of Our Board of Directors</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Audit Committee</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our Audit Committee
consists of Messrs. Weaver and White. Mr. Weaver serves as the chairman of the Audit Committee and qualifies as an audit committee
financial expert within the meaning of SEC regulations and the Nasdaq Listing Rules. In making a determination on which member
will qualify as a financial expert, our board of directors considers the formal education and nature and scope of such members&rsquo;
previous experience.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our Audit Committee
assists our board of directors in its oversight of our accounting and financial reporting process and the audits of our consolidated
financial statements. Our Audit Committee&rsquo;s responsibilities include:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">appointing, approving the compensation of, and assessing the independence of our registered public
accounting firm;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">overseeing the work of our registered public accounting firm, including through the receipt and
consideration of reports from such firm;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">reviewing and discussing with management and the registered public accounting firm our annual and
quarterly consolidated financial statements and related disclosures;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">monitoring our internal control over financial reporting, disclosure controls and procedures and
code of business conduct and ethics;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">overseeing our internal accounting function;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">discussing our risk management policies;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">establishing policies regarding hiring employees from our registered public accounting firm and
procedures for the receipt and retention of accounting-related complaints and concerns;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">meeting independently with our internal accounting staff, registered public accounting firm and
management;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">reviewing and approving or ratifying related party transactions; and</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">preparing audit committee reports required by SEC rules.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Compensation Committee</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our Compensation Committee
consists of Messrs. Weaver and White, with Mr. White serving as chairman. Our Compensation Committee assists our board of directors
in the discharge of its responsibilities relating to the compensation of our executive officers. The Compensation Committee&rsquo;s
responsibilities include:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">reviewing and approving corporate goals and objectives with respect to Chief Executive Officer
compensation;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">making recommendations to our board of directors with respect to the compensation of our Chief
Executive Officer and our other executive officers;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">overseeing evaluations of our senior executives;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">reviewing and assessing the independence of compensation advisers;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">overseeing and administering our equity incentive plans;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">reviewing and making recommendations to our board of directors with respect to director compensation;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">reviewing and discussing with management our &ldquo;Compensation Discussion and Analysis&rdquo;
disclosure; and</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">preparing the compensation committee reports required by SEC rules.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Compensation Committee Interlocks and
Insider Participation</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">None of the members
of our Compensation Committee, at any time, have been one of our officers or employees. None of our executive officers currently
serve, or in the past year have served, as a member of our board of directors or the compensation committee of any entity that
has one or more executive officers on our board of directors or Compensation Committee.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Nominations Committee</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our Nominations Committee
consists of Messrs. Weaver and White, with Mr. White serving as chairman. The Nominations Committee&rsquo;s responsibilities include:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">identifying individuals qualified to become board members;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">recommending to our board of directors the persons to be nominated for election as directors and
to be appointed to each committee of our board of directors;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">reviewing and making recommendations to our board of directors with respect to management succession
planning; and</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">overseeing periodic evaluations of board members.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Board Leadership Structure and Risk
Oversight</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our board of directors
oversees our business and considers the risks associated with our business strategy and decisions. Our board of directors currently
implements its risk oversight function as a whole. Each of the board committees also provides risk oversight in respect of its
areas of concentration and reports material risks to our board of directors for further consideration.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Code of Business Conduct and Ethics</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have adopted a written
code of business conduct and ethics that applies to our directors, officers and employees, including our principal executive officer,
principal financial officer and principal accounting officer or controller, or persons performing similar functions. The code of
conduct is posted on our website, and we will post all disclosures that are required by law or Nasdaq rules in regard to any amendments
to, or waivers from, any provision of the code.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Director Independence</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Rule 5605 of the Nasdaq
Listing Rules requires a majority of a listed company&rsquo;s board of directors to be comprised of independent directors within
one year of listing. In addition, the Nasdaq Listing Rules require that, subject to specified exceptions, each member of a listed
company&rsquo;s audit, compensation and nominating and corporate governance committees be independent and that audit committee
members also satisfy the independence criteria set forth in Rule 10A-3 under the Exchange Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In selecting our independent
directors, our board of directors considered the relationships that each such person has with our company and all the other facts
and circumstances our board of directors deemed relevant in determining independence, including the beneficial ownership of our
capital stock by each such person. Using this definition of independence, we have determined that that three directors, Kenneth
Weaver, Whitney White, and Christopher Sebes are independent directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Legal Proceedings</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Administrative Order and Settlement
with State Securities Commissions</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On June 25, 2013, the
Alabama Securities Commission issued a Cease and Desist Order (the &ldquo;Order&rdquo;) against Scott W. Absher and other named
persons and entities, requiring that they cease and desist from further offers or sales of any security in the State of Alabama.
The Order asserts that Mr. Absher was the president of a company that issued unregistered securities to certain Alabama residents,
that he was the owner of a company that was seeking investments, and that in March 2011 he spoke to an Alabama resident who was
an investor in one of the named entities. The Order concludes that Mr. Absher and others caused the offer or sale of unregistered
securities through unregistered agents. While Mr. Absher disputes many of the factual statements and specifically that he was an
owner or officer of any of the entities involved in the sale of the unregistered securities to Alabama residents or that he authorized
any person to solicit investments for his company, in the interest of allowing the matter to become resolved, he did not provide
a response.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Legal Matters Related to J. Stephen
Holmes</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">J. Stephen Holmes is
a co-founder and currently an independent contractor and major shareholder. As a condition of certifying our common stock for a
Nasdaq listing, Mr. Holmes agreed to the disclosure of his prior conviction for acts related to making false statements in relation
to two quarterly IRS Form 941 Employer Federal Quarterly tax returns, one in 1996 and the second in 1997, for a company for which
he was at the time an officer. The former company is not affiliated or related to us in any way. As an independent contractor with
us, Mr. Holmes is focusing upon building a sales network and providing consulting in relation to workers&rsquo; compensation programs
as well as ACA health insurance programs, and as such is not involved in any part of the accounting or tax paying and IRS return
filing areas of our operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: left">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><A NAME="a_004"></A><B>EXECUTIVE COMPENSATION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Set forth below is
certain information regarding the historical compensation of our named executive officers during the years ended August 31, 2019
and 2018. For additional information about our current officers and directors, see the section titled &ldquo;Management.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Executive Compensation</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Summary Compensation Table</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following table
provides information regarding the compensation paid during the last two fiscal years to the named executive officers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="white-space: nowrap; border-bottom: black 1pt solid; padding-right: 13.5pt"><FONT STYLE="font-size: 10pt"><B>Name and Principal Position</B></FONT></TD>
    <TD STYLE="white-space: nowrap; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="white-space: nowrap; border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Year</B></FONT></TD>
    <TD STYLE="white-space: nowrap; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="white-space: nowrap; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="white-space: nowrap; border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Salary<BR>
<BR>
($)</B></FONT></TD>
    <TD STYLE="white-space: nowrap; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="white-space: nowrap; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="white-space: nowrap; border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Stocks<BR>
<BR>
Awards<BR>
<BR>
($)</B></FONT></TD>
    <TD STYLE="white-space: nowrap; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="white-space: nowrap; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="white-space: nowrap; border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Option<BR>
<BR>
Awards<BR>
<BR>
($)<SUP>(1)</SUP></B></FONT></TD>
    <TD STYLE="white-space: nowrap; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="white-space: nowrap; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="white-space: nowrap; border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Non-Equity<BR>
<BR>
Incentive Plan<BR>
<BR>
Compensation<BR>
<BR>
($)</B></FONT></TD>
    <TD STYLE="white-space: nowrap; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="white-space: nowrap; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="white-space: nowrap; border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>All Other<BR>
<BR>
Compensation<BR>
<BR>
($)</B></FONT></TD>
    <TD STYLE="white-space: nowrap; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="white-space: nowrap; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="white-space: nowrap; border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Total<BR>
<BR>
($)</B>&nbsp;</FONT></TD>
    <TD STYLE="white-space: nowrap; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="width: 23%"><FONT STYLE="font-size: 10pt">Scott W. Absher</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: right">&nbsp;</TD>
    <TD STYLE="width: 8%; text-align: right"><FONT STYLE="font-size: 10pt">2019</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 8%; text-align: right"><FONT STYLE="font-size: 10pt">750,000</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 8%; text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 8%; text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 8%; text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 8%; text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 8%; text-align: right"><FONT STYLE="font-size: 10pt">750,000</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding-left: 24pt; text-indent: -12pt"><FONT STYLE="font-size: 10pt"><I>President, Chief Executive Officer and Director</I></FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">2018</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">750,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">750,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD><FONT STYLE="font-size: 10pt">Domonic J. Carney<SUP>(2)</SUP></FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">2019</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">12,115</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">12,115</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-left: 24pt; text-indent: -12pt"><FONT STYLE="font-size: 10pt"><I>Chief Financial Officer</I></FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">2018</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD><FONT STYLE="font-size: 10pt">Patrice H. Launay<SUP>(3)</SUP></FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">2019</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">285,558</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">50,875 </FONT></TD>
    <TD><FONT STYLE="font-size: 10pt"><SUP>(4)</SUP></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">336,433</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="white-space: nowrap; padding-left: 24pt; text-indent: -12pt"><FONT STYLE="font-size: 10pt"><I>Former Chief Financial Officer</I></FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">2018</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">180,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">50,875</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt"><SUP>(5)</SUP></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">230,875</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD><FONT STYLE="font-size: 10pt">Mark Absher<SUP>(6)</SUP></FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">2019</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">300,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&mdash;&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">300,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="white-space: nowrap; padding-left: 24pt; text-indent: -12pt"><FONT STYLE="font-size: 10pt"><I>Former In-House Counsel, Director and Secretary</I></FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">2018</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">275,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">50,875</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt"><SUP>(7)</SUP></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">325,875</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="white-space: nowrap; padding-left: 24pt; text-indent: -12pt">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt">(1)</TD><TD>The amount shown for option awards represents the grant date fair value of such awards granted to the named executive officers
as computed in accordance with Financial Accounting Standards Board (&ldquo;FASB&rdquo;) ASC Topic 718, Compensation-Stock Compensation.
For each award, the grant date fair value is calculated using the closing price of our common stock on the grant date. This amount
does not correspond to the actual value that may be realized by the named executive officers upon vesting or exercise of such award.
For information on the assumptions used to calculate the value of the awards, refer to Note 6 to the Consolidated Financial Statements.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt">(2)</TD><TD>Mr. Carney joined our company on August 4, 2019 and receives an annual salary of $350,000.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt">(3)</TD><TD>Mr. Launay joined our company as Chief Financial Officer on January 24, 2018, and resigned on July 30, 2019. Mr. Launay initially
received an annual salary of $240,000, which was later increased to $350,000 on February 1, 2019.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt">(4)</TD><TD>Represents 1,250 options issued pursuant to the 2017 Plan at an exercise price of $51.20 per share on April 1, 2019, estimated
to have been the fair market value price per share at the time of the award.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt">(5)</TD><TD>Represents the following grants pursuant to the 2017 Plan: 1,250 options issued at an exercise price of $118.00 per share on
February 1, 2018 and 156 options issued at an exercise price of $100.00 per share on May 10, 2018, estimated to have been the fair
market value price per share at the time of the awards.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt">(6)</TD><TD>Mr. Mark Absher resigned from his position as Registered In-House Counsel, Director and Secretary on February 6, 2019.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt">(7)</TD><TD>Represents 1,250 options issued pursuant to the 2017 Plan at an exercise price of $51.20 per share on May 10, 2018, estimated
to have been the fair market value price per share at the time of the award.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Outstanding Equity Awards at Fiscal
Year End</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following table
summarizes the outstanding equity awards held by each named executive officer as of August 31, 2019. This table includes unexercised
and unvested options and equity awards</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="white-space: nowrap; text-align: justify">&nbsp;</TD>
    <TD STYLE="white-space: nowrap; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="white-space: nowrap; border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Number of<BR>
        Securities<BR>
        Underlying<BR>
        Unexercised<BR>
        Options</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(#) Exercisable</B></P></TD>
    <TD STYLE="white-space: nowrap; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="white-space: nowrap; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="white-space: nowrap; border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Number of<BR>
Securities <BR>
Underlying <BR>
Unexercised <BR>
Unearned Options (#)<BR>
Unexercisable</B></FONT></TD>
    <TD STYLE="white-space: nowrap; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="white-space: nowrap; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="white-space: nowrap; border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Option</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Exercise</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Price</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>($)</B></P></TD>
    <TD STYLE="white-space: nowrap; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="white-space: nowrap; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="white-space: nowrap; border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Option</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Expiration</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Date</B></P></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="width: 48%">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: #CCEEFF">Scott W. Absher</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; background-color: #CCEEFF"><I>President, Chief Executive
        Officer and Director</I></P></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">1,250</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&mdash;</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">160.00</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">&nbsp;3/15/2027</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">Domonic J. Carney</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in; background-color: white"><I>Chief
        Financial Officer</I></P></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: #CCEEFF">Patrice H. Launay</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in; background-color: #CCEEFF"><I>Former
        Chief Financial Officer</I></P></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Mark Absher</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><I>Former Secretary
        and Director</I></P></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Director Compensation </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our directors classified
as employees receive no additional compensation for services as directors of the Company. The following table summarizes the compensation
paid to our non-employee directors during Fiscal 2019:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: black 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Name</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Fees<BR>
        Earned or</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Paid in</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Cash</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>($)<SUP>(1)</SUP></B></P></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Stock</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Awards</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>($)<SUP>(2)</SUP></B></P></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Option</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Awards</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>($)</B></P></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>All Other</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Compensation</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>($)</B></P></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Total</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>($)</B></P></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="width: 42%; text-align: justify"><FONT STYLE="font-size: 10pt">Scott W. Absher<SUP>(3)</SUP></FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 8%; text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 8%; text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 8%; text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 11%; text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 8%; text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Kenneth W. Weaver</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">91,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">75,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt"><SUP>(4)</SUP></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">166,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Whitney J. White</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">90,500</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">37,500</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt"><SUP>(5)</SUP></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">128,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Sean C. Higgins<SUP>(6)</SUP></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">85,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">37,500</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt"><SUP>(7)</SUP></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">122,500</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Christopher Sebes<SUP>(8)</SUP></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Amanda Murphy<SUP>(9)</SUP></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&mdash;</FONT></TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt">(1)</TD><TD>Represents monthly board of director fees paid or payable in cash during Fiscal 2019.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt">(2)</TD><TD>Represents annual value of stock awards issued during Fiscal 2019 under our 2017 Plan.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt">(3)</TD><TD>Mr. Absher did not receive any compensation for his services as a director during Fiscal 2019.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt">(4)</TD><TD>Pursuant to the terms of Mr. Weaver&rsquo;s director agreement, we issued 1,202 shares of common stock on May 15, 2019 valued
at $37,500, or $31.20 per share and 1,995 shares of common stock on August 19, 2019, or $18.80 per share.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt">(5)</TD><TD>Pursuant to the terms of Mr. White&rsquo;s director agreement, we issued 411 shares of common stock on April 16, 2019, valued
at $37,500 or $91.20 per share.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt">(6)</TD><TD>Mr. Higgins resigned from our board of directors on February 10, 2020, effective April 1, 2020.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt">(7)</TD><TD>Pursuant to the terms of Mr. Higgins&rsquo;s director agreement, we issued 411 shares of common stock on April 16, 2019, valued
at $37,500 or $91.20 per share.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt">(8)</TD><TD>Mr. Sebes joined our board of directors on February 7, 2020.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt">(9)</TD><TD>Ms. Murphy joined our board of directors on February 10, 2020.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Equity Incentive Plans</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In March 2017, we adopted the 2017 Plan.
The 2017 Plan provides incentives to eligible employees, officers, directors and consultants in the form of incentive stock options,
non-qualified stock options and stock. We have reserved, subject to shareholder approval, a total of 3,000,000 shares of common
stock for issuance under the 2017 Plan. Of these shares, approximately 43,415 shares have been designated by our board of directors
for issuance through July 24, 2020. Approximately 38,000 of the options have been forfeited and returned to the option pool under
the 2017 Plan as a consequence of employment terminations. Unless the Plan Administrator under the 2017 Plan determines otherwise,
each option is immediately exercisable and the shares subject to such option will vest pursuant to each grant notice.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On July 1, 2020, our board of directors
unanimously approved an increase in the number of shares of common stock issuable under our 2017 Plan from 250,000 to 3,000,000,
subject to approval by a majority of our shareholders no later than the next regularly scheduled annual shareholders meeting. Also
on July 1, 2020, our board of directors approved the award, primarily to current employees, and subject to shareholder approval
no later than the next regularly scheduled annual meeting, of grants of options to purchase 1,235,159 shares of our common stock
at an exercise price of $5.40 per share, which was the closing price of our common stock as reported by Nasdaq at the close of
trading on the day of our board of directors&rsquo; action. Of the options awarded, 995,000 are designated as &ldquo;incentive
stock options&rdquo;, and 280,159 are designated as &ldquo;non-qualifying&rdquo; or &ldquo;non-statutory&rdquo; options under the
Code. These options have a 10-year life, and will vest over a period of time as follows: 25% vest after a 12-month service period
following the award, and the balance vest in equal quarterly installments over the next 12 quarters of service.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Employment Agreements with our Named Executive Officers</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On March 23, 2016,
we entered into an offer letter agreement with Scott W. Absher, our President and Chief Executive Officer (the &ldquo;Absher Offer
Letter&rdquo;), which included certain provisions related to the executive&rsquo;s compensation. The Absher Offer Letter provides
for a full-time exempt position, an annual base salary and standard employee benefit plan participation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On July 16, 2019, we
entered into an offer letter agreement with Domonic J. Carney, our Chief Financial Officer (the &ldquo;Carney Offer Letter&rdquo;).
The Carney Offer Letter provides for at-will employment, a monthly salary of $29,166.67, participation in the 2017 Plan and standard
employee benefit plan participation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&nbsp;</P>

<P STYLE="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B><A NAME="a_005"></A>PRINCIPAL SHAREHOLDERS<SUP></SUP></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following table sets forth certain information known to
us regarding beneficial ownership of our capital stock as of July 24, 2020, for (i) all executive officers and directors as a group
and (ii) each person, or group of affiliated, known by us to be the beneficial owner of more than five percent (5%) of our capital
stock. The percentage of beneficial ownership in the table below is based on 16,816,686 shares of common stock deemed to be outstanding
as of July 24, 2020. In addition, shares of common stock that may be acquired by the shareholder within 60 days of July 24, 2020,
pursuant to the exercise of stock options are deemed to be outstanding for the purpose of computing the percentage ownership of
such shareholder but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person
shown in the table. Unless otherwise indicated, the business address for each stockholder listed is c/o ShiftPixy, Inc., 1 Venture,
Suite 150, Irvine, CA 92618.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Percentage of Common Stock Beneficially Owned</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: black 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt"><B>5% Stockholders</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Number of </B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Shares</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;Beneficially</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Owned</B></P></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Before Offering</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>After Offering</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="width: 61%; text-align: justify"><FONT STYLE="font-size: 10pt">Stephen Holmes</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">12,086,000</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt"><SUP>(1)</SUP></FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">42.2</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">%</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 10%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">%</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="white-space: nowrap; border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>&nbsp;Percentage of Common Stock<BR>
Beneficially Owned</B></FONT></TD>
    <TD STYLE="white-space: nowrap; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="white-space: nowrap; border-bottom: black 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Directors and Named Executive Officers</B></FONT></TD>
    <TD STYLE="white-space: nowrap; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="white-space: nowrap; border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Number of </B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Shares</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;Beneficially</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Owned</B></P></TD>
    <TD STYLE="white-space: nowrap; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="white-space: nowrap; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="white-space: nowrap; border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Before Offering</B></FONT></TD>
    <TD STYLE="white-space: nowrap; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="white-space: nowrap; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="white-space: nowrap; border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>After Offering</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="width: 61%; text-align: justify"><FONT STYLE="font-size: 10pt">Scott W. Absher</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">12,813,750</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt"><SUP>(2)</SUP></FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">76.2</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">%</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 10%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">%</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Domonic J. Carney</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">--</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">*</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">%</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Kenneth W. Weaver</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">5,062</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt"><SUP>(3)</SUP></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">*</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">%</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Whitney J. White</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">1,498</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt"><SUP>(3)</SUP></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">*</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">%</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Christopher Sebes&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">--</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">*</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">%</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Amanda Murphy</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">--</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">*</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">%</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Mark Absher<SUP>(4) </SUP></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">--</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">*</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">%</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Patrice H. Launay<SUP>(5)</SUP></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">--</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">*</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">%</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">All Executive Officers and Directors as a Group (7 persons)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">12,820,310</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">76.2</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">%</FONT></TD></TR>
</TABLE>
<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">                                                                                                                                          <TR STYLE="vertical-align: top">
<TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 27pt">*</TD><TD>Less than 1%</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(1)</TD><TD>Represents 294,750 shares of common stock, 1,250 shares underlying options exercisable within 60 days of July 24, 2020 and
11,790,000 shares of common stock underlying Preferred Options to purchase shares of Preferred Stock exercisable within 60 days
of July 24, 2020. The business address for Mr. Holmes is 22 Trailing Ivy, Irvine, CA 92620.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(2)</TD><TD>Represents 12,812,500 shares of common stock and 1,250 shares underlying options exercisable within 60 days of July 24,
                                                           2020.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(3)</TD><TD>Represents shares of common stock issued in conjunction with services rendered as a director.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(4)</TD><TD>Mr. Absher resigned as our Registered In-House Counsel, Director and Secretary on February 6, 2019.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.5in">(5)</TD><TD>Mr. Launay resigned as our Chief Financial Officer on July 30, 2019.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B><A NAME="a_006"></A>CERTAIN RELATIONSHIPS AND RELATED PARTY
TRANSACTIONS AND DIRECTOR INDEPENDENCE</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Related Party Transactions</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Except as set forth
below, none of our directors or executive officers, nor any proposed nominee for election as a director, nor any person who beneficially
owns, directly or indirectly, shares of stock carrying more than 5% of the voting rights attached to all of our outstanding shares,
nor any members of the immediate family (including spouse, parents, children, siblings, and in-laws) of any of the foregoing persons
has any material interest, direct or indirect, in any transaction since our incorporation, or in any presently proposed transaction
which, in either case, has or will materially affect us:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On September 28, 2017,
Whitney White, our independent director and Sean Higgins, our independent director who resigned effective April 1, 2020, were each
awarded 26,316 shares of our common stock for services rendered pursuant to the 2017 Plan. The fair value at the time of issuance
was $75,000, or $2.85 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On August 9, 2018,
Kenneth Weaver, our Chairman of the Audit Committee and independent director, was granted 24,592 shares of our common stock pursuant
to the 2017 Plan. The fair value at the time of issuance was approximately $75,000, or $3.05 per share. 12,296 of the shares issued
to Mr. Weaver were deemed to have been purchased and immediately vested on August 9, 2018, as a consequence of Mr. Weaver&rsquo;s
continued service as a director through that date. The other 12,296 shares of our common stock issued to Mr. Weaver on August 9,
2018 were deemed to have been purchased and immediately vested on November 30, 2018, contingent upon Mr. Weaver&rsquo;s continued
service as a director through that date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On April 16, 2019,
Messrs. White and Higgins were each issued 16,448 shares of our common stock for services rendered valued at $37,500 at a fair
value of $2.28 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On June 6, 2019,
we advanced $325,000 in cash to Mr. Stephen Holmes as payment for consulting services. Mr. Holmes is one of our founders and
owns 1.8% of our outstanding shares of common stock as of July 24, 2020. On July 18, 2019, Mr. Holmes repaid the advance by
returning 558,132 shares of common stock valued at $0.58 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On August 19, 2019,
we issued Mr. Weaver 79,788 shares of our common stock for services rendered valued at $37,500 at a fair value of $0.47 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On January 3, 2020,
effective January 1, 2020, we entered into&nbsp;the Vensure Asset Sale. Upon the occurrence of the Vensure Asset Sale, the holders
of our Preferred Options obtained the right to exercise each Preferred Option to purchase one share of our preferred stock for
$0.0001 per share.&nbsp; Each share of preferred stock is convertible into common stock on a one-for-one basis. As of the date
of this prospectus, the Preferred Options are exercisable to purchase up to 11,925,520 shares of preferred stock which are convertible
into an equal number of shares of common stock. Scott W. Absher, our Chief Executive Officer and director, exercised all of his
12,500,000 Preferred Options on June 4, 2020. Stephen Holmes, our founder and owner of 1.8% of our outstanding common stock,
owns 11,790,000 Preferred Options which are outstanding as of the date of this prospectus. The Preferred Options held by Mr. Holmes
became exercisable to purchase preferred stock upon the occurrence of the Vensure Asset Sale. Additionally, at some point in the
future we intend to adopt a second grant of options granting an additional 12,500,000 Preferred Options to each of Messrs. Absher
and Holmes whereby each option permits the holder to acquire one share of our preferred stock for $0.0001 per share. See &ldquo;Risk
Factors &mdash; Purchasers in the offering will suffer immediate and substantial dilution if our Option Shareholders exercise their
Preferred Options&rdquo; for a further discussion of the Preferred Options.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Director Independence</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our board of directors
has determined that we have three board members that qualify as &ldquo;independent&rdquo; as the term is used in Item 7(d)(3)(iv)(B)
of Schedule 14A under the Exchange Act, and as defined by Rule 4200(a)(15) of the Nasdaq Marketplace Rules.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-right: 0; margin-bottom: 0pt; text-align: left"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B><A NAME="a_007"></A>DESCRIPTION OF CAPITAL STOCK</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of the date of this
prospectus, we are authorized to issue up to 750,000,000 shares of common stock, par value $0.0001 per share and 50,000,000 shares
of preferred stock, par value $0.0001 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following is a
summary of the material terms of our capital stock and certain provisions of our certificate of incorporation and bylaws. Since
the terms of our certificate of incorporation and bylaws, and Wyoming law, are more detailed than the general information provided
below, you should only rely on the actual provisions of those documents and Wyoming law. If you would like to read those documents,
they are on file with the SEC, as described under the heading &ldquo;Where You Can Find More Information&rdquo; below. The summary
below is also qualified by provisions of applicable law.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On November 13, 2019,
our board of directors authorized the Reverse Stock Split. As a result of the Reverse Stock Split, each forty (40) shares of our
issued and outstanding common stock were automatically combined and converted into one issued and outstanding share of common stock.
The Reverse Stock Split affected all issued and outstanding shares of our common stock, as well as common stock underlying stock
options to purchase shares of common stock and warrants outstanding immediately prior to the effectiveness of the Reverse Stock
Split. The Reverse Stock Split did not alter the number of shares of preferred stock underlying the Preferred Options (as defined
below) and did not decrease the number of authorized shares of our common stock or preferred stock, alter the par value of our
common stock or preferred stock, both of which remain at $0.0001 per share, or modify any voting rights or other terms of our capital
stock. Unless otherwise indicated, all information set forth in this prospectus gives effect to the Reverse Stock Split.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of July 24, 2020,
there were 16,816,686 shares of common stock outstanding.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Common Stock</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Voting Rights</I>.
</B>Holders of our common stock are entitled to one vote for each share held of record on all matters submitted to a vote of the
shareholders. Wyoming law provides for cumulative voting for the election of directors. As a result, any shareholder may cumulate
his or her votes by casting them all for any one director nominee or by distributing them among two or more nominees. This may
make it easier for minority shareholders to elect a director.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Dividends</I>.
</B>Subject to preferences that may be granted to any then outstanding preferred stock, holders of our common stock are entitled
to receive ratably such dividends as may be declared by our board of directors out of funds legally available therefor as well
as any distributions to the shareholders. The payment of dividends on our common stock will be a business decision to be made by
our board of directors from time to time based upon results of our operations and our financial condition and any other factors
that our board of directors considers relevant. Payment of dividends on our common stock may be restricted by loan agreements,
indentures and other transactions we enter into from time to time.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Liquidation Rights</I>.
</B>In the event of our liquidation, dissolution or winding up, holders of our common stock are entitled to share ratably in all
of our assets remaining after payment of liabilities and the liquidation preference of any then outstanding preferred stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Absence of Other
Rights or Assessments</I>. </B>Holders of our common stock have no preferential, preemptive, conversion or exchange rights. There
are no redemption or sinking fund provisions applicable to our common stock. When issued in accordance with our articles of incorporation
and bylaws, shares of our common stock are fully paid and not liable to further calls or assessment by us.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Preferred Stock</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our board of directors
is authorized by our articles of incorporation to establish classes or series of preferred stock and fix the designation, powers,
preferences and rights of the shares of each such class or series and the qualifications, limitations or restrictions thereof without
any further vote or action by our shareholders. Any shares of preferred stock so issued would have priority over our common stock
with respect to dividend or liquidation rights. Any future issuance of preferred stock may have the effect of delaying, deferring
or preventing a change in our control without further action by our shareholders and may adversely affect the voting and other
rights of the holders of our common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Class A Preferred Stock</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Voting Rights</I></B>.
Holders of preferred stock shall not have voting rights other than those described under the section below entitled &ldquo;Description
of Capital Stock &ndash; Preferred Stock &ndash; Protective Provisions.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Dividends</I></B>.
Holders of our preferred stock shall not be entitled to receive annual or other dividends.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Liquidation Preference</I></B>.
In the event of our liquidation or winding up, the holders of the preferred stock will be entitled to receive in preference to
the holders of common stock an amount equal to their purchase price, subject to proportional adjustment for stock splits, stock
dividends, recapitalizations, and the like on a pro rata basis with the common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Conversion</I></B>.
Our board of directors and our shareholders recently approved an amendment to our Articles of Incorporation to add conversion rights
to our preferred stock. Holders of our preferred stock shall have the right to convert their preferred stock, on a one-for-one
basis, into shares of our common stock at any time, following at least 20 days after we file an Information Statement with the
SEC regarding such shareholder approval.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Anti-dilution
Protection</I></B>. There is anti-dilution protection afforded to the preferred stock solely for proportional adjustments for stock
splits, stock dividends, recapitalizations, and the like and not for other matters such as additional stock issuances or price
adjustments.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Protective Provisions</I></B>.
Consent of the holders of 75% of the voting rights of the outstanding preferred stock is required for any amendment or change of
the rights, preferences, privileges, or powers of, or the restrictions provided for the benefit of, the preferred stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Option to Acquire Preferred Stock</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As previously disclosed,
in September 2016, our founding shareholders, or Option Shareholders, were granted options to acquire our preferred stock, or Preferred
Options. The number of Preferred Options granted were based upon the number of shares held by the Option Shareholders at that time.
The Preferred Options are nontransferable and forfeited upon the sale of the related founding shares of common stock. Upon the
occurrence of certain specified events, the Option Shareholders could exercise each Preferred Option to purchase one share of our
preferred stock for $0.0001 per share. One such event occurred upon the Vensure Asset Sale in January 2020. As of the date of this
prospectus, the Preferred Options are exercisable to purchase up to 11,925,520 shares of our preferred stock which are convertible
into an equal number of shares of common stock. As stated above, the amount of Preferred Options, and the number of shares of preferred
stock issuable upon exercise of the Preferred Options, is based upon the number of shares of common stock held by the Option Shareholders
at the time such options were issued. Accordingly, in order to confirm the original intent of the granting of up to 50,000,000
Preferred Options to Messrs. Absher and Holmes, at some point in the future we intend to adopt a second grant of options granting
an additional 12,500,000 options to each of Messrs. Absher and Holmes whereby each option permits the holder to acquire one share
of our preferred stock for $0.0001 per share. Each share of preferred stock will be convertible into common stock on a one-for-one
basis. See &ldquo;Risk Factors &mdash; Purchasers in the offering will suffer immediate and substantial dilution if our Option
Shareholders exercise their Preferred Options&rdquo; for a further discussion of the Preferred Options.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Preferred Option
described above has the following general rights, preferences, privileges and restrictions:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Exercisability</I></B>.
The Preferred Option may only be exercised upon (i) the acquisition of a Controlling Interest by a shareholder other than the original
holders. &ldquo;Controlling Interest&rdquo; means the ownership of our outstanding voting shares sufficient to enable the acquiring
person, directly or indirectly and individually or in association with others, to exercise one-fifth or more of all of our voting
power in the election of directors or any other business matter on which shareholders have the right to vote under Wyoming law
or (ii) prior to any proposed merger, consolidation (in which our common stock is changed or exchanged) or sale of at least 50%
of our assets or earning power (other than a reincorporation). The right to exercise the Preferred Option shall terminate on December
31, 2023.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Proportional
Adjustment to Preferred Option</I></B>. In the event that, at the time the Preferred Option becomes exercisable, the total number
of authorized shares of preferred stock is less than the lesser of (a) the number of shares of common stock held by holders of
our common stock on September 28, 2016, or (b) the number of shares of common stock held by holders of our common stock on the
date on which the Preferred Option becomes exercisable (such lesser amount of shares of common stock hereinafter referred to as
the &ldquo;Total Holder Shares&rdquo;), then the number of shares of the preferred stock that each holder can purchase in connection
with the Preferred Option shall be proportionally reduced to a percentage (of such holder&rsquo;s Total Holder Shares) that is
equal to the percentage calculated by dividing the total number of authorized shares of preferred stock by the Total Holder Shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Transferability</I></B>.
The Preferred Option is not assignable except to any person or entity deemed an Affiliate of the Preferred Option holder as the
term Affiliate is defined under SEC Rule 144.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Effective January 1,
2020, we entered into the Vensure Asset Sale, in which, pursuant to an asset purchase agreement with Shiftable HR Acquisition,
LLC, part of Vensure Employer Services, Inc., we assigned client contracts representing approximately 70% of our billable clients,
which comprised approximately 88% of our quarterly revenue as of November 30, 2019, and certain operating assets, which triggered
the Option Shareholders&rsquo; right to acquire preferred stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Pre-Funded Warrants</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following summary
of certain terms and provisions of pre-funded warrants that are being offered hereby is not complete and is subject to, and qualified
in its entirety by, the provisions of the pre-funded warrant, the form of which is filed as an exhibit to the registration statement
of which this prospectus forms a part. Prospective investors should carefully review the terms and provisions of the form of pre-funded
warrant for a complete description of the terms and conditions of the pre-funded warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Duration and
Exercise Price</I></B>. Each pre-funded warrant offered hereby will have an initial exercise price per share equal to $0.001. The
pre-funded warrants will be immediately exercisable and may be exercised at any time until the pre-funded warrants are exercised
in full. The exercise price and number of shares of common stock issuable upon exercise is subject to appropriate adjustment in
the event of stock dividends, stock splits, reorganizations or similar events affecting our common stock and the exercise price.
The pre-funded warrants will be issued separately from the accompanying warrants, and may be transferred separately immediately
thereafter.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Exercisability</I></B>.
The pre-funded warrants will be exercisable, at the option of each holder, in whole or in part, by delivering to us a duly executed
exercise notice accompanied by payment in full for the number of shares of our common stock purchased upon such exercise (except
in the case of a cashless exercise as discussed below). A holder (together with its affiliates) may not exercise any portion of
the pre-funded warrant to the extent that the holder would own more than 4.99% of the outstanding common stock immediately after
exercise, except that upon at least 61 days&rsquo; prior notice from the holder to us, the holder may increase the amount of ownership
of outstanding stock after exercising the holder&rsquo;s pre-funded warrants up to 9.99% of the number of shares of our common
stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with
the terms of the pre-funded warrants. Purchasers of pre-funded warrants in this offering may also elect prior to the issuance of
the pre-funded warrants to have the initial exercise limitation set at 9.99% of our outstanding common stock. No fractional shares
of common stock will be issued in connection with the exercise of a pre-funded warrant. In lieu of fractional shares, we will either
pay the holder an amount in cash equal to the fractional amount multiplied by the exercise price or round up to the next whole
share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Cashless Exercise</I></B>.
If, at the time a holder exercises its pre-funded warrants, a registration statement registering the issuance of the shares of
common stock underlying the pre-funded warrants under the Securities Act is not then effective or available and an exemption from
registration under the Securities Act is not available for the issuance of such shares, then in lieu of making the cash payment
otherwise contemplated to be made to us upon such exercise in payment of the aggregate exercise price, the holder may elect instead
to receive upon such exercise (either in whole or in part) the net number of shares of common stock determined according to a formula
set forth in the pre-funded warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Transferability</I></B>.
Subject to applicable laws, a pre-funded warrant may be transferred at the option of the holder upon surrender of the pre-funded
warrant to us together with the appropriate instruments of transfer.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Exchange Listing</I></B>.
We do not intend to list the pre-funded warrants on Nasdaq or any other national securities exchange or nationally recognized trading
system. The common stock issuable upon exercise of the pre-funded warrants is currently listed on Nasdaq.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Right as a Shareholder</I></B>.
Except as otherwise provided in the pre-funded warrants or by virtue of such holder&rsquo;s ownership of shares of our common stock,
the holders of the pre-funded warrants do not have the rights or privileges of holders of our common stock, including any voting
rights, until they exercise their pre-funded warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Fundamental Transaction</I></B>.
In the event of a fundamental transaction, as described in the pre-funded warrants and generally including any reorganization,
recapitalization or reclassification of our common stock, the sale, transfer or other disposition of all or substantially all of
our properties or assets, our consolidation or merger with or into another person, the acquisition of more than 50% of our outstanding
common stock, or any person or group becoming the beneficial owner of 50% of the voting power represented by our outstanding common
stock, the holders of the pre-funded warrants will be entitled to receive upon exercise of the pre-funded warrants the kind and
amount of securities, cash or other property that the holders would have received had they exercised the pre-funded warrants immediately
prior to such fundamental transaction. In addition, upon a fundamental transaction, the holder will have the right to require us
to repurchase its pre-funded warrants at their fair value using the Black Scholes option pricing formula; provided, however, that
we will pay such holder using the same type or form of consideration (and in the same proportion) that is being offered and paid
to the holders of our common stock in connection with the fundamental transaction, whether that consideration be in the form of
cash, stock or any combination thereof, or whether the holders of our common stock are given the choice to receive from among alternative
forms of consideration in connection with the fundamental transaction.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Purchase Warrants</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following
summary of certain terms and provisions of purchase warrants that are being offered hereby is not complete and is subject to,
and qualified in its entirety by, the provisions of the purchase warrant, the form of which is filed as an exhibit to the
registration statement of which this prospectus forms a part. Prospective investors should carefully review the terms and
provisions of the form of purchase warrant for a complete description of the terms and conditions of the purchase
warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Duration and
Exercise Price</I></B><I>.</I>&nbsp;The purchase warrants will have an exercise price of $ (no less than 110% of the public offering
price). The exercise price is subject to appropriate adjustment in the event of certain stock dividends and distributions, stock
splits, stock combinations, reclassifications or similar events affecting our common stock and also upon any distributions of assets,
including cash, stock or other property to our stockholders. The purchase warrants&nbsp;<FONT STYLE="background-color: white">are
exercisable immediately, and at any time up to the date that is five years after their original issuance</FONT>.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Exercisability</I></B><I>.
</I>The purchase warrants <FONT STYLE="background-color: white">will be exercisable, at the option of each holder, in whole or
in part by delivering to us a duly executed exercise notice and, at any time a registration statement registering the issuance
of the shares of common stock underlying the </FONT>purchase warrant<FONT STYLE="background-color: white">s under the Securities
Act is effective and available for the issuance of such shares, or an exemption from registration under the Securities Act is available
for the issuance of such shares, by payment in full in immediately available funds for the number of shares of common stock purchased
upon such exercise. </FONT>A holder will not have the right to exercise any portion of the purchase warrant if the holder (together
with its affiliates) would beneficially own in excess of 4.99% (or, upon election of the holder, 9.99%) of the number of shares
of our common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in
accordance with the terms of the purchase warrants. However, any holder may increase or decrease such percentage, provided that
any increase will not be effective until the 61st day after such election.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Cashless Exercise</I></B><I>.
</I><FONT STYLE="background-color: white">If a registration statement registering the issuance of the shares of common stock underlying
the </FONT>purchase warrant<FONT STYLE="background-color: white">s under the Securities Act is not effective or available and an
exemption from registration under the Securities Act is not available for the issuance of such shares, the holder may elect to
exercise the </FONT>purchase warrant <FONT STYLE="background-color: white">only through a cashless exercise, in which case the
holder would receive upon such exercise the net number of shares of common stock determined according to the formula set forth
in the </FONT>purchase warrant<FONT STYLE="background-color: white">. No fractional shares of common stock will be issued in connection
with the exercise of a </FONT>purchase warrant<FONT STYLE="background-color: white">. In lieu of fractional shares, we will pay
the holder an amount in cash equal to the fractional amount multiplied by the exercise price. Notwithstanding anything to the contrary,
in the event we do not have or maintain an effective registration statement, there are no circumstances that would require us to
make any cash payments or net cash settle the </FONT>purchase warrant<FONT STYLE="background-color: white">s to the holders.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Transferability</I></B><I>.
</I>Subject to applicable laws, the purchase warrants may be offered for sale, sold, transferred or assigned without our consent.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Exchange Listing</I></B><I>.
</I>There is no established trading market for the purchase warrants and we do not expect a market to develop. In addition, we
do not intend to apply for the listing of the purchase warrants on any national securities exchange or other trading market. Without
an active trading market, the liquidity of the purchase warrants will be limited.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Rights as a Stockholder</I></B>.
Except as otherwise provided in the purchase warrants or by virtue of such holder&rsquo;s ownership of shares of our common stock,
the holder of a purchase warrant does not have the rights or privileges of a holder of our common stock, including any voting rights,
until the holder exercises the purchase warrant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B><I>Fundamental Transactions</I></B><I>.
</I>If a fundamental transaction occurs, then the successor entity will succeed to, and be substituted for us, and may exercise
every right and power that we may exercise and will assume all of our obligations under the purchase warrants with the same effect
as if such successor entity had been named in the purchase warrant itself. If holders of our common stock are given a choice as
to the securities, cash or property to be received in a fundamental transaction, then the holder shall be given the same choice
as to the consideration it receives upon any exercise of the purchase warrant following such fundamental transaction.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Outstanding Warrants</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Prior to this offering,
as of July 24, 2020, we had outstanding warrants to purchase shares of common stock as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; white-space: nowrap; text-align: center"><FONT STYLE="font-size: 10pt"><B>Total Outstanding and<BR>
Exercisable</B></FONT></TD>
    <TD STYLE="text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; white-space: nowrap; text-align: center"><FONT STYLE="font-size: 10pt"><B>Exercise Price Per<BR>
Share</B></FONT></TD>
    <TD STYLE="text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; white-space: nowrap; text-align: center"><FONT STYLE="font-size: 10pt"><B>Expiration<BR>
Date</B></FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="width: 51%"><FONT STYLE="font-size: 10pt">Warrants issued for placement fees</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 16%; text-align: right"><FONT STYLE="font-size: 10pt">2,500</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 13%; text-align: right"><FONT STYLE="font-size: 10pt">276.00</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="white-space: nowrap; width: 13%; text-align: right"><FONT STYLE="font-size: 10pt">June 26, 2022</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD><FONT STYLE="font-size: 10pt">Warrants issued in June 2018 financing</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">12,552</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">5.29</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="white-space: nowrap; text-align: right"><FONT STYLE="font-size: 10pt">December 4, 2023</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD><FONT STYLE="font-size: 10pt">Warrants issued for June 2018 placement fees</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">5,422</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">99.60</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="white-space: nowrap; text-align: right"><FONT STYLE="font-size: 10pt">December 4, 2023</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD><FONT STYLE="font-size: 10pt">Warrants issued in March 2019 financing</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">66,288</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">40.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="white-space: nowrap; text-align: right"><FONT STYLE="font-size: 10pt">March 12, 2024</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD><FONT STYLE="font-size: 10pt">Warrants issued for March 2019 placement fees</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">3,366</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">70.00</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="white-space: nowrap; text-align: right"><FONT STYLE="font-size: 10pt">March 12, 2024</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD><FONT STYLE="font-size: 10pt">Settlement warrants</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">423,669</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">10.17</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="white-space: nowrap; text-align: right"><FONT STYLE="font-size: 10pt">March 24, 2025</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD><P STYLE="margin: 0pt 0; font: 10pt Times New Roman, Times, Serif">Warrants issued for May 2020 underwriting fees</P></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">111,108</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">5.40</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="white-space: nowrap; text-align: right"><FONT STYLE="font-size: 10pt">May 26, 2025</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD><FONT STYLE="font-size: 10pt">Warrants issued in May 2020 Public Offering</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">1,277,580</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">5.40</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="white-space: nowrap; text-align: right"><FONT STYLE="font-size: 10pt">May 26, 2025</FONT></TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The June 2018 Warrants
(as defined below) include certain exercise price protection provisions pursuant to which the exercise price will be adjusted downward
if we issue or sell any shares of common stock or securities convertible into shares of common stock, including in this offering,
at an exercise price per share less than the outstanding warrant&rsquo;s exercise price listed in the table above.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For additional information
on our outstanding warrants, see the section entitled &ldquo;Description of Capital Stock&mdash;Debt and Equity Offerings.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Debt and Equity Offerings</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>The June 2018 Financing Transaction</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On June 4, 2018, we
completed an offer and sale to certain accredited investors, in a private placement, of the following unregistered securities (the
&ldquo;June 2018 Financing Transaction&rdquo;):</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I>$10,000,000 of 8%
Senior Secured Convertible Notes</I>. A total of 250,000 shares of our common stock have been reserved for the repayment and/or
conversion of the June 2018 Notes. The June 2018 Notes may be converted at a conversion price of $99.60 per share. The June 2018
Notes are amortized as follows: commencing on November 1, 2018 and continuing on the first day of each of the following successive
months thereafter until the maturity date of the June 2018 Notes, provided that such date is a Business Day (as defined in the
June 2018 Note (each an &ldquo;Amortization Payment Date&rdquo;)), we shall redeem the June 2018 Notes, plus interest and make
whole according to an amortization schedule attached to each June 2018 Note (each, an &ldquo;Amortization Payment&rdquo;). Each
Amortization Payment shall, at our option, be made in whole or in part, in cash equal to the sum of the Amortization Payment provided
for in the schedule attached to the June 2018 Notes, or, subject to our compliance with the equity conditions set forth in the
June 2018 Note, in common stock at a 15% discount to the lowest volume weighted average price during the ten trading days prior
to the Amortization Payment Date (the &ldquo;Amortization Conversion Rate&rdquo;); provided, however, that in the event that a
June 2018 Note holder elects to defer an Amortization Payment, the Amortization Conversion Rate shall be calculated based on the
date that the June 2018 Note holder provides us with notice of its intent to receive an Amortization Payment. Any Amortization
Payment or portion thereof made in cash will be subject to a 10% premium on such payment. No Amortization Payment may be made in
common stock if the price of such common stock is trading below a price of $1.00 on the Amortization Payment Date. Any holder of
a June 2018 Note, at its option and without regard to the actions of any other June 2018 Note holder, shall be entitled to accelerate
each Amortization Payment in up to three separate Amortization Payments each month and demand such payments in common stock pursuant
to the then-current Amortization Conversion Rate. In the event that such a holder elects to accelerate an Amortization Payment,
such accelerated Amortization Payment shall be effected from the last Amortization Payment due. Any holder of a June 2018 Note,
at its option and without regard to the actions of any other June 2018 Note holder, shall be entitled to defer each and any Amortization
Payment in its sole discretion and for as long as it wishes to defer such Amortization Payment and receive such payments in common
stock pursuant to the Amortization Conversion Rate, to be calculated when requested and received. Such deferring holder shall be
entitled to receive such deferred Amortization Payment upon three hours&rsquo; written notice, which Amortization Payment shall
be settled no later than two trading days after notice has been provided. Each June 2018 Note contains certain ownership limitations
that may restrict its conversion.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I>Warrants to purchase
up to an aggregate of 30,526 shares of common stock</I>. In connection with the issuance of the June 2018 Notes, we issued a total
of 30,526 June 2018 Warrants, consisting of 25,104 warrants issued to investors and 5,422 warrants issued to the placement agent.
The 25,104 June 2018 Warrants issued to investors (a) have an initial exercise price of $99.60 per share (subject to adjustment
as set forth therein), (b) become exercisable at any time on or after December 4, 2018, and on or prior to December 4, 2023, (c)
contain certain ownership limitations that may restrict their exercise and (d) became exercisable on a cashless basis on December
4, 2018. The 5,422 June 2018 Warrants issued to the placement agent are exercisable on a cashless basis without any conditions.
The Registration Statement on Form S-3 for the described securities did not register the offer or sale of any of the June 2018
Warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I>Registration Statement
on Form S-3 for the June 2018 securities</I>. On October 1, 2018, we filed a Registration Statement on Form S-3 (the &ldquo;October
Registration Statement&rdquo;) for the resale, from time to time, by certain selling shareholders of up to 255,526 shares of our
common stock, 225,000 shares of which are issuable upon the repayment and/or conversion of the June 2018 Notes and 30,526 shares
of which are issuable upon exercise of the June 2018 Warrants, all issued by us to the selling shareholders on June 4, 2018. The
October Registration Statement was declared effective on October 29, 2018, and as of the date of this prospectus, 152,005 shares
of our common stock have been issued and sold following conversion and/or amortization under the October Registration Statement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of the date of this
prospectus, no June 2018 Notes remain outstanding. A total of 12,052 June 2018 Warrants issued to investors are exercisable at
$5.29 per share and 5,222 of the June 2018 Warrants issued to the placement agent are exercisable at $99.60 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>The December 2018 Settlement Transaction</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I>Limited Settlement
Agreement and Mutual Release dated December 20, 2018</I>. Due to certain material failures under the June 2018 Financing Transaction,
we entered into a Limited Settlement Agreement and Mutual Release with the investors in the June 2018 Financing Transaction pursuant
to which we issued the December 2018 Notes in the principal amount of $888,888, increasing the total amount due to the investors
under the June 2018 Notes and December 2018 Notes to $10,888,888. The December 2018 Notes have identical terms to the June 2018
Notes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I>Registration Statement
on Form S-3 for the December 2018 securities</I>. On December 24, 2018, we filed a Registration Statement on Form S-3 (the &ldquo;December
Registration Statement&rdquo;) for the resale, from time to time, by certain selling shareholders of up to 17,778 shares of our
common stock upon the repayment and/or conversion of the December 2018 Notes. The December Registration Statement was declared
effective on February 1, 2019. As of the date of this prospectus, 460 shares of our common stock have been issued or sold following
conversion and/or amortization under the December Registration Statement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of the date of this
prospectus, no December 2018 Notes remain outstanding. All December 2018 Notes were either repaid, converted into shares of common
stock, or exchanged for December 2019 Exchange Notes which are no longer outstanding. See &ldquo;Description of Capital Stock &ndash;
Debt and Equity Offerings &ndash; The 2019 and 2020 Exchange and Settlement Transactions.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Amendments to the June 2018 Notes
and the December 2018 Notes</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On March 11, 2019,
we entered into certain amendment agreements with the holders of the June 2018 Notes and December 2018 Notes which, among other
things, reduced the floor price for amortization payments eligible to be paid, subject to conversion limitations, in shares of
our common stock from $1.25 per share to $1.00 per share. We filed a Current Report on Form 8-K with the SEC on March 13, 2019
describing these amendments.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>The March 2019 Financing Transaction</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On March 12, 2019,
we completed an offer and sale to certain accredited investors, in a private placement, of the following unregistered securities:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I>$4,750,000 of Senior
Convertible Notes</I>. A total of 766,129 shares of common stock have been reserved for the repayment and/or conversion of the
March 2019 Notes. The terms of the March 2019 Notes provide for payment of 110% of all amounts outstanding thereunder (including,
the principal amount of each March 2019 Note together with any accrued and unpaid interest and any other accrued and unpaid charges
thereunder, if any) at maturity on September 12, 2020 (the &ldquo;Maturity Date&rdquo;), subject to extension in certain circumstances
at the option of the March 2019 Note holder.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Subject to a 4.99%
beneficial ownership limitation (which may be increased to 9.99%) and an additional 19.9% limitation (collectively with the June
2018 and December 2018 transactions) under the rules and regulations of the principal market until shareholder approval is obtained
(collectively, the &ldquo;Conversion Limitations&rdquo;), the holders of the March 2019 Notes are entitled, at any time at their
option, to convert all, or any portion, of the outstanding and unpaid principal, accrued and unpaid interest and fees on the March
2019 Notes into fully paid, nonassessable shares of our common stock. Subject to the Conversion Limitations, each March 2019 Note
may be converted, at the option of the holder thereof, at the fixed price of $66.80 per share, subject to adjustment as described
below or, alternatively, at a variable price calculated by dividing (x) such portion of the principal, accrued and unpaid interest
and fees subject to conversion by (y) the greater of (i) $0.31, and (ii) the lower of the Conversion Price and 85% (subject to
downward adjustment in the case of conversion upon an event of default or bankruptcy) of the lowest volume-weighted average price
per share during the ten consecutive trading days prior to conversion as described more fully below.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Conversion of the March
2019 Notes and exercise of the March 2019 Warrants (defined and described below) would have a potentially dilutive effect to our
existing shareholders for two primary reasons: (i) conversion or exercise would result in the issuance of additional shares of
our common stock thereby reducing the percentage ownership interest of all of our current shareholders; and (ii) conversion or
exercise at a price lower than the price at which our common stock is trading increases the number of shares we will issue and
creates downward pressure on our stock price and value.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Amounts due and owing
under the March 2019 Notes are convertible into shares of our common stock at an initial conversion price of $66.80 (the &ldquo;initial
conversion price&rdquo;). The March 2019 Notes contain anti-dilution protection provisions for the lenders whereby the initial
conversion price will be adjusted downward upon the occurrence of any one of more of the following events if such events are for
a consideration per share lower than $66.80 (however, the conversion price of the March 2019 Notes may never be lower than $0.31
per share (the &ldquo;floor price&rdquo;)):</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">1.</TD><TD>Issuance of shares of our common stock;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">2.</TD><TD>Issuance of options to purchase shares of our common stock;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">3.</TD><TD>Issuance of convertible securities;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">4.</TD><TD>Change in existing option price or rate of conversion;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">5.</TD><TD>A subdivision or combination of our common stock (such as a stock split, stock dividend, stock combination, recapitalization,
or similar transaction);</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">6.</TD><TD>Issuance of variable price securities;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">7.</TD><TD>Any other event which would have a dilutive effect on the March 2019 Notes; and</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">8.</TD><TD>A voluntary adjustment of the initial conversion price by us with the consent of the March 2019 Note holders.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Due to the floor price,
we calculate the maximum number of shares of common stock issuable under the March 2019 Notes to be 383,065 shares if all amounts
under the March 2019 Notes are converted and 71,023 shares if all warrants are exercised for a total of 454,088 shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The March 2019 Notes
are also convertible pursuant to alternate conversion features in the event of the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">1.</TD><TD>In the event of either a bankruptcy or failure to pay any amounts due under the agreements, the March 2019 Notes are convertible
at an alternate conversion price of the greater of (x) $0.31 and (y) the lower of (i) the conversion price then in effect, and
(ii) 75% of the lowest volume-weighted average price per share of our common stock during the ten consecutive trading day period;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">2.</TD><TD>In the event of a default under the agreements (other than a bankruptcy or failure to pay as described above), the March 2019
Notes are convertible at an alternate conversion price of the greater of (x) $0.31 and (y) the lower of (i) the conversion price
then in effect, and (ii) 80% of the lowest volume-weighted average price per share of our common stock during the ten consecutive
trading day period; and</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">3.</TD><TD>At any time, at the option of the holder, the March 2019 Notes are convertible at an alternate conversion price of the greater
of (x) $0.31 and (y) the lower of (i) the conversion price then in effect, and (ii) 85% of the lowest volume-weighted average price
per share of our common stock during the ten consecutive trading day period.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have the right to
redeem the full amount of unpaid principal, accrued and unpaid interest and any fees on the March 2019 Notes at any time upon notice
to the holders of the March 2019 Notes at a price that is equal to the greater of (i) 100% of the amount of unpaid principal, accrued
and unpaid interest and fees on the March 2019 Note then outstanding during the 45 day calendar period commencing on the issuance
date and thereafter at 115% of the amount of unpaid principal, accrued and unpaid interest and fees on the March 2019 Notes then
outstanding and (ii) the product of (x) the aggregate number of shares then issuable upon conversion of such portion of the March
2019 Notes subject to redemption multiplied by (y) the greatest closing sale price of our common stock on any trading day during
the period commencing on the date immediately preceding our notice of optional redemption and ending on the trading day immediately
prior to the date we make the entire redemption payment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I>Warrants to purchase
up to an aggregate of 74,390 shares of common stock</I>. In connection with the issuance of the March 2019 Notes, we issued a total
of 74,390 March 2019 Warrants, consisting of 71,024 warrants issued to investors and 3,366 warrants issued to the placement agent.
The 71,024 March 2019 Warrants issued to investors (a) have an initial exercise price of $40.00 per share (subject to adjustment
as set forth therein), (b) are exercisable at any time between March 12, 2019 and on or prior to March 12, 2024, (c) contain certain
ownership limitations that may restrict their exercise and (d) are exercisable on a cashless basis if at the time of exercise there
is no effective registration statement registering, or the prospectus contained therein is not available for, the resale of shares
of common stock for which the March 2019 Warrants are exercisable. The 3,366 March 2019 Warrants issued to the placement agent
have an exercise price of $70.00 per share. The Registration Statement on Form S-3 for the described securities did not register
the offer or sale of any of the March 2019 Warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I>Registration Statement
on Form S-3 for the March 2019 securities</I>. On April 2, 2019, we filed a Registration Statement on Form S-3, amended on April
29, 2019 (the &ldquo;April Registration Statement&rdquo;) for the resale, from time to time, by certain selling shareholders of
up to 910,305 shares of our common stock, 766,129 shares of which are issuable upon the repayment and/or conversion of the March
2019 Notes and 144,176 shares of which are issuable upon exercise of the March 2019 Warrants. The April Registration Statement
was declared effective on May 22, 2019, and as of the date of this prospectus, 98,514 shares of our common stock have been issued
and sold following conversion and/or amortization under the April Registration Statement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>The 2019 and 2020 Exchange and Settlement
Transactions</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I>December 2019 Exchange</I>.
In December 2019, we exchanged $2,445,000 of the March 2019 Notes and $222,000 of the June 2018 Notes for $2,933,944 of the June
2018 Exchange Notes. The December Exchange 2019 Notes (a) have a fixed conversion price of $12.20 per share for $293,000 of the
note principal until January 31, 2020, (b) have a fixed conversion price of $40.00 per share for all note principal remaining after
January 31, 2020, (c) have amortization of 12.5% of the note principal balance as of February 1, 2020 each quarter beginning on
April 1, 2020, with payments to be made in cash or in shares of common stock at the fixed conversion price and (d) may be converted
at a default conversion price of a 15% discount to the volume-weighted average price, subject to a minimum conversion price of
$1.84 per share, in the event we do not make an amortization payment. In addition, in connection with this exchange, the investor
who received the December 2019 Exchange Notes also had its March 2019 Warrants amended to fix the exercise price at $40.00 per
share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I>January 2020 Settlements</I>.
In January 2020, we paid approximately $2,600,000 and converted or issued 148,804 shares of common stock to certain investors to
repay all of our outstanding June 2018 Notes and December 2018 Notes. We also fully settled with two investors, which included
the cancellation of their March 2019 Warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I>March 2020 Settlements.
</I>In March 2020, we (i) further amended the December 2019 Exchange Notes to fix the conversion price at $9.20 per share of common
stock (ii) exchanged $772,000 of the March 2019 Notes with full-ratchet anti-dilution price protection for $997,000 of amended
March 2019 Notes with a fixed conversion price at $9.20 per share of common stock and (iii) amended, cancelled or had holders exercise
for shares of common stock via cashless exercise all March 2019 Warrants which previously included full-ratchet anti-dilution price
protection and issued new warrants to purchase 423,669 shares of common stock at an exercise price of $10.17 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of July 24, 2020,
there were no convertible notes outstanding, no warrants with full-ratchet anti-dilution protection outstanding and 6,276 June
2018 Warrants outstanding with price protection anti-dilution provisions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>The May 2020 Public Offering</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On May 20, 2020,
we entered into an underwriting agreement with A.G.P., in connection with the May 2020 Public Offering of an aggregate of (i)
1,898,850 shares of common stock, (ii) pre-funded warrants to purchase 323,310 shares of common stock and (iii) warrants to
purchase 1,277,580 shares of common stock, which included the partial exercise of A.G.P.&rsquo;s over-allotment option to
purchase 166,500 additional warrants. The May 2020 Public Offering closed on May 26, 2020 and we received net proceeds of
approximately $10.9 million after deducting underwriting discounts and commissions and estimated expenses payable by us
associated with the May 2020 Public Offering. On June 11, 2020 and July 7, 2020, we closed partial over-allotment options
exercised by A.G.P. to purchase 250,340 additional shares of common stock resulting in net proceeds of an aggregate of
approximately $1.25 million after deducting underwriting discounts and commissions and estimated expenses payable by us.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>2017 Stock Option and Share Issuance
Plan</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In March 2017, we adopted
the 2017 Plan. The 2017 Plan provides incentives to eligible employees, officers, directors and consultants in the form of incentive
stock options, non-qualified stock options and stock. We have reserved, subject to shareholder approval, a total of 3,000,000 shares
of common stock for issuance under the 2017 Plan. Of these shares, approximately 43,415 shares have been designated by our board
of directors for issuance through July 24, 2020. Approximately 38,000 of the options have been forfeited and returned to the option
pool under the 2017 Plan as a consequence of employment terminations. Unless the Plan Administrator under the 2017 Plan determines
otherwise, each option is immediately exercisable and the shares subject to such option will vest pursuant to each grant notice.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">On July 1, 2020, our
board of directors unanimously approved an increase in the number of shares of common stock issuable under our 2017 Plan from 250,000
to 3,000,000, subject to approval by a majority of our shareholders no later than the next regularly scheduled annual shareholders
meeting. Also on July 1, 2020, our board of directors approved the award, primarily to current employees, and subject to shareholder
approval no later than the next regularly scheduled annual meeting, of grants of options to purchase 1,235,159 shares of our common
stock at an exercise price of $5.40 per share, which was the closing price of our common stock as reported by Nasdaq at the close
of trading on the day of our board of directors&rsquo; action. Of the options awarded, 995,000 are designated as &ldquo;incentive
stock options&rdquo;, and 280,159 are designated as &ldquo;non-qualifying&rdquo; or &ldquo;non-statutory&rdquo; options under the
Code. These options have a 10-year life, and will vest over a period of time as follows: 25% vest after a 12-month service period
following the award, and the balance vest in equal quarterly installments over the next 12 quarters of service.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Certain Anti-Takeover Effects</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Certain provisions
of Wyoming law may have an anti-takeover effect and may delay or prevent a tender offer or other acquisition transaction that a
shareholder might consider to be in his or her best interest. The summary of the provisions of Wyoming law set forth below does
not purport to be complete and is qualified in its entirety by reference to Wyoming law.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The issuance of shares
of preferred stock, the issuance of rights to purchase such shares, and the imposition of certain other adverse effects on any
party contemplating a takeover could be used to discourage an unsolicited acquisition proposal. For instance, the issuance of the
preferred stock, if the option to acquire such shares is exercised, would impede a business combination by the voting rights that
would enable a holder to block such a transaction. In addition, under certain circumstances, the issuance of other preferred stock
could adversely affect the voting power of holders of our common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Under Wyoming law,
a director, in determining what he reasonably believes to be in or not opposed to the best interests of the corporation, does not
need to consider only the interests of the corporation&rsquo;s shareholders in any matter but may also, in his discretion, consider
any of the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.5in">(i)</TD><TD>The interests of the corporation&rsquo;s employees, suppliers, creditors and customers;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.5in">(ii)</TD><TD>The economy of the state and nation;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.5in">(iii)</TD><TD>The impact of any action upon the communities in or near which the corporation&rsquo;s facilities or operations are located;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.5in">(iv)</TD><TD>The long-term interests of the corporation and its shareholders, including the possibility that those interests may be best
served by the continued independence of the corporation; and</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.5in">(v)</TD><TD>Any other factors relevant to promoting or preserving public or community interests.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The Preferred Options to acquire 11,925,520 shares of preferred
stock will, if exercised and converted into shares of our common stock, deter a takeover.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Because our board of
directors is not required to make any determination on matters affecting potential takeovers solely based on its judgment as to
the best interests of our shareholders, our board of directors could act in a manner that would discourage an acquisition attempt
or other transaction that some, or a majority, of our shareholders might believe to be in their best interests or in which such
shareholders might receive a premium for their stock over the then market price of such stock. Our board of directors presently
does not intend to seek shareholder approval prior to the issuance of currently authorized stock, unless otherwise required by
law or applicable stock exchange rules.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B></B>&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><A NAME="k_001"></A><B>MATERIAL U.S.
FEDERAL INCOME TAX CONSEQUENCES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">The
following summary describes the material U.S. federal income tax consequences of the acquisition, ownership and disposition of
our common stock and the acquisition, ownership, exercise, expiration or disposition of warrants acquired in this offering by Non-U.S.
Holders (as defined below). This discussion does not address all aspects of U.S. federal income taxes, does not discuss the potential
application of the alternative minimum tax or Medicare Contribution tax and does not discuss state or local taxes, U.S. federal
gift and estate tax laws, or any non-U.S. tax consequences that may be relevant to Non-U.S. Holders in light of their particular
circumstances.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Special
rules different from those described below may apply to certain Non-U.S. Holders that are subject to special treatment under the
Code, such as:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">insurance companies, banks and other financial institutions;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">tax-exempt organizations (including private foundations) and tax-qualified retirement plans;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">foreign governments and international organizations;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">broker-dealers and traders in securities;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">U.S. expatriates and certain former citizens or long-term residents of the United States;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">persons that own, or are deemed to own, more than 5% of our capital stock;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">&ldquo;controlled foreign corporations,&rdquo; &ldquo;passive foreign investment companies&rdquo;
and corporations that accumulate earnings to avoid U.S. federal income tax;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">persons that hold our common stock or warrants as part of a &ldquo;straddle,&rdquo; &ldquo;hedge,&rdquo;
&ldquo;conversion transaction,&rdquo; &ldquo;synthetic security&rdquo; or integrated investment or other risk reduction strategy;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">persons who do not hold our common stock or warrants as a capital asset within the meaning of Section
1221 of the Code (generally, for investment purposes); and</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">partnerships and other pass-through entities, and investors in such pass-through entities (regardless
of their places of organization or formation).</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Such
Non-U.S. Holders are urged to consult their own tax advisors to determine the U.S. federal, state, local and other tax consequences
that may be relevant to them.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Furthermore,
the discussion below is based upon the provisions of the Code, and United States Treasury Regulations, IRS rulings and judicial
decisions thereunder as of the date hereof, and such authorities may be repealed, revoked or modified, possibly retroactively,
and are subject to differing interpretations which could result in U.S. federal income tax consequences different from those discussed
below. We have not requested a ruling from the Internal Revenue Service, or IRS, with respect to the statements made and the conclusions
reached in the following summary, and there can be no assurance that the IRS will agree with such statements and conclusions or
will not take a contrary position regarding the tax consequences described herein, or that any such contrary position would not
be sustained by a court.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Finally,
the discussion below assumes that the pre-funded warrants are characterized for U.S. federal income tax purposes in accordance
with their form as warrants to acquire our common stock. Given the terms of the pre-funded warrants, it is possible that the IRS
could successfully assert that the pre-funded warrants in substance represent direct ownership of our common stock prior to exercise.
Under this treatment, a Non-U.S. Holder of a pre-funded warrant could be subject to the tax consequences described below that are
applicable to a holder of our common stock, including under the heading &ldquo;Distributions.&rdquo; <B>Persons considering the
acquisition of a pre-funded warrant are encouraged to consult their own tax advisors concerning the tax characterization of the
pre-funded warrants and the consequences of acquiring, owning or disposing of a pre-funded warrant.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">PERSONS
CONSIDERING THE PURCHASE OF OUR COMMON STOCK OR WARRANTS PURSUANT TO THIS OFFERING SHOULD CONSULT THEIR OWN TAX ADVISORS
CONCERNING THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF ACQUIRING, OWNING AND DISPOSING OF OUR COMMON STOCK OR WARRANTS IN
LIGHT OF THEIR PARTICULAR SITUATIONS AS WELL AS ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY OTHER TAXING JURISDICTION,
INCLUDING ANY STATE, LOCAL OR NON-U.S. TAX CONSEQUENCES OR ANY U.S. FEDERAL NON-INCOME TAX CONSEQUENCES, AND THE POSSIBLE
APPLICATION OF TAX TREATIES.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">For
the purposes of this discussion, a &ldquo;Non-U.S. Holder&rdquo; is, for U.S. federal income tax purposes, a beneficial owner of
common stock or warrants that is not a U.S. Holder or a partnership for U.S. federal income tax purposes. A &ldquo;U.S. Holder&rdquo;
means a beneficial owner of our common stock or warrants that is for U.S. federal income tax purposes (a) an individual citizen
or resident of the United States, (b) a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes),
created or organized in or under the laws of the United States, any state thereof or the District of Columbia, (c) an estate the
income of which is subject to U.S. federal income taxation regardless of its source, or (d) a trust if it (1) is subject to the
primary supervision of a court within the United States and one or more U.S. persons (within the meaning of Section 7701(a)(30)
of the Code) have the authority to control all substantial decisions of the trust or (2) has a valid election in effect under applicable
U.S. Treasury regulations to be treated as a U.S. person.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">If
you are an individual non-U.S. citizen, you may, in some cases, under a &ldquo;look-back&rdquo; rule, be deemed to be a resident
alien (as opposed to a nonresident alien) by virtue of being present in the United States for at least 31 days in the calendar
year and for an aggregate of at least 183 days during a three-year period ending in the current calendar year. Generally, for this
purpose, all the days present in the current year, one-third of the days present in the immediately preceding year, and one-sixth
of the days present in the second preceding year, are counted.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Resident
aliens are generally subject to U.S. federal income tax as if they were U.S. citizens. Individuals who are uncertain of their status
as resident or nonresident aliens for U.S. federal income tax purposes are urged to consult their own tax advisors regarding the
U.S. federal income tax consequences of the ownership or disposition of our common stock or warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 10pt; text-align: justify; text-indent: -10pt; background-color: white"><B>Exercise
of Warrants</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 10pt; text-align: justify; text-indent: -10pt; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">In
general, a Non-U.S. Holder will not recognize gain or loss for U.S. federal income tax purposes upon exercise of a warrant, except
to the extent the Non-U.S. Holder receives a cash payment for any such fractional share that would otherwise have been issuable
upon exercise of the warrant, which will be treated as a sale subject to the rules described under &ldquo;Gain on Disposition of
Our Common Stock&rdquo; below. The Non-U.S. Holder will take a tax basis in the shares acquired on the exercise of a warrant equal
to the exercise price of the warrant. The Non-U.S. Holder&rsquo;s holding period in the shares of our common stock acquired on
exercise of the warrant will begin on the date of exercise of the warrant, and will not include any period for which the Non-U.S.
Holder held the warrant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 10pt; text-align: justify; text-indent: -10pt; background-color: white"><B>Expiration
of Warrants</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 10pt; text-align: justify; text-indent: -10pt; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Expiration
of warrants will be treated as if the Non-U.S. Holder sold or exchanged the warrant and recognized a capital loss equal to the
Non-U.S. Holder&rsquo;s tax basis in the warrant. However, a Non-U.S. Holder will not be able to utilize a loss recognized upon
expiration of a warrant against the Non-U.S. Holder&rsquo;s U.S. federal income tax liability unless the loss is effectively connected
with the Non-U.S. Holder&rsquo;s conduct of a trade or business within the United States (and, if an income tax treaty applies,
is attributable to a permanent establishment in the United States) or is treated as a U.S.-source loss and the Non-U.S. Holder
is present 183 days or more in the taxable year of disposition and certain other conditions are met.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 10pt; text-align: justify; text-indent: -10pt; background-color: white"><B>Certain
Adjustments to the Warrants</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 10pt; text-align: justify; text-indent: -10pt; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Under
Section 305 of the Code, an adjustment to the number of shares of common stock that will be issued on the exercise of the warrants,
or an adjustment to the exercise price of the warrants, may be treated as a constructive distribution to a Non-U.S. Holder of the
warrants if, and to the extent that, such adjustment has the effect of increasing such Non-U.S. Holder&rsquo;s proportionate interest
in our &ldquo;earnings and profits&rdquo; or assets, depending on the circumstances of such adjustment (for example, if such adjustment
is to compensate for a distribution of cash or other property to our shareholders). Adjustments to the exercise price of warrants
made pursuant to a <I>bona fide</I> reasonable adjustment formula that has the effect of preventing dilution of the interest of
the holders of the warrants generally should not be considered to result in a constructive distribution. Such constructive distribution
would be treated as a dividend, return of capital or capital gain as described under the heading &ldquo;Distributions&rdquo; below.
Any such constructive distribution would be taxable whether or not there is an actual distribution of cash or other property.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">In
addition, regulations governing &ldquo;dividend equivalents&rdquo; under Section 871(m) of the Code should apply to the pre-funded
warrants. Under those regulations, an implicit or explicit payment under the pre-funded warrants that references a dividend distribution
on our common stock (including an adjustment to the amount due on the pre-funded warrant to take into account a dividend distribution
on our common stock) would be taxable to a Non-U.S. Holder as described under the heading &ldquo;Distributions&rdquo; below. Such
dividend equivalent amount would be taxable and subject to withholding whether or not there is actual payment of cash or other
property. Non-U.S. holders are encouraged to consult their own tax advisors regarding the application of Section 871(m) to the
pre-funded warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">On
April 12, 2016, the IRS issued proposed regulations addressing the amount and timing of deemed distributions, obligations of
withholding agents and filing and notice obligations of issuers. If adopted as proposed, the regulations would generally
provide that (i) the amount of a deemed distribution is the excess of the fair market value of a warrant immediately after
the number-of-shares or exercise-price adjustment over the fair market value of the warrant without the adjustment, (ii) the
deemed distribution occurs at the earlier of the date the adjustment occurs under the terms of the warrant and the date of
the actual distribution of cash or property that results in the deemed distribution, (iii) subject to certain limited
exceptions, a withholding agent is required to impose any applicable withholding on deemed distributions to a Non-U.S. Holder
and, if there is no associated cash payment, may set off its withholding obligations against other payments to or funds of
such holder and (iv) we are required to report the amount of any deemed distributions on our website or to the IRS and all
holders of warrants (including holders of warrants that would otherwise be exempt from reporting). The final regulations will
be effective for deemed distributions occurring on or after the date of adoption, but holders of warrants and withholding
agents may rely on them prior to that date under certain circumstances.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Distributions</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">We
do not expect to make any distributions on our common stock in the foreseeable future. If we do make distributions on our common
stock, however, such distributions made to a Non-U.S. Holder of our common stock (including constructive distributions or dividend
equivalents deemed paid) will constitute dividends for U.S. tax purposes to the extent paid out of our current or accumulated earnings
and profits (as determined under U.S. federal income tax principles). Distributions in excess of our current and accumulated earnings
and profits will constitute a return of capital that is applied against and reduces, but not below zero, a Non-U.S. Holder&rsquo;s
adjusted tax basis in our common stock. Any remaining excess will be treated as gain realized on the sale or exchange of our common
stock as described below under the section titled &ldquo;Gain on Disposition of Our Common Stock or Warrants.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Any
distribution on our common stock that is treated as a dividend paid to a Non-U.S. Holder (including constructive distributions
or dividend equivalents deemed paid) that is not effectively connected with the holder&rsquo;s conduct of a trade or business in
the United States will generally be subject to withholding tax at a 30% rate or such lower rate as may be specified by an applicable
income tax treaty between the United States and the Non-U.S. Holder&rsquo;s country of residence. To obtain a reduced rate of withholding
under a treaty, a Non-U.S. Holder generally will be required to provide the applicable withholding agent with a properly executed
IRS Form W-8BEN, IRS Form W-8BEN-E or other appropriate form, certifying the Non-U.S. Holder&rsquo;s entitlement to benefits under
that treaty. Such form must be provided prior to the payment of dividends and must be updated periodically. If a Non-U.S. Holder
holds stock through a financial institution or other agent acting on the holder&rsquo;s behalf, the holder will be required to
provide appropriate documentation to such agent. The holder&rsquo;s agent may then be required to provide certification to the
applicable withholding agent, either directly or through other intermediaries. If you are eligible for a reduced rate of U.S. withholding
tax under an income tax treaty, you should consult with your own tax advisor to determine if you are able to obtain a refund or
credit of any excess amounts withheld by timely filing an appropriate claim for a refund with the IRS.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">We
generally are not required to withhold tax on dividends paid (or constructive dividends or dividend equivalents deemed paid) to
a Non-U.S. Holder that are effectively connected with the holder&rsquo;s conduct of a trade or business within the United States
(and, if required by an applicable income tax treaty, are attributable to a permanent establishment that the holder maintains in
the United States) if a properly executed IRS Form W-8ECI, stating that the dividends are so connected, is furnished to us (or,
if stock is held through a financial institution or other agent, to the applicable withholding agent). In general, such effectively
connected dividends will be subject to U.S. federal income tax on a net income basis at the regular graduated rates applicable
to U.S. persons. A corporate Non-U.S. Holder receiving effectively connected dividends may also be subject to an additional &ldquo;branch
profits tax,&rdquo; which is imposed, under certain circumstances, at a rate of 30% (or such lower rate as may be specified by
an applicable treaty) on the corporate Non-U.S. Holder&rsquo;s effectively connected earnings and profits, subject to certain adjustments.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">See
also the section below titled &ldquo;Foreign Accounts&rdquo; for additional withholding rules that may apply to dividends paid
to certain foreign financial institutions or non-financial foreign entities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 10pt; text-align: justify; text-indent: -10pt; background-color: white"><B>Gain
on Disposition of Our Common Stock or Warrants</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 10pt; text-align: justify; text-indent: -10pt; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Subject
to the discussions below under the sections titled &ldquo;Backup Withholding and Information Reporting&rdquo; and &ldquo;Foreign
Accounts,&rdquo; a Non-U.S. Holder generally will not be subject to U.S. federal income or withholding tax with respect to gain
realized on a sale or other disposition of our common stock or warrants unless (a) the gain is effectively connected with a trade
or business of the holder in the United States (and, if required by an applicable income tax treaty, is attributable to a permanent
establishment that the holder maintains in the United States), (b) the Non-U.S. Holder is a nonresident alien individual and is
present in the United States for 183 or more days in the taxable year of the disposition and certain other conditions are met,
or (c) we are or have been a &ldquo;United States real property holding corporation&rdquo; within the meaning of Code Section 897(c)(2)
at any time within the shorter of the five-year period preceding such disposition or the holder&rsquo;s holding period in the common
stock or warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">If
you are a Non-U.S. Holder described in (a) above, you will be required to pay tax on the net gain derived from the sale at
the regular graduated U.S. federal income tax rates applicable to U.S. persons. Corporate Non-U.S. Holders described in (a)
above may also be subject to the additional branch profits tax at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty. If you are an individual Non-U.S. Holder described in (b) above, you will be required to pay a
flat 30% tax on the gain derived from the sale, which gain may be offset by U.S. source capital losses (even though you are
not considered a resident of the United States), provided you have timely filed.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><B>U.S. Federal
Income Tax Returns with Respect to Such Losses</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">With
respect to (c) above, in general, we would be a United States real property holding corporation if U.S. real property interests
as defined in the Code and the Treasury Regulations comprised (by fair market value) at least half of our assets. We believe that
we are not, and do not anticipate becoming, a United States real property holding corporation. However, there can be no assurance
that we will not become a United States real property holding corporation in the future. Even if we are treated as a U.S. real
property holding corporation, gain realized by a Non-U.S. Holder on a disposition of our common stock or warrants will not be subject
to U.S. federal income tax so long as (1) the Non-U.S. Holder owned, directly, indirectly or constructively, no more than five
percent of our common stock at all times within the shorter of (i) the five-year period preceding the disposition or (ii) the holder&rsquo;s
holding period and (2) our common stock is regularly traded on an established securities market. There can be no assurance that
our common stock will qualify as regularly traded on an established securities market.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">See
the section titled &ldquo;Foreign Accounts&rdquo; for additional information regarding withholding rules that may apply to proceeds
of a disposition of our common stock or warrants paid to foreign financial institutions or non-financial foreign entities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 10.1pt; text-align: justify; text-indent: -10.1pt; background-color: white"><B>Backup
Withholding and Information Reporting</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 10.1pt; text-align: justify; text-indent: -10.1pt; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Generally,
we or certain financial middlemen must report information to the IRS with respect to any dividends we pay on our common stock including
the amount of any such dividends (including constructive distributions or dividend equivalents deemed paid), the name and address
of the recipient, and the amount, if any, of tax withheld. A similar report is sent to the holder to whom any such dividends are
paid. Pursuant to tax treaties or certain other agreements, the IRS may make its reports available to tax authorities in the recipient&rsquo;s
country of residence.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Dividends
paid by us (or our paying agents) to a Non-U.S. Holder (including constructive distributions or dividend equivalents deemed paid)
may also be subject to U.S. backup withholding. U.S. backup withholding generally will not apply to a Non-U.S. Holder who provides
a properly executed IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable, or otherwise establishes an exemption, provided that the
applicable withholding agent does not have actual knowledge or reason to know the holder is a U.S. person.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Under
current U.S. federal income tax law, U.S. information reporting and backup withholding requirements generally will apply to the
proceeds of a disposition of our common stock or warrants effected by or through a U.S. office of any broker, U.S. or non-U.S.,
unless the Non-U.S. Holder provides a properly executed IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable, or otherwise meets
documentary evidence requirements for establishing non-U.S. person status or otherwise establishes an exemption. Generally, U.S.
information reporting and backup withholding requirements will not apply to a payment of disposition proceeds to a Non-U.S. Holder
where the transaction is effected outside the United States through a non-U.S. office of a non-U.S. broker. Information reporting
and backup withholding requirements may, however, apply to a payment of disposition proceeds if the broker has actual knowledge,
or reason to know, that the holder is, in fact, a U.S. person. For information reporting purposes, certain brokers with substantial
U.S. ownership or operations will generally be treated in a manner similar to U.S. brokers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Backup
withholding is not an additional tax. If backup withholding is applied to you, you should consult with your own tax advisor to
determine whether you have overpaid your U.S. federal income tax, and whether you are able to obtain a tax refund or credit of
the overpaid amount.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 10pt; text-align: justify; text-indent: -10pt; background-color: white"><B>Foreign
Accounts</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 10pt; text-align: justify; text-indent: -10pt; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">In
addition, U.S. federal withholding taxes may apply under the Foreign Account Tax Compliance Act (&ldquo;FATCA&rdquo;), on
certain types of payments, including dividends, constructive dividends or dividend equivalents deemed paid and, on or after
January 1, 2019, the gross proceeds of a disposition of our common stock or warrants, paid to non-U.S. financial institutions
and certain other non-U.S. entities. Specifically, a 30% withholding tax may be imposed on dividends (including constructive
dividends and dividend equivalents), on or after January 1, 2019, gross proceeds from the sale or other disposition of, our
common stock or warrants paid to a &ldquo;foreign financial institution&rdquo; or a &ldquo;non-financial foreign
entity&rdquo; (each as defined in the Code), unless (1) the foreign financial institution agrees to undertake certain
diligence and reporting obligations, (2) the non-financial foreign entity either certifies it does not have any
&ldquo;substantial United States owners&rdquo; (as defined in the Code) or furnishes identifying information regarding each
substantial United States owner, or (3) the foreign financial institution or non-financial foreign entity otherwise qualifies
for an exemption from these rules. The 30% federal withholding tax described in this paragraph cannot be reduced under an
income tax treaty with the United States. If the payee is a foreign financial institution and is subject to the diligence and
reporting requirements in (1) above, it must enter into an agreement with the U.S. Department of the Treasury requiring,
among other things, that it undertake to identify accounts held by certain &ldquo;specified United States persons&rdquo; or
&ldquo;United States-owned foreign entities&rdquo; (each as defined in the Code), annually report certain information about
such accounts, and withhold 30% on certain payments to non-compliant foreign financial institutions and certain other account
holders. Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United
States governing FATCA may be subject to different rules.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Prospective
investors should consult their tax advisors regarding the potential application of withholding under FATCA to their investment
in our common stock or warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">EACH
PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE TAX CONSEQUENCES OF PURCHASING, HOLDING AND DISPOSING OF
OUR COMMON STOCK OR WARRANTS, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLE LAW, AS WELL AS TAX CONSEQUENCES
ARISING UNDER ANY STATE, LOCAL, NON-U.S. OR U.S. FEDERAL NON-INCOME TAX LAWS SUCH AS ESTATE AND GIFT TAX.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><A NAME="k_002"></A><B>UNDERWRITING</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have entered into
an underwriting agreement dated &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;with A.G.P., as underwriter, with respect to the securities being offered hereby. Subject to
the terms and conditions of the underwriting agreement, we have agreed to sell to the underwriter and the underwriter has agreed
to purchase from us, at the public offering price less the underwriting discounts and commissions set forth on the cover page of
this prospectus, shares of our common stock, purchase warrants and pre-funded warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Pursuant to the terms
and subject to the conditions contained in the underwriting agreement, we have agreed to sell to the underwriter named below, and
the underwriter has agreed to purchase from us, the respective number of shares of common stock, purchase warrants and pre-funded
warrants set forth opposite its name below:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid"><FONT STYLE="font-size: 10pt"><B>Underwriter</B></FONT></TD>
    <TD STYLE="vertical-align: bottom; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Number of<BR>
Shares</B></FONT></TD>
    <TD STYLE="vertical-align: bottom; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Number of<BR>
Pre-Funded<BR>
Warrants</B></FONT></TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Number of<BR>
Purchase<BR>
Warrants</B></FONT></TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Total</B></FONT></TD>
    <TD STYLE="vertical-align: bottom; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: bottom; width: 49%; padding-left: 10pt; text-indent: -10pt"><FONT STYLE="font-size: 10pt">A.G.P./Alliance Global Partners</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 10%; text-align: right">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 10%; text-align: right">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%">&nbsp;</TD>
    <TD STYLE="vertical-align: top; width: 10%">&nbsp;</TD>
    <TD STYLE="vertical-align: top; width: 1%">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 10%; text-align: right">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%">&nbsp;</TD></TR>
<TR STYLE="background-color: white">
    <TD STYLE="vertical-align: bottom; padding-left: 20pt; text-indent: -10pt"><FONT STYLE="font-size: 10pt"><B>Total</B></FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="background-color: white">The
underwriting agreement provides that the obligation of the underwriter to purchase the shares of common stock, purchase warrants
and pre-funded warrants offered by this prospectus is subject to certain conditions. The </FONT>underwriter is <FONT STYLE="background-color: white">obligated
to purchase all of the shares of common stock, purchase warrants and pre-funded warrants offered hereby if any of the shares, purchase
warrants or pre-funded </FONT>warrants <FONT STYLE="background-color: white">are purchased.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><B>Underwriting
Discounts, Commissions and Expenses</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have agreed to sell
the securities to the underwriter at the offering price of $ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; per share of common stock and purchase warrant or $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; per pre-funded
warrant and purchase warrant, as applicable, which represents the offering price of such securities set forth on the cover page
of this prospectus, less the applicable 7.0% underwriting discount.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The underwriter has
advised us that they propose to offer the shares of common stock, purchase warrants and the pre-funded warrants at the public offering
price set forth on the cover page of this prospectus and to certain dealers at that price less a concession not in excess of $
per share of common stock, the purchase warrant and pre-funded warrant. The underwriter may allow, and certain dealers may reallow,
a discount from the concession not in excess of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; per share of common stock, the purchase warrant and the pre-funded warrant to
certain brokers and dealers. After this offering, the public offering price, concession and reallowance to dealers may be changed
by the representative. No such change shall change the amount of proceeds to be received by us as set forth on the cover page of
this prospectus. The shares of common stock, the purchase warrants and the pre-funded warrants are offered by the underwriter as
stated herein, subject to receipt and acceptance by them and subject to its right to reject any order in whole or in part. The
underwriter has informed us that it does not intend to confirm sales to any accounts over which they exercise discretionary authority.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have also agreed to reimburse the underwriter for accountable
legal expenses not to exceed $100,000 and non-accountable expenses not to exceed 1% of the aggregate gross proceeds of this offering.
We estimate that expenses payable by us in connection with this offering, including reimbursement of the underwriter&rsquo;s out-of-pocket
expenses, but excluding the underwriting discount referred to above, will be approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The following table
shows the underwriting discounts and commissions payable to the underwriter by us in connection with this offering (assuming both
the exercise and non-exercise of the over-allotment option to purchase additional shares of common stock and/or purchase warrants
we have granted to the underwriter):</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
<TD STYLE="padding-bottom: 1pt; white-space: nowrap; text-align: center">&nbsp;</TD>
<TD STYLE="white-space: nowrap; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
<TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; white-space: nowrap; text-align: center"><B>Per Share<BR> and accompanying<BR> Purchase
Warrant</B></TD>
<TD STYLE="white-space: nowrap; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
<TD STYLE="white-space: nowrap; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
<TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; white-space: nowrap; text-align: center"><B>Per Pre-Funded Warrant<BR> and
accompanying<BR> Purchase Warrant</B></TD>
<TD STYLE="white-space: nowrap; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
<TD STYLE="white-space: nowrap; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
<TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; white-space: nowrap; text-align: center"><FONT STYLE="font-size: 10pt"><B>Total Without
Over-<BR> Allotment</B></FONT></TD>
<TD STYLE="white-space: nowrap; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
<TD STYLE="white-space: nowrap; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
<TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; white-space: nowrap; text-align: center"><FONT STYLE="font-size: 10pt"><B>Total With
Over-<BR> Allotment</B></FONT></TD>
<TD STYLE="white-space: nowrap; text-align: center; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
<TD STYLE="width: 48%"><FONT STYLE="font-size: 10pt">Public offering price</FONT></TD>
<TD STYLE="width: 1%">&nbsp;</TD>
<TD STYLE="width: 1%">&nbsp;</TD>
<TD STYLE="width: 10%">&nbsp;</TD>
<TD STYLE="width: 1%">&nbsp;</TD>
<TD STYLE="width: 1%">&nbsp;</TD>
<TD STYLE="width: 1%">&nbsp;</TD>
<TD STYLE="width: 10%">&nbsp;</TD>
<TD STYLE="width: 1%">&nbsp;</TD>
<TD STYLE="width: 1%">&nbsp;</TD>
<TD STYLE="width: 1%">&nbsp;</TD>
<TD STYLE="width: 10%">&nbsp;</TD>
<TD STYLE="width: 1%">&nbsp;</TD>
<TD STYLE="width: 1%">&nbsp;</TD>
<TD STYLE="width: 1%">&nbsp;</TD>
<TD STYLE="width: 10%">&nbsp;</TD>
<TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
<TD><FONT STYLE="font-size: 10pt">Underwriting discounts and commissions (7%)</FONT></TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
<TD><FONT STYLE="font-size: 10pt">Proceeds, before expenses, to us</FONT></TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD STYLE="text-align: right">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD></TR>
</TABLE>




<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"></P>

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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white"><FONT STYLE="background-color: white"><B>Over-allotment
Option</B>&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">Pursuant
to the underwriting agreement, we have granted the underwriter an option, exercisable for up to 45 days from the date of this prospectus,
to purchase up to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; additional shares of common stock and/or additional purchase warrants to purchase up to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of
common stock at the public offering price set forth on the cover page hereto, less the underwriting discounts and commissions<FONT STYLE="background-color: white">.
The underwriter may exercise the option solely to cover over-allotments, if any, made in connection with this offering. </FONT>If
any additional shares of common stock and/or purchase warrants are purchased pursuant to the over-allotment option, the underwriters
will offer these shares of common stock and/or purchase warrants on the same terms as those on which the other securities are being
offered.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Underwriter Warrants</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white"><FONT STYLE="background-color: white">Upon
closing of this offering, we will issue to A.G.P. a compensation warrant entitling A.G.P. or its designees to purchase up to shares
of our common stock (equal to up to 5% of the aggregate number of the shares of common stock and common stock issuable upon exercise
of the pre-funded warrants that we issue in this offering), subject to any reductions necessary to comply with the rules and regulations
of the Financial Industry Regulatory Authority, Inc., or FINRA. This warrant will be exercisable at any time and from time to time,
in whole or in part, during the five-year period commencing six months from the effective date of the registration statement of
which this prospectus forms a part. The warrant will provide for registration rights for the shares underlying the warrant, pursuant
to FINRA Rule 5110(f)(2)G), including a one-time demand registration right and piggyback rights for period of not more than five
years and seven years, respectively, as well as contain customary anti-dilution provisions.&nbsp;Pursuant to FINRA Rule 5110(g),
the underwriter warrants and any shares issued upon exercise of the underwriter warrants shall not be sold, transferred, assigned,
pledged, or hypothecated, or be the subject of any hedging, short sale, derivative, put or call transaction that would result in
the effective economic disposition of the securities by any person for a period of 180 days immediately following the date of effectiveness
or commencement of sales of this offering, except the transfer of any security: (i) by operation of law or by reason of our reorganization;
(ii) to any FINRA member firm participating in the offering and the officers or partners thereof, if all securities so transferred
remain subject to the lock-up restriction set forth above for the remainder of the time period; (iii) if the aggregate amount of
our securities held by the underwriter or related persons do not exceed 1% of the securities being offered; (iv) that is beneficially
owned on a pro rata basis by all equity owners of an investment fund, provided that no participating member manages or otherwise
directs investments by the fund and the participating members in the aggregate do not own more than 10% of the equity in the fund;
or (v) the exercise or conversion of any security, if all securities remain subject to the lock-up restriction set forth above
for the remainder of the time period.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Indemnification</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have agreed to indemnify
the underwriter against certain liabilities, including liabilities under the Securities Act and liabilities arising from breaches
of representations and warranties contained in the underwriting agreement, or to contribute to payments that the underwriter may
be required to make in respect of those liabilities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Lock-up Agreements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In connection with
this offering, we, along with our directors and executive officers have agreed with the underwriter that for a 90-day &ldquo;lock-up&rdquo;
period, commencing from the date of this prospectus, subject to specified exceptions, without the prior written consent of the
underwriter, we and they will not offer, sell, pledge or otherwise dispose of these securities without the prior written consent
of the underwriter.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Price Stabilization, Short Positions
and Penalty Bids</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The underwriter has
advised us that it does not intend to conduct any stabilization or over-allotment activities in connection with this offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Passive Market Making</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In connection
with this offering, the underwriter and any selling group members may engage in passive market making transactions in our
common stock on Nasdaq in accordance with Rule 103 of Regulation M under the Securities Exchange Act of 1934, as amended,
during a period before the commencement of offers or sales of common stock and extending through the completion of the
distribution. A passive market maker must display its bid at a price not in excess of the highest independent bid of that
security.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">However, if all independent bids are lowered
below the passive market maker&rsquo;s bid that bid must then be lowered when specified purchase limits are exceeded.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Electronic Distribution</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">This prospectus in
electronic format may be made available on websites or through other online services maintained by the underwriter, or by its affiliates.
Other than this prospectus in electronic format, the information on the underwriter&rsquo;s website and any information contained
in any other website maintained by the underwriter is not part of this prospectus or the registration statement of which this prospectus
forms a part, has not been approved and/or endorsed by us or the underwriter in its capacity as underwriter, and should not be
relied upon by investors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Other</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">From time to time,
the underwriter and/or its affiliates have provided, and may in the future provide, various investment banking and other financial
services for us for which services they have received and, may in the future receive, customary fees. In the course of their businesses,
the underwriter and its affiliates may actively trade our securities or loans for its own account or for the accounts of customers,
and, accordingly, the underwriter and its affiliates may at any time hold long or short positions in such securities or loans.
Except for services provided in connection with this offering, the underwriter has not provided any investment banking or other
financial services to us during the 180-day period preceding the date of this prospectus, and we do not expect to retain the underwriter
to perform any investment banking or other financial services for at least 90 days after the date of this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Selling Restrictions</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">This prospectus does
not constitute an offer to sell to, or a solicitation of an offer to buy from, anyone in any country or jurisdiction (i) in which
such an offer or solicitation is not authorized, (ii) in which any person making such offer or solicitation is not qualified to
do so or (iii) in which any such offer or solicitation would otherwise be unlawful. No action has been taken that would, or is
intended to, permit a public offer of the securities or possession or distribution of this prospectus or any other offering or
publicity material relating to the securities in any country or jurisdiction (other than the United States) where any such action
for that purpose is required. Accordingly, the underwriter has undertaken that it will not, directly or indirectly, offer or sell
any securities or have in its possession, distribute or publish any prospectus, form of application, advertisement or other document
or information in any country or jurisdiction except under circumstances that will, to the best of its knowledge and belief, result
in compliance with any applicable laws and regulations and all offers and sales of securities by it will be made on the same terms.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>European Economic Area</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">In relation to each
Member State of the European Economic Area which has implemented the Prospectus Directive (each, a &ldquo;Relevant Member State&rdquo;)
an offer to the public of any securities may not be made in that Relevant Member State, except that an offer to the public in that
Relevant Member State of any securities may be made at any time under the following exemptions under the Prospectus Directive,
if they have been implemented in that Relevant Member State:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">to legal entities which are qualified investors as defined under the Prospectus Directive;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">by the underwriter to fewer than 150, natural or legal persons (other than qualified investors
as defined in the Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of
the representatives of the underwriter for any such offer; or</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that
no such offer of our common stock shall result in a requirement for us or any underwriter to publish a prospectus pursuant to Article
3 of the Prospectus Directive.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For the purposes of
this provision, (1) the expression an &ldquo;offer of common stock to the public&rdquo; in relation to any common stock in any
Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer
and any securities to be offered so as to enable an investor to decide to purchase or subscribe for the common stock, as the same
may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State,
(2) the expression &ldquo;Prospectus Directive&rdquo; means Directive 2003/71/EC (and amendments thereto, including the 2010 PD
Amending Directive), and includes any relevant implementing measure in each Relevant Member State and (3) the expression &ldquo;2010
PD Amending Directive&rdquo; means Directive 2010/73/EU.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>




<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>United Kingdom</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">This prospectus has
only been communicated or caused to have been communicated and will only be communicated or caused to be communicated as an invitation
or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act of 2000
(the &ldquo;FSMA&rdquo;)) as received in connection with the issue or sale of the common stock in circumstances in which Section
21(1) of the FSMA does not apply to us. All applicable provisions of the FSMA will be complied with in respect to anything done
in relation to the common stock in, from or otherwise involving the United Kingdom.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Canada</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The securities may
be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National
Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined
in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the securities
must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable
securities laws.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Securities legislation
in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus
(including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised
by the purchaser within the time limit prescribed by the securities legislation of the purchaser&rsquo;s province or territory.
The purchaser should refer to any applicable provisions of the securities legislation of the purchaser&rsquo;s province or territory
for particulars of these rights or consult with a legal advisor.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="background-color: white">Pursuant
to section 3A.3 of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the </FONT>underwriter is <FONT STYLE="background-color: white">not
required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with
this offering.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Australia</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="background-color: white">No
placement document, prospectus, product disclosure statement or other disclosure document has been lodged with the Australian Securities
and Investments Commission in relation to the offering. This prospectus does not constitute a prospectus, product disclosure statement
or other disclosure document under the Corporations Act 2001, or the Corporations Act, and does not purport to include the information
required for a prospectus, product disclosure statement or other disclosure document under the Corporations Act.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="background-color: white">Any
offer in Australia of the securities may only be made to persons, or the Exempt Investors, who are &ldquo;sophisticated investors&rdquo;
(within the meaning of section 708(8) of the Corporations Act), &ldquo;professional investors&rdquo; (within the meaning of section
708(11) of the Corporations Act) or otherwise pursuant to one or more exemptions contained in section 708 of the Corporations Act
so that it is lawful to offer the securities without disclosure to investors under Chapter 6D of the Corporations Act.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="background-color: white">The
securities applied for by Exempt Investors in Australia must not be offered for sale in Australia in the period of 12 months after
the date of allotment under the offering, except in circumstances where disclosure to investors under Chapter 6D of the Corporations
Act would not be required pursuant to an exemption under section 708 of the Corporations Act or otherwise or where the offer is
pursuant to a disclosure document which complies with Chapter 6D of the Corporations Act. Any person acquiring securities must
observe such Australian on-sale restrictions.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="background-color: white">This
prospectus contains general information only and does not take account of the investment objectives, financial situation or needs
of any particular person. It does not contain any securities recommendations or financial product advice. Before making an investment
decision, investors need to consider whether the information in this prospectus is appropriate to their needs, objectives and circumstances
and, if necessar</FONT>y, seek expert advice on those matters.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Switzerland</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The securities may
not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange, or SIX, or on any other stock exchange
or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for i<FONT STYLE="background-color: white">ssuance
prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses
under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland.
Neither this document nor any other offering or marketing material relating to the securities or the offering may be publicly distributed
or otherwise made publicly available in Switzerland.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="background-color: white">Neither
this document nor any other offering or marketing material relating to the offering, or the securities have been or will be
filed with or approved by any Swiss regulatory authority. This document will not be filed with, and the offer of securities
will not be supervised by, the Swiss Financial Market Supervisory Authority FINMA, and the offer of securities has not been
and will not be </FONT>authorized under the Swi<FONT STYLE="font-size: 10pt">ss Federal Act on Collective Investment Schemes,
or CISA. The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not
extend to acquirers of securities.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Dubai International Financial Centre</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">This prospectus relates
to an Exempt Offer in accordance with the Offered Securities Rules of the Dubai Financial Services Authority, or DFSA. This prospectus
is intended for distribution only to persons of a type specified in the Offered Securities Rules of the DFSA. It must not be delivered
to, or relied on by, any other person. The DFSA has no responsibility for reviewing or verifying any documents relating to Exempt
Offers. The DFSA has not approved this prospectus nor taken steps to verify the information set forth herein and has no responsibility
for the prospectus. The securities to which this prospectus relates may be illiquid and/or subject to restrictions on their resale.
Prospective purchasers of the securities offered should conduct their own due diligence on the securities. If you do not understand
the contents of this prospectus, you should consult an authorized financial advisor.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Hong Kong</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The securities have
not been offered or sold and will not be offered or sold in Hong Kong, by means of any document, other than (a) to &ldquo;professional
investors&rdquo; as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance
or (b) in other circumstances which do not result in the document being a &ldquo;prospectus&rdquo; as defined in the Companies
Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning of that Ordinance. No advertisement,
invitation or document relating to the securities has been or may be issued or has been or may be in the possession of any person
for the purposes of issue, whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed
or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect
to securities which are or are intended to be disposed of only to persons outside Hong Kong or only to &ldquo;professional investors&rdquo;
as defined in the Securities and Futures Ordinance and any rules made under that Ordinance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Japan</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The securities have
not been and will not be registered under the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948, as amended)
and, accordingly, will not be offered or sold, directly or indirectly, in Japan, or for the benefit of any Japanese Person or to
others for re-offering or resale, directly or indirectly, in Japan or to any Japanese Person, except in compliance with all applicable
laws, regulations and ministerial guidelines promulgated by relevant Japanese governmental or regulatory authorities in effect
at the relevant time. For the purposes of this paragraph, &ldquo;Japanese Person&rdquo; shall mean any person resident in Japan,
including any corporation or other entity organized under the laws of Japan.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><A NAME="k_003"></A><B>LEGAL MATTERS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="background-color: white">The
validity of the shares of common stock, purchase warrants and pre-funded warrants offered hereby will be passed upon for us by
Bailey, Stock, Harmon, Cottam, Lopez LLP. Certain other matters in connection with this offering will be passed upon for us by
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., New York, New York. Sullivan &amp; Worcester LLP, New York, New York, has
acted as counsel for the </FONT>underwriter.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><A NAME="k_004"></A><B>EXPERTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Our consolidated financial
statements as of August 31, 2019 and 2018 and for the fiscal years then ended have been audited by Marcum LLP as set forth in their
report (which report includes an explanatory paragraph as to our ability to continue as a going concern). We have included our
consolidated financial statements in the prospectus and elsewhere in the registration statement in reliance on Marcum LLP&rsquo;s
report, given on the authority of such firm as experts in accounting and auditing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><A NAME="k_005"></A><B>WHERE YOU CAN FIND MORE INFORMATION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We have filed with
the SEC a registration statement on Form S-1 under the Securities Act with respect to the shares of our common stock, purchase
warrants and pre-funded warrants offered hereby. This prospectus, which constitutes a part of the registration statement, does
not contain all of the information set forth in the registration statement or the exhibits and schedules filed therewith. For further
information about us and our common stock, the purchase warrants and the pre-funded warrants offered hereby, we refer you to the
registration statement and the exhibits and schedules filed therewith. Statements contained in this prospectus regarding the contents
of any contract or any other document that is filed as an exhibit to the registration statement are not necessarily complete, and
each such statement is qualified in all respects by reference to the full text of such contract or other document filed as an exhibit
to the registration statement. The SEC maintains a website that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the SEC. The address is <I>http://www.sec.gov.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We are subject to the
reporting requirements of the Exchange Act, as amended, and file annual, quarterly and current reports, proxy statements and other
information with the SEC. You can read our SEC filings, including the registration statement, over the Internet at the SEC&rsquo;s
website at <I>http://www.sec.gov. </I>We also maintain a website at <I>http://www.shiftpixy.com</I>, at which you may access these
materials free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC.
The information contained in, or that can be accessed through, our website is not part of this prospectus. You may also request
a copy of these filings, at no cost, by writing or telephoning us at: 1 Venture, Suite 150, Irvine, CA 92618, (888) 798-9100.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><A NAME="a_009"></A><B>INDEX TO FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; background-color: white; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="width: 92%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 7%; text-align: center"><FONT STYLE="font-size: 10pt"><B>Page&nbsp;No.</B></FONT></TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; padding-left: 12pt; text-indent: -12pt"><A HREF="#l_001"><FONT STYLE="font-size: 10pt; background-color: #CCEEFF">Condensed Consolidated Balance Sheets as of May 31, 2020 and August 31, 2019</FONT></A></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: center"><A HREF="#l_001"><FONT STYLE="font-size: 10pt">F-2</FONT></A></TD></TR>
<TR>
    <TD STYLE="vertical-align: top; padding-left: 12pt; text-indent: -12pt"><A HREF="#l_002"><FONT STYLE="font-size: 10pt">Condensed Consolidated Statements of Operations for the Three and Nine Months Ended May 31, 2020 and May 31, 2019 (Unaudited)</FONT></A></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: center"><A HREF="#l_002"><FONT STYLE="font-size: 10pt">F-3</FONT></A></TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; padding-left: 12pt; text-indent: -12pt"><A HREF="#l_003"><FONT STYLE="font-size: 10pt; background-color: #CCEEFF">Condensed Consolidated Statements of Stockholders&rsquo; Equity (Deficit) for the Three and Nine Months Ended May 31, 2020 and May 31, 2019 (Unaudited)</FONT></A></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: center"><A HREF="#l_003"><FONT STYLE="font-size: 10pt">F-4</FONT></A></TD></TR>
<TR>
    <TD STYLE="vertical-align: top; padding-left: 12pt; text-indent: -12pt"><A HREF="#a_010"><FONT STYLE="font-size: 10pt">Condensed Consolidated Statements of Cash Flows for the Nine Months Ended May 31, 2020 and May 31, 2019 (Unaudited)</FONT></A></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: center"><A HREF="#a_010"><FONT STYLE="font-size: 10pt">F-7</FONT></A></TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; padding-left: 12pt"><A HREF="#a_011"><FONT STYLE="font-size: 10pt">Notes to the Condensed Consolidated Financial Statements (Unaudited)</FONT></A></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: center"><A HREF="#a_011"><FONT STYLE="font-size: 10pt">F-8</FONT></A></TD></TR>
<TR>
    <TD STYLE="vertical-align: top; padding-left: 12pt"><A HREF="#a_012"><FONT STYLE="font-size: 10pt">Report of Independent Registered Public Accounting Firm</FONT></A></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: center"><A HREF="#a_012"><FONT STYLE="font-size: 10pt">F-26</FONT></A></TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; padding-left: 12pt; text-indent: -12pt"><A HREF="#a_013"><FONT STYLE="font-size: 10pt">Consolidated Balance Sheets for the Years Ended August 31, 2019 and 2018&nbsp;</FONT></A></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: center"><A HREF="#a_013"><FONT STYLE="font-size: 10pt">F-27</FONT></A></TD></TR>
<TR>
    <TD STYLE="vertical-align: top; padding-left: 12pt; text-indent: -12pt"><A HREF="#a_014"><FONT STYLE="font-size: 10pt">Consolidated Statements of Operations for the Years Ended August 31, 2019 and 2018</FONT></A></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: center"><A HREF="#a_014"><FONT STYLE="font-size: 10pt">F-28</FONT></A></TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; padding-left: 12pt; text-indent: -12pt"><A HREF="#a_015"><FONT STYLE="font-size: 10pt">Consolidated Statements of Stockholders&rsquo; Deficit for the Two Years Ended August 31, 2019 and 2018</FONT></A></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: center"><A HREF="#a_015"><FONT STYLE="font-size: 10pt">F-29</FONT></A></TD></TR>
<TR>
    <TD STYLE="vertical-align: top; padding-left: 12pt; text-indent: -12pt"><A HREF="#a_016"><FONT STYLE="font-size: 10pt">Consolidated Statements of Cash Flows for the Years Ended August 31, 2019 and 2018</FONT></A></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: center"><A HREF="#a_016"><FONT STYLE="font-size: 10pt">F-30</FONT></A></TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; padding-left: 12pt; text-indent: -12pt"><A HREF="#a_017"><FONT STYLE="font-size: 10pt">Notes to Consolidated Financial Statements</FONT></A></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: center"><A HREF="#a_017"><FONT STYLE="font-size: 10pt">F-31</FONT></A></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>ShiftPixy, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><A NAME="l_001"></A><B>Condensed Consolidated Balance Sheets</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">May 31, <BR> 2020</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">August 31, <BR> 2019</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: center"><B>(Unaudited)</B></TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: center">ASSETS</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify">Current assets</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 74%; font-size: 10pt; font-weight: bold; text-align: justify; padding-left: 11.25pt">Cash</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">10,835,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">1,561,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-left: 11.25pt">Accounts receivable, net</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">179,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">86,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-left: 11.25pt">Unbilled accounts receivable</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2,133,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1,137,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-left: 11.25pt">Note receivable, current portion</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1,291,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-left: 11.25pt">Deposit &ndash; workers&rsquo; compensation</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">473,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">235,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-left: 11.25pt">Prepaid expenses</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">295,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">349,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-left: 11.25pt">Other current assets</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">190,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">244,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-bottom: 1pt; padding-left: 11.25pt">Current assets of discontinued operations</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">2,386,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">10,419,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify">Total current assets</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">17,782,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">14,031,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-left: 11.25pt">Fixed assets, net</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2,382,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">3,320,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-left: 11.25pt">Note receivable, net</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">5,108,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-left: 11.25pt">Deposits &ndash; workers&rsquo; compensation</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">347,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">754,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-left: 11.25pt">Deposits and other assets</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">140,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">124,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-bottom: 1pt; padding-left: 11.25pt">Non current assets of discontinued operations</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">1,749,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">5,567,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-bottom: 2.5pt">Total assets</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">27,508,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">23,796,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: center">LIABILITIES AND STOCKHOLDERS&rsquo; DEFICIT</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify">Current liabilities</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-left: 11.25pt">Accounts payable and other accrued liabilities</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">2,823,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">4,455,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-left: 11.25pt">Payroll related liabilities</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">8,704,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">8,533,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-left: 11.25pt">Convertible notes, net</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">3,351,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-left: 11.25pt">Accrued workers&rsquo; compensation costs</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">473,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">235,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-left: 11.25pt">Default penalties accrual</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1,800,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-left: 11.25pt">Derivative liability</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">3,756,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-bottom: 1pt; padding-left: 11.25pt">Current liabilities of discontinued operations</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">2,386,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">10,058,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify">Total current liabilities</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">14,386,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">32,188,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify">Non-current liabilities</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-left: 11.25pt">Accrued workers&rsquo; compensation costs</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1,098,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">525,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-bottom: 1pt; padding-left: 11.25pt">Non-current liabilities of discontinued operations</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">5,533,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">3,853,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-bottom: 1pt">Total liabilities</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">21,017,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">36,566,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify">Commitments and contingencies</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-left: 11.25pt">Stockholders&rsquo; equity (deficit)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-left: 22.5pt">Preferred stock, 50,000,000 authorized shares; $0.0001 par value</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-left: 22.5pt">Common stock, 750,000,000 authorized shares; $0.0001 par value; 3,857,316 and 909,222 shares issued as of May 31, 2020 and August 31, 2019</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-left: 22.5pt">Additional paid-in capital</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">117,730,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">32,505,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-left: 22.5pt">Treasury stock, at cost-0 and 13,953 shares as of May 31, 2020 and August 31, 2019</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(325,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-bottom: 1pt; padding-left: 22.5pt">Accumulated deficit</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(111,239,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(44,950,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-bottom: 1pt; padding-left: 22.5pt">Total stockholders&rsquo; equity (deficit)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">6,491,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(12,770,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-bottom: 2.5pt">Total liabilities and stockholders&rsquo; equity (deficit)</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">27,508,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">23,796,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">See accompanying notes to the unaudited
interim condensed consolidated financial statements.&nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>




<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>ShiftPixy Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><A NAME="l_002"></A><B>Condensed Consolidated Statements of
Operations</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(Unaudited)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">For the Three Months Ended</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 10pt">&nbsp;<B>For the Nine Months Ended </B></FONT></TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">May 31, 2020</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">May 31, 2019</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">May 31, 2020</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">May 31, 2019</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 48%; font-size: 10pt; text-align: left">Revenues (gross billings of $14.4 million and $11.9 million less worksite employee payroll cost of $12.4 million and $10.3 million, respectively for the three months ended; gross billings of $47.0 million and $25.9 million less worksite employee payroll cost of $40.3 million and $22.3 million, respectively for nine months ended)</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">2,014,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">1,638,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">6,775,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">3,658,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-bottom: 1pt">Cost of revenue</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">1,873,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">1,467,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">6,051,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">3,126,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">Gross profit</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">141,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">171,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">724,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">532,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left">Operating expenses:</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 12.1pt">Salaries, wages, and payroll taxes</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1,793,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1,152,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">5,246,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">3,182,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 12.1pt">Stock-based compensation &ndash; general and administrative</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">150,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(5,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">895,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">154,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-left: 12.1pt">Commissions</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">27,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">64,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">137,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">130,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 12.1pt">Professional fees</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">439,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1,280,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2,276,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2,799,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 12.1pt">Software development</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">686,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">221,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1,390,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1,249,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 12.1pt">Depreciation and amortization</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">545,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">222,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1,025,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">603,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 12.1pt">General and administrative</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">1,054,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">1,541,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">2,617,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">3,654,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 24.2pt">Total operating expenses</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">4,694,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">4,475,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">13,586,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">11,771,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 24.2pt">Operating Loss</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(4,553,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(4,304,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(12,862,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(11,239,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left">Other (expense) income:</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 12.1pt">Interest expense</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(559,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(4,345,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(2,524,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(6,270,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 12.1pt">Expense related to preferred options</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(62,091,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(62,091,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 12.1pt">Expense related to modification of warrants</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(22,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 12.1pt">Loss from debt conversion</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(2,842,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(3,500,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 12.1pt">Inducement loss</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(57,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(2,273,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(624,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(3,829,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 12.1pt">Loss on debt extinguishment</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(1,592,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(1,592,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 12.1pt">Change in fair value derivative and warrant liability</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">6,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">4,748,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1,777,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">4,748,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 12.1pt">Loss on convertible note settlement</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2,611,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 12.1pt">Gain on convertible note penalties accrual</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">760,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 24.2pt">Total other (expense) income</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(67,135,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(1,870,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(67,816,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(2,740,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;Loss from continuing operations</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(71,688,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(6,174,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(80,678,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(13,979,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left">Income (Loss) from discontinued operations</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; text-indent: 22.5pt">Income (Loss) from discontinued operations</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(1,490,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1,178,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(1,293,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">4,596,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; text-indent: 22.5pt">Gain from asset sale</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">15,682,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">Total Income (Loss) from discontinued operations, net of tax</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(1,490,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">1,178,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">14,389,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">4,596,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt; padding-left: 24.2pt">Net loss</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">(73,178,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">(4,996,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">(66,289,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">(9,383,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">Net Loss per share, Basic and diluted</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left">Continuing operations</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(2.73</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(7.92</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(5.49</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(18.54</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">Discontinued operations</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating income (loss)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(0.06</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1.51</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(0.09</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">6.10</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gain on sale of assets</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">1.07</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total discontinued operations</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(0.06</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">1.51</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">0.98</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">6.10</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">Net Loss per share of common stock &ndash; Basic and diluted</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">(2.79</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">(6.41</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">(4.51</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">(12.44</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">Weighted average common stock outstanding &ndash; Basic and diluted</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">26,249,518</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">779,634</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">14,708,554</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">753,808</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">See accompanying notes to the unaudited
interim condensed consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>




<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>ShiftPixy Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><A NAME="l_003"></A><B>Condensed Consolidated Statements of&nbsp;Stockholders&rsquo;
Equity (Deficit)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>For the Three Months Ended May 31, 2020
(Unaudited)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: center">Common Stock</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center">Additional</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Total</B></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Stockholders&rsquo;</B></P></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Issued</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center">Paid-In</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center">Accumulated</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center">Equity</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Shares</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Amount</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Capital</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Deficit</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">(Deficit)</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 35%; font-size: 10pt">Balance, March 1, 2020</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">1,103,643</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">-</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">37,620,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">(38,061,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">)</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">(441,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">Common stock issued for warrant exercise</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">6,275</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">33,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">33,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left">Common stock issued for underwritten offering, net of offering costs</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2,222,160</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">10,332,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">10,332,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">Stock-based compensation expense</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">75,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">75,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left">Common stock issued upon conversion of convertible notes and interest</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">441,573</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">4,023,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">4,023,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">Reclassification of derivative liabilities to paid in capital</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">288,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">288,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left">Inducement loss on note conversions</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1,012</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">57,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">57,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">Common stock issued for warrant exchange</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">82,653</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">552,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">552,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left">Allocated fair value of beneficial conversion feature &ndash; exchanged notes payable</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">653,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">653,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">Allocated fair value of warrants issued &ndash; exchanged notes payable</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2,006,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2,006,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left">Expense related to preferred options</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">62,091,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">62,091,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">Net Loss</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(73,178,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(73,178,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">Balance, May 31, 2020</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">3,857,316</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">117,730,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">(111,239,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">6,491,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">See accompanying notes
to the unaudited interim condensed consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>




<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>ShiftPixy Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><A NAME="l_004"></A><B>Condensed Consolidated Statements of
Stockholders&rsquo; Equity (Deficit)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>For the Nine Months Ended May 31, 2020
(Unaudited)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 8pt">Common Stock</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 8pt">Additional</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt"><B>Total</B></FONT></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 8pt"><B>Stockholders&rsquo;</B></FONT></P></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Issued</FONT></TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 8pt">Paid-In</FONT></TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 8pt">Treasury</FONT></TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 8pt">Accumulated</FONT></TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center"><FONT STYLE="font-size: 8pt">Equity</FONT></TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Shares</FONT></TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Amount</FONT></TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Capital</FONT></TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Stock</FONT></TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">Deficit</FONT></TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 8pt">(Deficit)</FONT></TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 22%; font-size: 10pt"><FONT STYLE="font-size: 8pt">Balance, September 1, 2019</FONT></TD><TD STYLE="width: 1%; font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">909,222</FONT></TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%; font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%; font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">32,505,000</FONT></TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="width: 1%; font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">(325,000</FONT></TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD STYLE="width: 1%; font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">(44,950,000</FONT></TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD STYLE="width: 1%; font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">(12,770,000</FONT></TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">Treasury stock retired</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">(13,953</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">(325,000</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">325,000</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">Common stock issued for note exchange</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">21,750</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">200,000</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">200,000</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">Common stock issued for services rendered</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">856</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">75,000</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">75,000</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">Common stock issued for warrant exercise</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">6,275</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">33,000</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">33,000</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">Common&#8239;stock issued for underwritten offering,
    net of offering costs</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">2,222,160</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">10,332,000</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">10,332,000</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">Common stock issued upon conversion of convertible
    notes and interest</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">589,695</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">6,238,000</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">6,238,000</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">Reclassification of derivative liabilities to paid
    in capital</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">1,979,000</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">1,979,000</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">Inducement loss on note conversions</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">38,658</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">624,000</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">624,000</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">Common stock issued for warrant exchange</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">82,653</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">552,000</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">552,000</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">Allocated fair value of beneficial conversion feature
    &ndash; exchanged notes payable</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">653,000</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">653,000</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">Allocated fair value of warrants issued &ndash;
    exchanged notes payable</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">2,006,000</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">2,006,000</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">Stock-based compensation expense</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">745,000</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">745,000</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">Modification of warrants</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">22,000</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">22,000</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">Expense related to preferred options</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">62,091,000</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">62,091,000</FONT></TD><TD STYLE="font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">Net Loss</FONT></TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">(66,289,000</FONT></TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">(66,289,000</FONT></TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">Balance, May 31, 2020</FONT></TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">3,857,316</FONT></TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">117,730,000</FONT></TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">-</FONT></TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">(111,239,000</FONT></TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">)</FONT></TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right"><FONT STYLE="font-size: 8pt">6,491,000</FONT></TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left"><FONT STYLE="font-size: 8pt">&nbsp;</FONT></TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">See accompanying notes to the unaudited
interim condensed consolidated financial statements.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>




<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;<B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>ShiftPixy Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Condensed Consolidated Statements of
Stockholders&rsquo; Deficit</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>For the Three Months Ended May 31, 2019
(Unaudited)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="border-bottom: black 1pt solid; text-align: center">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><B>Common Stock</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><B>Issued</B></P></TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><B>Additional</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><B>Paid-In</B></P></TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Accumulated</B></FONT></TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><B>Total</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><B>Stockholders&rsquo;</B></P></TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Shares</B></FONT></TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Amount</B></FONT></TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Capital</B></FONT></TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Deficit</B></FONT></TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Deficit</B></FONT></TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="width: 43%"><FONT STYLE="font-size: 10pt">Balance, March 1, 2019</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 8%; text-align: right"><FONT STYLE="font-size: 10pt">802,933</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 8%; text-align: right"><FONT STYLE="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 8%; text-align: right"><FONT STYLE="font-size: 10pt">25,846,000</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">(30,610,000</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">(4,764,000</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD><FONT STYLE="font-size: 10pt">Common stock issued for services rendered</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">2,024</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">113,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">113,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD><FONT STYLE="font-size: 10pt">Stock-based compensation expense</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(5,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(5,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-indent: -0.125in; padding-left: 0.125in"><FONT STYLE="font-size: 10pt">Reclassification of derivative liability upon conversion of related convertible debentures</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">12,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">12,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="text-indent: -0.125in; padding-left: 0.125in"><FONT STYLE="font-size: 10pt">Common stock issued upon conversion of convertible notes and interest</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">52,211</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">3,948,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">3,948,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD><FONT STYLE="font-size: 10pt">Inducement loss from debt conversion</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">43,787</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">2,273,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">2,273,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD><FONT STYLE="font-size: 10pt">Net Loss</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(4,996,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(4,996,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD><FONT STYLE="font-size: 10pt">Balance, May 31, 2019</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">900,955</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">32,187,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">(35,606,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">(3,419,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>ShiftPixy Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Condensed Consolidated Statements of
Stockholders&rsquo; Deficit</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>For the Nine Months Ended May 31, 2019
(Unaudited)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="6" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Common Stock</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Issued</B></P></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Additional</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Paid-In</B></P></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Accumulated</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Total</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Stockholders&rsquo;</B></P></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Shares</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Amount</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Capital</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Deficit</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Deficit</B></FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="width: 43%"><FONT STYLE="font-size: 10pt">Balance, September 1, 2018</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 8%; text-align: right"><FONT STYLE="font-size: 10pt">721,295</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 8%; text-align: right"><FONT STYLE="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 8%; text-align: right"><FONT STYLE="font-size: 10pt">18,468,000</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">(26,223,000</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">(7,755,000</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD><FONT STYLE="font-size: 10pt">Warrants exercised for cash</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">6,688</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">660,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">660,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD><FONT STYLE="font-size: 10pt">Common stock issued for services rendered</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">2,990</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">225,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">225,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD><FONT STYLE="font-size: 10pt">Stock-based compensation expense</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">154,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">154,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="text-indent: -0.125in; padding-left: 0.125in; text-align: left"><FONT STYLE="font-size: 10pt">Reclassification of derivative liability upon conversion of related convertible debentures</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">12,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">12,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-indent: -0.125in; padding-left: 0.125in"><FONT STYLE="font-size: 10pt">Common stock issued upon conversion of convertible notes and interest</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">101,679</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">8,839,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">8,839,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD><FONT STYLE="font-size: 10pt">Inducement loss from debt conversion</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">68,303</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">3,829,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">3,829,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD><FONT STYLE="font-size: 10pt">Net Loss</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(9,383,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(9,383,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD><FONT STYLE="font-size: 10pt">Balance, May 31, 2019</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">900,955</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">32,187,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">(35,606,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">(3,419,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">See accompanying notes to the unaudited interim condensed consolidated
financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>ShiftPixy, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B><A NAME="a_010"></A>Condensed Consolidated Statements of
Cash Flows</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(Unaudited)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>For the Nine Months Ended</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>May 31, <BR>
2020</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>May 31, <BR>
2019</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt"><B>OPERATING ACTIVITIES</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="width: 74%; padding-left: 9pt; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Net Loss</B></FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">(66,289,000</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">(9,383,000</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding-bottom: 1pt; padding-left: 9pt; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Income from discontinued operations</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">14,389,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">4,596,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-left: 9pt; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Net loss from continuing operations</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(80,678,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(13,979,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding-left: 9pt; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Adjustments to reconcile net loss from continuing operations to net cash used in continuing operating activities:</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-left: 9pt; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Expense related to preferred options </B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">62,091,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding-left: 9pt; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Depreciation and amortization</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">1,025,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">603,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-left: 9pt; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Gain on convertible note settlement</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(2,611,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding-left: 9pt"><FONT STYLE="font-size: 10pt"><B>Gain on convertible note penalties accrual</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(760,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-left: 9pt; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Amortization of debt discount and debt issuance cost</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">6,749,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">3,599,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding-left: 9pt; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Stock issued for services</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">75,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">225,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-left: 9pt; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Stock-based compensation- general and administrative</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">745,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">154,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding-left: 9pt; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Expense related to warrant modification</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">22,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-left: 9pt; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Inducement loss on note conversions</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">624,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">3,829,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding-left: 9pt; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Expense related to warrant exchange</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">552,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-left: 9pt; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Non-cash interest</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">509,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding-left: 9pt; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Change in fair value of derivative and warrant liability</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(1,777,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(4,748,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-left: 9pt; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Financing costs</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">2,588,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding-left: 9pt; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Changes in operating assets and liabilities</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-left: 0.25in; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Accounts receivable</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(763,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(58,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding-left: 0.25in; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Unbilled accounts receivable</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(996,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(455,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-left: 0.25in; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Prepaid expenses</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">54,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(205,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding-left: 0.25in; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Other current assets</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">54,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">32,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-left: 0.25in; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Deposits &ndash; workers&rsquo; compensation</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">3,283,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(729,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding-left: 0.25in; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Deposits and other assets</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(16,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">27,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-left: 0.25in; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Accounts payable</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(151,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">925,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding-left: 0.25in; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Payroll related liabilities</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(108,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">1,269,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-left: 0.25in; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Accrued workers&rsquo; compensation</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">1,665,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">423,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding-bottom: 1pt; padding-left: 0.25in; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Other current liabilities</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(2,284,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(215,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-bottom: 1pt; padding-left: 9pt; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Total Adjustments</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">70,084,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">5,162,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding-bottom: 1pt; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Net cash used in continuing operating activities</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(10,594,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(8,817,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-bottom: 1pt; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Net cash provided by discontinued operating activities</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">76,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">7,194,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding-bottom: 1pt; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Net cash used in operating activities</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(10,518,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(1,623,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt"><B>INVESTING ACTIVITIES</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-left: 9pt; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Purchase of fixed assets</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(81,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(581,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding-left: 9pt; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Proceeds from sale of fixed assets</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">34,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-left: 9pt; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Proceeds from working capital adjustment &ndash; sale of assets</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">1,214,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding-bottom: 1pt; padding-left: 9pt; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Proceeds from sale of assets</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">9,500,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-bottom: 1pt; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Net cash provided by (used in) investing activities</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">10,667,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(581,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt"><B>FINANCING ACTIVITIES</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding-left: 9pt; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Proceeds from underwritten public offering, net of offering costs</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">10,332,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-left: 9pt; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Proceeds from issuance of convertible notes</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">3,750,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding-left: 9pt; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Issuance costs related to convertible notes</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(485,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-left: 9pt; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Repayment of convertible notes</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(1,240,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(436,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding-bottom: 1pt; padding-left: 9pt; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Proceeds from exercise of warrants</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">33,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">660,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-bottom: 1pt; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Net cash provided by financing activities</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">9,125,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">3,489,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding-bottom: 1pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt"><B>Net increase in cash</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">9,274,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">1,285,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding-bottom: 1pt; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Cash - Beginning of Period</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">1,561,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">1,650,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>

<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-bottom: 2.5pt; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Cash -End of Period</B></FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">10,835,000</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">2,935,000</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD><FONT STYLE="font-size: 10pt"><B>Supplemental Disclosure of Cash Flows Information:</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Cash paid for interest</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">315,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">226,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt"><B>Non-cash Investing and Financing Activities:</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Conversion of debt and accrued interest into common stock</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">6,238,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">8,839,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Additional Principal to settle registration rights penalties</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">889,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Common stock issued for services</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">75,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Common stock issued for note exchange</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">200,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Additional principal issued for note exchange</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">433,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Interest capitalized into notes receivable</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">59,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Common stock issued in exchange for warrants</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">552,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Discount recorded for asset sale note receivable</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">1,818,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Reclassification of derivative liabilities to paid in capital</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">1,979,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Expense related to warrant modification</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">22,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">See accompanying notes to the unaudited
interim condensed consolidated financial statements.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>ShiftPixy, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B><A NAME="a_011"></A>Notes to the Condensed Consolidated Financial
Statements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(Unaudited)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>May 31, 2020</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Note 1: Nature of Operations</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">ShiftPixy, Inc. was incorporated on June
3, 2015. The Company is a specialized staffing service provider that provides solutions for large contingent part-time workforce
demands, primarily in the restaurant and hospitality service trades. The Company&rsquo;s focus is on the restaurant industry in
Southern California.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On March 25, 2020, the Company filed Amended
and Restated Articles of Incorporation (the &ldquo;Restated Articles of Incorporation&rdquo;) with the Wyoming Secretary of State,
which were approved by the Company&rsquo;s board of directors (the &ldquo;Board of Directors&rdquo;) and its shareholders representing
a majority of its outstanding shares of capital stock. The Restated Articles of Incorporation, among other things, set conversion
rights for the Company&rsquo;s Class A Preferred Stock, par value $0.0001 per share, to convert into shares of common stock on
a one-for-one basis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company and its wholly-owned subsidiary
Rethink, Inc. (&ldquo;RT&rdquo;) function as employment administrative services (&ldquo;EAS&rdquo;) providers including services
such as administrative and processing services, performing functions in the nature of a payroll processor, human resources consultant,
administrator of workers&rsquo; compensation coverages and claims and provide workers compensation coverage written in the names
of the clients (as may be required by some states). The Company has built a human resources information systems platform to assist
in customer acquisition and hopes that this mechanism may become a way to onboard new clients into the Company&rsquo;s closed proprietary
operating and processing information system (the &ldquo;ShiftPixy Ecosystem&rdquo;) when eligible clients recognize the value of
the services provided by the parent Company. This platform is expected to facilitate additional value-added services in future
reporting periods. In January 2020, the Company sold Shift Human Capital Management Inc. (&ldquo;SHCM&rdquo;), previously a wholly-owned
subsidiary of the Company, and assigned the majority of the Company&rsquo;s billable clients to a third party for cash as described
below in Note 3 and formed RT.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company is currently operating in one
reportable segment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Note 2: Summary of significant accounting
policies</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Basis of Presentation</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The accompanying unaudited condensed consolidated
financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United
States of America (&ldquo;GAAP&rdquo;) and the rules of the Securities and Exchange Commission (&ldquo;SEC&rdquo;) applicable to
interim reports of companies filing as a smaller reporting company. Accordingly, the Company does not include all of the information
and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for fair presentation have been included. The results of operations for the three
and nine months ended May 31, 2020, are not necessarily indicative of the results that may be expected for the year ending August
31, 2020.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company&rsquo;s annual report on Form 10-K for the year ended August
31, 2019, filed with the SEC on December 13, 2019.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Principles of Consolidation</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company and its wholly-owned subsidiary
have been consolidated in the accompanying unaudited condensed consolidated financial statements. All intercompany balances have
been eliminated in consolidation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Use of Estimates</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The preparation of financial statements
in conformity with GAAP requires the Company to make estimates and assumptions that affect certain reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR>
    <TD STYLE="width: 24px; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; width: 24px; text-align: justify"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Valuation expense related to preferred stock options</FONT></TD></TR>
<TR>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Liability for legal contingencies;</FONT></TD></TR>
<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Useful lives of property and equipment;</FONT></TD></TR>
<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Assumptions made in valuing embedded derivatives and freestanding equity-linked instruments classified as liabilities;</FONT></TD></TR>
<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Deferred income taxes and related valuation allowance; </FONT></TD></TR>
<TR>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: top"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="vertical-align: top"><FONT STYLE="font-size: 10pt">Valuation of long-lived assets including long term notes receivable; and</FONT></TD></TR>
<TR>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD></TR>
<TR>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">&nbsp;Projected development of workers&rsquo; compensation claims.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Revenue and Direct Cost Recognition</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company provides an array of human
resources and business solutions designed to help improve business performance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company&rsquo;s revenues are primarily
attributable to fees for providing staffing solutions and EAS/human capital management services. The Company recognizes revenue
when all of the following criteria are met: (i) persuasive evidence of an arrangement exists; (ii) the services have been rendered
to the customer; (iii) the sales price is fixed or determinable; and (iv) collectability is reasonably assured. The Company enters
into contracts with its clients for EAS based on a stated rate and price in the contract. Contracts generally have a term of 12
months but are cancellable at any time by either party with 30 days&rsquo; notice. Contract performance obligations are satisfied
as services are rendered, and the time period between invoicing and when the performance obligations are satisfied is not significant.
The Company does not have significant financing components or significant payment terms for its customers and consequently has
no material credit losses. Payments for the Company&rsquo;s services are typically made in advance of, or at the time that the
services are provided.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company accounts for its EAS revenues
in accordance with Financial Accounting Standards Board (&ldquo;FASB&rdquo;) Accounting Standards Codification (&ldquo;ASC&rdquo;)
605-45, <I>Revenue Recognition, Principal Agent Considerations</I>. EAS solutions revenue is primarily derived from the Company&rsquo;s
gross billings, which are based on (i) the payroll cost of the Company&rsquo;s worksite employees (&ldquo;WSEs&rdquo;) and (ii)
a mark-up computed as a percentage of payroll costs for payroll taxes and workers compensation premiums.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Gross billings are invoiced to each client
concurrently with each periodic payroll of the Company&rsquo;s WSEs which coincides with the services provided and which is typically
a fixed percentage of the payroll processed. Revenues, which exclude the payroll cost component of gross billings and therefore
consist solely of markup, are recognized ratably over the payroll period as WSEs perform their service at the client worksite.
Revenues that have been recognized but not invoiced are included in unbilled accounts receivable on the Company&rsquo;s condensed
consolidated balance sheets, and were $270,000 and $170,000 as of May 31, 2020 and August 31, 2019, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Consistent with the Company&rsquo;s revenue
recognition policy, direct costs do not include the payroll cost of its WSEs. The cost of revenue associated with the Company&rsquo;s
revenue generating activities is primarily comprised of all other costs related to its WSEs, such as the employer portion of payroll-related
taxes, employee benefit plan premiums and workers&rsquo; compensation insurance costs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company has evaluated its revenue recognition
policies in conjunction with its future expected business which may be migrating to a staffing business model. For fiscal years
2020 and 2019, there were no revenues which should have been evaluated under a staffing business model. Such a staffing business
model would have included the payroll costs in revenues with a corresponding increase to cost of revenues for payroll costs associated
with staffing services.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Concentration of Credit Risk</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company considers all highly liquid
investments with an original maturity of three months or less when purchased as cash equivalents. The Company maintains cash with
a commercial bank and from time to time exceed the federally insured limits. The Company has not experienced losses from these
deposits.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">No one individual client represents more
than 10% of revenues for the three and nine months ended May 31, 2020, and May 31, 2019, respectively. However, three clients represent
93% of total accounts receivable at May 31, 2020.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Impairment and Disposal of Long-Lived
Assets</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company periodically evaluates its
long-lived assets for impairment in accordance with ASC 360-10, <I>Property, Plant, and Equipment</I>. ASC 360-10 requires that
an impairment loss be recognized for assets to be disposed of or held-for-use when the carrying amount of an asset is deemed to
not be recoverable. If events or circumstances were to indicate that any of our long-lived assets might be impaired, the Company
would assess recoverability based on the estimated undiscounted future cash flows to be generated from the applicable asset. In
addition, the Company may record an impairment loss to the extent that the carrying value of the asset exceeded the fair value
of the asset. Fair value is generally determined using an estimate of discounted future net cash flows from operating activities
or upon disposal of the asset. There were no impairments recognized for the periods ended May 31, 2020, and May 31, 2019.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Workers&rsquo; compensation</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Everest Program</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Up to July 2018, a portion of the Company&rsquo;s
workers&rsquo; compensation risk was covered by a retrospective rated policy, which calculates the final policy premium based on
the Company&rsquo;s loss experience during the term of the policy and the stipulated formula set forth in the policy. The Company
funds the policy premium based on standard premium rates on a monthly basis and based on the gross payroll applicable to workers
covered by the policy. During the policy term and thereafter, periodic adjustments may involve either a return of previously paid
premiums or a payment of additional premiums by the Company or a combination of both. If the Company&rsquo;s losses under that
policy exceed the expected losses under that policy, then the Company could receive a demand for additional premium payments.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company utilizes a third-party to estimate
its loss development rate, which is based primarily upon the nature of WSEs&rsquo; job responsibilities, the location of WSEs,
the historical frequency and severity of workers&rsquo; compensation claims, and an estimate of future cost trends. Each reporting
period, changes in the assumptions resulting from changes in actual claims experience and other trends are incorporated into its
workers&rsquo; compensation claims cost estimates. As of May 31, 2020, the Company classified $0.1 million in long term accrued
workers&rsquo; compensation in the Company&rsquo;s condensed consolidated balance sheets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Sunz Program</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Starting in July 2018, the Company&rsquo;s
workers&rsquo; compensation program for its WSEs has been provided through an arrangement with United Wisconsin Insurance Company
and administered by the Sunz Insurance Company. Under this program, the Company has financial responsibility for the first $0.5
million of claims per occurrence. The Company provides and maintains a loss fund that will be used to pay claims and claim related
expenses. The workers&rsquo; compensation insurance carrier established monthly funding requirements comprised of premium costs
and funds to be set aside for payment of future claims (&ldquo;claim loss funds&rdquo;). The level of claim loss funds is primarily
based upon anticipated WSE payroll levels and expected workers&rsquo; compensation loss rates, as determined by the insurance carrier.
Monies funded into the program for incurred claims expected to be paid within one year are recorded as Deposit - workers&rsquo;
compensation, a short-term asset, while the remainder of claim funds are included in deposits- workers&rsquo; compensation, a long-term
asset in its condensed consolidated balance sheets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of May 31, 2020, the Company had $0.5
million in deposit &ndash; workers&rsquo; compensation classified as a short-term asset and $0.3 million classified as a long-term
asset.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company&rsquo;s estimate of incurred
claim costs expected to be paid within one year is included in short-term liabilities, while its estimate of incurred claim costs
expected to be paid beyond one year is included in long-term liabilities on its consolidated balance sheets. As of May 31, 2020,
the Company had short term accrued workers&rsquo; compensation costs of $0.5 million and long term accrued workers&rsquo; compensation
costs of $1.0 million.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company retained workers compensation
asset reserves and workers compensation related liabilities for former WSEs of clients transferred to Shiftable HR Acquisition,
LLC, part of Vensure Employer Services, Inc. (&ldquo;Vensure&rdquo;) in connection with the Asset Sale (as defined below).&nbsp;
As of May 31, 2020, the retained workers compensation assets and liabilities are presented as a discontinued operations net asset
or liability.&nbsp; As of May 31, 2020 the Company had $2.4 million in both short term assets and short term liabilities and had
$1.7 million of long term assets and $5.5 million of long term liabilities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Because the Company bears the
financial responsibility for claims up to the level noted above, such claims, which are the primary component of its
workers&rsquo; compensation costs, are recorded in the period incurred. Workers&rsquo; compensation insurance includes
ongoing health care and indemnity coverage whereby claims are paid over numerous years following the date of injury.
Accordingly, the accrual of related incurred costs in each reporting period includes estimates, which take into account the
ongoing development of claims and therefore requires a significant level of judgment. In estimating ultimate loss rates, the
Company utilizes historical loss experience, exposure data, and actuarial judgment, together with a range of inputs which are
primarily based upon the WSE&rsquo;s job responsibilities, their location, the historical frequency and severity of
workers&rsquo; compensation claims, and an estimate of future cost trends. For each reporting period, changes in the
actuarial assumptions resulting from changes in actual claims experience and other trends are incorporated into its
workers&rsquo; compensation claims cost estimates. The estimated incurred claims are based upon: (i) the level of claims
processed during each quarter; (ii) estimated completion rates based upon recent claim development patterns under the plan;
and (iii) the number of participants in the plan.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We expect additional workers compensation
claims to be made by furloughed WSEs as a result of the employment downturn caused by the COVID-19 pandemic. On May 4, 2020, the
State of California indicated that workers who became ill with COVID-19 would have a potential claim against workers compensation
insurance for their illnesses. We expect additional workers compensation claims could be made by employees required to work by
their employers during the COVID-19 pandemic, which could have a material impact to our workers compensation liability estimates.
While we have not seen additional expenses as a result of any such potential claims to date, which would include claims for reporting
periods after May 31, 2020, we will continue to closely monitor all workers compensation claims made during the COVID-19 pandemic.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Fair Value of Financial Instruments</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">ASC 825, &ldquo;Financial Instruments,&rdquo;
requires entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized
on the balance sheet, for which it is practical to estimate fair value. ASC 825 defines fair value of a financial instrument as
the amount at which the instrument could be exchanged in a current transaction between willing parties. At May 31, 2020 and August
31, 2019, the carrying value of certain financial instruments (cash, accounts receivable and payable) approximates fair value due
to the short-term nature of the instruments. Convertible notes approximate fair value based on comparison of terms from similar
instruments in the marketplace.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company measures fair value under a
framework that utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.
The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level
1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of inputs which prioritize
the inputs used in measuring fair value are:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR>
    <TD STYLE="width: 24px; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; width: 24px; text-align: justify"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access.</FONT></TD></TR>
<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Level 2: Inputs to the valuation methodology include:</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR>
    <TD STYLE="width: 48px">&nbsp;</TD>
    <TD STYLE="vertical-align: top; width: 24px; text-align: justify"><FONT STYLE="font-family: Symbol; font-size: 10pt">o</FONT></TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Quoted prices for similar assets or liabilities in active markets;</FONT></TD></TR>
<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-family: Symbol; font-size: 10pt">o</FONT></TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Quoted prices for identical or similar assets or liabilities in inactive markets;</FONT></TD></TR>
<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-family: Symbol; font-size: 10pt">o</FONT></TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Inputs other than quoted prices that are observable for the asset or liability;</FONT></TD></TR>
<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-family: Symbol; font-size: 10pt">o</FONT></TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Inputs that are derived principally from or corroborated by observable market data by correlation or other means; and</FONT></TD></TR>
<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-family: Symbol; font-size: 10pt">o</FONT></TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR>
    <TD STYLE="width: 24px; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; width: 24px; text-align: justify"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company did not have any Level 1 or
Level 2 assets and liabilities at May 31, 2020 or August 31, 2019. The Company recorded expense related to preferred stock options
in the three and nine months ended May 31, 2020 using Level 2 fair value measurements. See Note 6 for assumptions used for this
valuation. The valuation of the Note Receivable (as defined below) from the Asset Sale (as defined below) and the derivative liabilities
associated with its March 2019 Notes (as defined below) (see Note 5), consisted of conversion feature derivatives and warrants,
are Level 3 fair value measurements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Level 3 assets and liabilities:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Note Receivable, as described in
Note 3, <FONT STYLE="background-color: white">was estimated using a discounted cash flow technique with significant inputs
that are not observable in the market and thus represents a Level 3 fair value measurement as defined in ASC 820. We valued
the Note Receivable on the January 1, 2020 transaction date using a 10% discount rate which contemplates the risk and
probability assessments of the expected future cash flows. The fair value assumptions have not changed as of May 31, 2020 and
any impact to the fair value was immaterial. For the three and nine months ended May 31, 2020 we identified $0.7 and $1.3
million of working capital adjustments, respectively. The significant inputs in the Level 3 measurement not supported by
market activity include the probability </FONT>assessments of expected future cash flows related to the acquisitions,
appropriately discounted considering the uncertainties associated with the obligation, and as calculated in accordance with
the terms of the acquisition agreements. We believe there are risks associated with the value of the Note Receivable due to
business impacts of the COVID-19 pandemic. The expected cash payments from the Note Receivable is based on gross profits
generated by the clients transferred to Vensure. Those transferred clients may have their business impacted due to the
pandemic which, in turn, would result in lower gross profits. While we believe the current valuation of the Note Receivable
is properly recorded as of May 31, 2020, a material change in the business transferred may result in an impairment of this
asset. The development and determination of the unobservable inputs for Level 3 fair value measurements and the fair value
calculations are the responsibility of the Company&rsquo;s chief financial officer and are approved by the chief executive
officer.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The table below sets forth a summary of
the changes in the fair value of the Company&rsquo;s derivative liabilities classified as Level 3 as of May 31, 2020:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>March 2019</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Conversion</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Feature</B></P></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>March 2019</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Warrant</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Liability</B></P></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Total</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="width: 61%; text-align: justify"><FONT STYLE="font-size: 10pt">Balance at August 31, 2019</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">2,852,000</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">904,000</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">3,756,000</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Reclassification to APIC due to note settlements, exchanges or conversions</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(1,784,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(195,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(1,979,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding-bottom: 1pt; text-align: justify"><FONT STYLE="font-size: 10pt">Change in fair value</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(1,068,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(709,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(1,777,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-bottom: 2.5pt; text-align: justify"><FONT STYLE="font-size: 10pt">Balance at May 31, 2020 (unaudited)</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company had no derivative liabilities
as of May 31, 2020 since all the convertible notes were converted to equity or repaid and any warrants requiring accounting as
derivatives were exchanged for shares of common stock and new warrant issuances do not require derivative liability accounting
treatment. As of August 31, 2019, and during the nine months ended May 31, 2020, the Company estimated the fair value of the conversion
feature derivatives embedded in the convertible debentures and the fair value of the warrant liabilities based on weighted probabilities
of assumptions used in the Lattice-based option valuation model. The key valuation assumptions used consist, in part, of the price
of the common stock, a risk free interest rate based on the average yield of a Treasury note and expected volatility of the common
stock, all as of the measurement dates, and the various estimated reset exercise prices weighted by probability.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company used the following assumptions
to estimate fair value of the derivatives in March 2020 prior to the amendments and exchanges for the convertible notes and warrants:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>March 2019<BR>
        Conversion </B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Feature</B></P></TD>
    <TD STYLE="padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>March 2019<BR>
        Warrant</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;Liability</B></P></TD>
    <TD STYLE="padding-bottom: 1pt; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>(unaudited)</B></FONT></TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>(unaudited)</B></FONT></TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="width: 70%; text-align: justify"><FONT STYLE="font-size: 10pt">Risk free rate</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">0.08-0.17</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">%</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: right">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">1.6</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">%</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Market price per share</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">6.68</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">6.68</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Life of instrument in years</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">0.47-1.15</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">4.0</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Volatility</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">117-139</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">102</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">%</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Dividend yield</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">%</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">When the Company changes its valuation
inputs for measuring financial assets and liabilities at fair value, either due to changes in current market conditions or other
factors, it may need to transfer those assets or liabilities to another level in the hierarchy based on the new inputs used. The
Company recognizes these transfers at the end of the reporting period that the transfers occur. For the periods ended May 31, 2020
and May 31, 2019, there were no transfers of financial assets or financial liabilities between the hierarchy levels.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Research and Development</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During the three months ended May 31, 2020
and May 31, 2019, the Company incurred research and development costs of approximately $1.5 million and $0.7 million, respectively.
During the nine months ended May 31, 2020 and May 31, 2019, the Company incurred research and development costs of approximately
$3.4 million and $3.1 million, respectively. All costs were related to internally developed or externally contracted software and
related technology for the Company&rsquo;s Human Resources Information System (&ldquo;HRIS&rdquo;) platform and related mobile
application. In addition, no software costs were capitalized for the three and nine months ended May 31, 2020 and $0 and $0.5 million
for the three and nine months ended May 31, 2019, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Advertising Costs&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company expenses all advertising as
incurred. The Company recorded net costs totaling $206,000 and $389,000 for the three and nine months ended May 31, 2020, respectively,
and expenses of $366,000 and $948,000 for the three and nine months ended May 31, 2019, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Convertible Debt</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company evaluates embedded conversion
features within convertible debt under ASC 815 &ldquo;Derivatives and Hedging&rdquo; to determine whether the embedded conversion
feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value
recorded in earnings. If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated
under ASC 470-20 &ldquo;Debt with Conversion and Other Options&rdquo; for consideration of any beneficial conversion features.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Reverse Stock Split</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On December 17, 2019, the Company effected
a 1 for 40 reverse stock split. All common shares and common stock equivalents are presented retroactively to reflect the reverse
split.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Earnings (Loss) Per Share</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company utilizes FASB ASC 260, &ldquo;Earnings
per Share.&rdquo; Basic earnings (loss) per share is computed by dividing earnings (loss) attributable to common stockholders by
the weighted-average number of common stock outstanding during the reporting period. Diluted earnings (loss) per share is computed
similar to basic earnings (loss) per share except that the denominator is increased to include additional common stock equivalents
available upon exercise of stock options and warrants using the treasury stock method. Dilutive common stock equivalents include
the dilutive effect of in-the-money share equivalents, which are calculated based on the average share price for each period using
the treasury stock method, excluding any common stock equivalents if their effect would be anti-dilutive. In periods in which a
net loss has been incurred, all potentially dilutive common stock is considered anti-dilutive and thus is excluded from the calculation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The number of shares used for the weighted
average number of common stock outstanding for the earnings per share for the three and nine months ended May 31, 2020 was increased
by 24,634,560 shares effective as of January 1, 2020. This increase reflects the inclusion of common stock issuable upon full exercise
of options to purchase a similar number of preferred shares and full conversion of those shares of preferred stock to shares of
common stock. The preferred share option was deemed to be exercisable into preferred shares on the effective date of the Asset
Sale as described in Note 3. The one to one ratio of conversion of shares of preferred stock to shares of common stock was set
on March 25, 2020 as described in Note 6.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Securities used in, or that are excluded
from the calculation of weighted average dilutive common stock, because their inclusion would have been antidilutive are:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>For the</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Three</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Months</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Ended</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>May 31,</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>2020</B></P></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>For the</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Three Months</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Ended</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>May 31,</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>2019</B></P></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="width: 74%"><FONT STYLE="font-size: 10pt">Options</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">43,406</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">48,792</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD><FONT STYLE="font-size: 10pt">Senior Convertible Notes (Note 5)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">308,312</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">Warrants</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">1,896,209</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">107,410</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding-bottom: 1pt; padding-left: 12.1pt"><FONT STYLE="font-size: 10pt">Total potentially dilutive shares</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">1,939,615</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">464,514</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Stock-Based Compensation</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">At May 31, 2020, the Company has one stock-based
compensation plan under which the Company may issue awards. The Company accounts for this plan under the recognition and measurement
principles of ASC 718, <I>Compensation- Stock Compensation</I>, which requires all share-based payments to employees, including
grants of employee stock options, to be recognized in the condensed consolidated statements of operations on their fair values.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The grant date fair value is determined
using the Black-Scholes-Merton pricing model. For all employee stock options, the Company recognizes expense over the requisite
service period on an accelerated basis over the employee&rsquo;s requisite service period (generally the vesting period of the
equity grant).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company&rsquo;s option pricing model
requires the input of highly subjective assumptions, including the expected stock price volatility and expected term. The expected
volatility is based on the historical volatility of the Company. Any changes in these highly subjective assumptions significantly
impact stock-based compensation expense.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company elected to account for forfeitures
as they occur. As such, compensation cost previously recognized for an award that is forfeited because of the failure to satisfy
a service condition is revised in the period of forfeiture.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Treasury Stock</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Treasury stock represents shares of common
stock provided to the Company in satisfaction of the related party advance, described in Note 13. Shares of common stock provided
are recorded at cost as treasury stock. The Company retired all of its treasury stock outstanding as of August 31, 2019 in fiscal
2020. Any treasury stock retired is recorded to additional paid-in capital, limited to the amount previously credited to additional
paid-in capital, if any. Any excess is charged to accumulated deficit.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Reclassifications</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Certain reclassifications have been made
to prior year&rsquo;s data to confirm to the current year&rsquo;s presentation. Such reclassifications had no impact on the Company&rsquo;s
financial condition, operating results, cash flows or stockholders&rsquo; equity.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Recent Accounting Standards</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In May 2014, the FASB issued Accounting
Standards Update (&ldquo;ASU&rdquo;) No. 2014-09, Revenue from Contracts with Customers (Topic 606), which outlines a single comprehensive
model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition
guidance, including industry-specific guidance. The core principle of the revenue model is that &ldquo;an entity recognizes revenue
to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services.&rdquo; The standard provides enhancements to the quality and consistency
of how revenue is reported by companies, while also improving comparability in the financial statements of companies reporting
using International Financial Reporting Standards or U.S. GAAP. The new standard also will require enhanced revenue disclosures,
provide guidance for transactions that were not previously addressed comprehensively, and improve guidance for multiple-element
arrangements. This accounting standard becomes effective for the Company for annual reporting periods beginning after December
15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. Early adoption is permitted
for annual reporting periods (including interim periods) beginning after December 15, 2016. This new standard permits the use of
either the retrospective or cumulative effect transition method. The Company is continuing to evaluate the impact and believes
that the adoption of Topic 606 will have a minimal impact.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In March 2016, the FASB issued ASU No.
2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations. The purpose of this standard
is to clarify the implementation of guidance on principal versus agent considerations related to ASU 2014-09. The standard has
the same effective date as ASU 2014-09 described above.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In April 2016, the FASB issued ASU No.
2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which provides clarity
related to ASU 2014-09 regarding identifying performance obligations and licensing implementation. The standard has the same effective
date as ASU 2014-09 described above.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In May 2016, the FASB issued ASU 2016-12:
Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which provides narrow scope
improvements and practical expedients related to ASU 2014-09. The purpose of this standard is to clarify certain narrow aspects
of ASU 2014-09, such as assessing the collectability criterion, presentation of sales taxes, and other similar taxes collected
from customers, noncash consideration, contract modifications at transition, completed contracts at transition, and technical correction.
The standard has the same effective date as ASU 2014-09 described above.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In December 2016, the FASB issued ASU 2016-20:
Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers. The amendments in this standard affect
narrow aspects of guidance issued in ASU 2014-09. The standard has the same effective date as ASU 2014-09 described above. Topic
606 is effective for the company beginning with the fiscal year ending August 31, 2020.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In August 2018, the FASB issued ASU
No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework &ndash; Changes to the Disclosure Requirements for Fair
Value Measurement. For all entities, amendments are effective for fiscal years, and interim periods within those fiscal
years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted
average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of
measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the
initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their
effective date. Early adoption is permitted. An entity is permitted to early adopt any removed or modified disclosures upon
issuance of ASU No. 2018-13 and delay adoption of the additional disclosures until their effective date. The Company is
currently evaluating the potential impact this guidance will have on the condensed consolidated financial statements, if
any.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In February 2016, the FASB issued new accounting
guidance on leases ASU 2016-02, Leases. The new standard requires that a lessee recognize assets and liabilities on the balance
sheet for leases with terms longer than 12 months. The recognition, measurement and presentation of lease expenses and cash flows
by a lessee will depend on its classification as a finance or operating lease. The guidance also includes new disclosure requirements
providing information on the amounts recorded in the financial statements. In July 2018, the FASB issued ASU 2018-10, Codification
Improvements to Topic 842, Leases. For entities that early adopted Topic 842, the amendments are effective upon issuance of ASU
2018-10, and the transition requirements are the same as those in Topic 842. For entities that have not adopted Topic 842, the
effective date and transition requirements will be the same as the effective date and transition requirements in Topic 842. In
April 2020, the FASB voted to defer the effective date for private companies for one year. The updated effective date will be for
fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company is evaluating the effect of
adopting this new accounting guidance and is currently finalizing its analysis of the financial impact of the adoption. The Company
expects to adopt the guidance using the modified retrospective method.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Note 3 &ndash; Discontinued Operations</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On January 3, 2020, the Company executed
an asset purchase agreement assigning client contracts comprising approximately 88% of its quarterly revenue through the date of
the transaction, including 100% of its existing professional employer organization (&ldquo;PEO&rdquo;) business effective as of
December 31, 2019, and the transfer of $1.5 million of working capital assets, including cash balances and certain operating assets
associated with the assigned client contracts included in the agreement (the &ldquo;Asset Sale&rdquo;). Gross proceeds from the
Asset Sale were $19.2 million, of which $9.7 million was received at closing and $9.5 million will be paid out in equal monthly
payments over the next four years (the &ldquo;Note Receivable&rdquo;), subject to adjustments for working capital and customer
retention over the twelve month period following the Asset Sale.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following is a reconciliation of the
gross proceeds to the net proceeds from the Asset Sale as presented in the statement of cash flows for the period ending May 31,
2020.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="width: 87%; text-align: justify"><FONT STYLE="font-size: 10pt">Gross proceeds</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">19,166,000</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Cash received at closing &ndash; asset sale</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(9,500,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Cash received at closing &ndash; working capital</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(166,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Discount recorded</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(1,818,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-bottom: 1pt; text-align: justify"><FONT STYLE="font-size: 10pt">Less: Transaction reconciliation &ndash; working capital adjustment</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(1,283,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding-bottom: 1pt; text-align: justify"><FONT STYLE="font-size: 10pt">Adjusted Note Receivable</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">6,399,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-bottom: 1pt; text-align: justify"><FONT STYLE="font-size: 10pt">Short-term note receivable</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">1,291,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding-bottom: 1pt; text-align: justify"><FONT STYLE="font-size: 10pt">Long-term note receivable</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">5,108,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Asset Sale generated a gain of $15.7
million for the nine months ended May 31, 2020. The Company expects a minimal tax impact from the Asset Sale as it intends to utilize
its net operating losses accumulated since inception to offset the gain resulting from discontinued operations tax provision with
a corresponding offset to the valuation allowance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Asset Sale met the criteria of discontinued
operations set forth in ASC 205 and as such the Company has reclassified its discontinued operations for all periods presented
and has excluded the results of its discontinued operations from continuing operations for all periods presented. The Company recorded
the Note Receivable net of a discount using its estimated cost of capital at a discount rate of (10%).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Asset Sale calls for adjustments to
the Note Receivable either for: (i) working capital adjustments or (ii) in the event that the gross profit of the business transferred
is less than the required amount. Through May 31, 2020, the Company has identified $1,283,000 of working capital adjustments, including
$88,000 related to lower net assets transferred at closing, $201,000 of liabilities paid on behalf of the Company, and $994,000
of cash remitted to the Company&rsquo;s bank accounts, net. Under the terms of the Asset Sale, a reconciliation of the working
capital was to have been completed by April 15, 2020. Due to operational difficulties and quarantined staff caused by <FONT STYLE="background-color: white">the
outbreak of COVID-19</FONT>, the reconciliation remains unresolved. The working capital adjustment recorded as of May 31, 2020
represents the Company&rsquo;s estimate of the reconciliation. There is no assurance that the working capital change identified
as of May 31, 2020 represents the final working capital adjustment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The carrying amounts of the classes of
assets and liabilities from the Asset Sale included in discontinued operations were as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>May 31, 2020</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>August 31, 2019</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Unaudited</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Unaudited</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Cash</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="width: 74%; text-align: justify"><FONT STYLE="font-size: 10pt">Accounts receivable and unbilled account receivable</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">8,526,000</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Prepaid expenses and other current assets</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">171,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-bottom: 1pt; text-align: justify"><FONT STYLE="font-size: 10pt">Deposits &ndash; workers&rsquo; compensation</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">2,386,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">1,722,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding-bottom: 1pt; padding-left: 11.25pt; text-align: justify"><FONT STYLE="font-size: 10pt">Total current assets</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">2,386,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">10,419,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Fixed assets, net</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">40,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding-bottom: 1pt; text-align: justify"><FONT STYLE="font-size: 10pt">Deposits &ndash; workers&rsquo; compensation</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">1,749,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">5,527,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-bottom: 1pt; padding-left: 11.25pt; text-align: justify"><FONT STYLE="font-size: 10pt">Total assets</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">4,135,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">15,986,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Accounts payable and other current liabilities</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">457,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Payroll related liabilities</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">7,879,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-bottom: 1pt; text-align: justify"><FONT STYLE="font-size: 10pt">Accrued workers&rsquo; compensation cost</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">2,386,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">1,722,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding-bottom: 1pt; padding-left: 13.5pt; text-align: justify"><FONT STYLE="font-size: 10pt">Total current liabilities</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">2,386,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">10,058,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-bottom: 1pt; text-align: justify"><FONT STYLE="font-size: 10pt">Accrued workers&rsquo; compensation cost</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">5,533,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">3,853,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding-bottom: 1pt; padding-left: 11.25pt; text-align: justify"><FONT STYLE="font-size: 10pt">Total liabilities</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">7,919,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">13,911,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-bottom: 1pt; padding-left: 11.25pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding-bottom: 1pt; padding-left: 11.25pt; text-align: justify"><FONT STYLE="font-size: 10pt">Net assets/(liability)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(3,784,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">2,075,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Reported results for the discontinued operations by period were
as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>For the Three Months Ended</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;<B>For the Nine Months Ended </B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>May 31, 2020</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>May 31, 2019</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>May 31, 2020</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>May 31, 2019</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="width: 48%"><FONT STYLE="font-size: 10pt">Revenues (gross billings of $0 and $82.3 million less worksite employee payroll cost of $0 million and $69.7 million, respectively for the three months ended; gross billings of $120.0 million and $221.7 million less worksite employee payroll cost of $103.3 million and $187.3 million, respectively for Nine Months ended)</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">12,666,000</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">17,138,000</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">34,354,000</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">Cost of revenue</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">1,490,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">10,125,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">17,025,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">25,567,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">Gross profit (loss)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(1,490,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">2,541,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">113,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">8,787,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD><FONT STYLE="font-size: 10pt">Operating expenses:</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-left: 12.1pt"><FONT STYLE="font-size: 10pt">Salaries, wages and payroll taxes</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">662,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">658,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">2,414,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding-bottom: 1pt; padding-left: 12.1pt"><FONT STYLE="font-size: 10pt">Commissions</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">701,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">748,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">1,777,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-bottom: 1pt; padding-left: 24.2pt"><FONT STYLE="font-size: 10pt">Total operating expenses</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">1,363,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">1,406,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">4,191,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-bottom: 1pt; padding-left: 24.2pt"><FONT STYLE="font-size: 10pt">(Loss) income from discontinued operations</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(1,490,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">1,178,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(1,293,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">4,596,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Note 4: Going Concern</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of May 31, 2020, the Company had cash
of $10.8 million and a working capital surplus of $3.4 million. During the nine months ended May 31, 2020, the Company used approximately
$10.6 million of cash from its continuing operations and repaid $1.2 million of convertible notes, after receiving $9.5 million
of cash from the Asset Sale described below, and closed an underwritten public offering and receiving $10.3 million, net of offering
costs. The Company has incurred recurring losses resulting in an accumulated deficit of $111.2 million as of May 31, 2020. The
recurring losses and cash used in operations raise substantial doubt as to its ability to continue as going concern within one
year from issuance date of the financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Historically, the Company&rsquo;s
principal source of financing has come through the sale of its common stock and issuance of convertible notes. The Company
successfully completed an IPO on The Nasdaq Stock Market LLC (&ldquo;Nasdaq&rdquo;) on June 29, 2017, raising a total of $12
million ($10.9 million net of costs). In June 2018, the Company completed a private placement of 8% senior secured
convertible notes to institutional investors raising $9 million of gross proceeds ($8.4 million net of costs). In March 2019,
the Company completed a private placement of senior secured notes to institutional investors raising $3.75 million ($3.3
million net of costs). Between September 1, 2019 and May 22, 2020 all convertible notes outstanding as of August 31, 2019
were repaid or converted into equity. On May 26, 2020, the Company successfully completed an underwritten public offering
raising a total of $12 million ($10.3 million net of costs) and closed an additional $1.35 million ($1.25 million net of
costs) between June 1, 2020 and July 7, 2020 pursuant to the underwriter&rsquo;s overallotment. The Company&rsquo;s plans and
expectations for the next 12 months include raising additional capital to help fund expansion of its operations, including
the continued development and support of its IT and HR platform. The Company engaged an investment banking firm to assist the
Company in (i) preparing information materials, (ii) advising the Company concerning the structure, price and conditions and
(iii) organizing the marketing efforts with potential investors in connection with a financing transaction.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 9; Value: 8 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><P STYLE="font-size: 10pt; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<FONT STYLE="font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->16<!-- Field: /Sequence --></FONT> </P></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In January 2020, the Company assigned approximately
88% of its customer contracts in exchange for $9.7 million in cash at closing and received an additional $1.0 million of cash,
net of $0.9 million of cash transferred, and expects to receive an additional $7.5 million over the four years following the closing
of the Asset Sale, subject to certain closing conditions. The Company transferred $1.6 million of working capital, including $0.9
million of cash. The business transferred represented approximately $6.0 million of the Company&rsquo;s annualized gross profit.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company continues to experience significant
growth in the number of WSEs, which would generate additional administrative fees that would offset the current level of operational
cash burn. The Company retained the high growth business which accounted for over 100% of billings and revenue growth. The Company
also retained the rights to monetize the existing pool of WSEs and has begun to roll out its delivery and scheduling applications
to its customers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company has and will be impacted by
the COVID-19 pandemic. The current business focus is on providing payroll services for the restaurant and hospitality industries
which have seen a significant reduction in payroll and consequently a reduction in payroll processing fees. Between March 1, 2020
and May 31, 2020, the number of our billed clients has been reduced by approximately 20% as a result of workforce reduction from
our clients. To date, some of our clients have received Coronavirus Aid, Relief, and Economic Security Act (&ldquo;CARES Act&rdquo;)
benefits to offset this reduction, but not at significant levels, and our business has been impacted since the COVID-19 lockdown
starting in March 2020. If the lockdown continues, our clients delay hiring or rehiring employees, or if our clients shut down
operations, our ability to generate operational cash flows may be significantly impaired.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company&rsquo;s management believes,
but cannot be certain, that the Company&rsquo;s current cash position, along with its revenue growth and the financing from potential
institutional investors will be sufficient to fund its operations for at least a year from the date these financials are available.
If these sources do not provide the capital necessary to fund the Company&rsquo;s operations during the next twelve months from
the date of this Report, the Company 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 terms advantageous to the Company, or that any such additional financing
will be available to the Company. These condensed consolidated financial statements do not include any adjustments for this uncertainty.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Note 5: Senior Convertible Notes Payable
</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company has issued four series of senior
secured convertible notes payable (collectively, the &ldquo;Senior Convertible Notes&rdquo;). In general, each series is convertible
into shares of common stock. At August 31, 2019, the Company had $6.8 million of the Senior Convertible Notes in default. During
the nine months ended May 31, 2020, the Company entered into a series of note amendments, exchanges, and settlements resulting
in the resolution of the default conditions and subsequent repayment or conversion of all Senior Convertible Notes. The Senior
Convertible Notes Payable consist of the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>May 31</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>August 31,</B></FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>2020</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>2019</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>(unaudited)</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="width: 74%; text-align: justify"><FONT STYLE="font-size: 10pt">Senior Convertible Notes, Principal</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;-</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">6,808,000</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-bottom: 1pt; text-align: justify"><FONT STYLE="font-size: 10pt">Less: debt discount and deferred financing costs</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(3,457,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding-bottom: 1pt; text-align: justify"><FONT STYLE="font-size: 10pt">Total outstanding convertible notes, net</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">3,351,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-bottom: 1pt; text-align: justify"><FONT STYLE="font-size: 10pt">Less: current portion of convertible notes payable</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(3,351,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding-bottom: 1pt; text-align: justify"><FONT STYLE="font-size: 10pt">Long-term convertible notes payable</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of August 31, 2019, the Company had
been declared in default of its Senior Convertible Notes for not honoring conversion notices in June 2019. Three of the Company&rsquo;s
five institutional investors had filed litigation and the Senior Convertible Notes were considered to be in default as of August
31, 2019. See also Note 9 for additional information on the litigation related to the Senior Convertible Notes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During the nine months ended May 31, 2020,
the Company resolved all litigation related to its outstanding notes and all of the Senior Convertible Notes were repaid in cash
or converted into common stock.&nbsp; On August 31, 2019 the Company had gross principal of $6,808,000 representing:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<!-- Field: Page; Sequence: 10; Value: 8 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><P STYLE="font-size: 10pt; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<FONT STYLE="font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->17<!-- Field: /Sequence --></FONT> </P></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<!-- Field: Split-Segment; Name: 14 -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">June 2018 Senior Convertible Notes due September 6, 2019 with a principal balance of $1,466,000 (the &ldquo;June 2018 Notes&rdquo;). The June 2018 Notes were converted or repaid in cash in January 2020 as described in the activity below.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Senior Convertible Notes due December 31, 2019 with a principal balance of $867,000 (the &ldquo;December 2018 Notes&rdquo;). The December 2018 Notes were either exchanged for December 2019 Exchange Notes and subsequently converted into common shares, converted into common shares in January 2020 or repaid in cash in January 2020 as described in the activity below.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Senior Convertible Notes due September 12, 2020 with a principal balance of $4,475,000 (the &ldquo;March 2019 Notes&rdquo;). The March 2019 Notes were either exchanged for December 2019 Exchange Notes (as defined below), converted or repaid in cash in January 2020 or exchanged for amended notes in March 2020 which were converted in the quarter ended May 31, 2020.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On December 6, 2019, the Company entered
into an exchange agreement with the holder of $2,445,000 of its March 2019 Notes and $222,000 of its December 2018 Notes for new
senior convertible notes (the &ldquo;December 2019 Exchange Notes&rdquo;). The December 2019 Exchange Notes and the related warrant
and note conversion agreement revised the conversion price of the holder&rsquo;s December 2018 Notes and March 2019 Notes to $40.00
per share, extended the term of the notes to March 1, 2022, provided for a revised quarterly amortization schedule beginning April
1, 2020 of 12.5% of the principal balance as of January 31, 2020 payable in cash, and removed certain anti-dilution terms warrants
issued in March 2019 (the &ldquo;March 2019 Warrants&rdquo;). The Company agreed to issue an additional $200,000 of consideration
to the holder, payable in common stock, as consideration for this exchange and agreed to increase the principal outstanding on
the notes exchanged by 10% from $222,000 for the December 2018 Notes to $244,000, and from $2,445,000 for the March 2019 Notes
to $2,690,000, for a combined revised principal balance of $2,934,000. On December 11, 2019, the Company issued 21,750 shares of
common stock to the holder in satisfaction of the additional $200,000 of consideration. The Company provided for up to 10% of the
revised combined principal of $2,934,000 to be converted at a reduced price of $12.20 per share until January 31, 2020. In January
2020, the investor converted $293,000 into 24,049 shares of common stock. The Company evaluated the exchange under ASC 470 and
determined that the exchange should be treated as a debt modification. The Company recorded an additional note discount of $467,000
representing the combined additional shares issued, valued at $200,000 and the additional $267,000 in notes issued in the exchange.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>December 2019 Exchange</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The terms of the December 2019 Exchange
Notes are summarized as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR>
    <TD STYLE="width: 24px; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; width: 24px; text-align: left"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Term: April 1, 2022;</FONT></TD></TR>
<TR>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: left">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: left"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Coupon: 0%;</FONT></TD></TR>
<TR>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: left">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: left"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Default interest rate: 18%;</FONT></TD></TR>
<TR>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: left">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: left"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">10% of the revised note balance may be converted at $12.20 per share until January 31, 2020</FONT></TD></TR>
<TR>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: left">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: left"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="vertical-align: top; text-align: justify"><P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-size: 10pt">Remainder Convertible at the option of the holder at any time at a price of $40 per share but subject to down round price protection;</FONT></P>
                                                         <P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P></TD></TR>
<TR>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: left">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: left"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Amortization payment of 12.5% of January 31, 2020 principal balance payable in cash;</FONT></TD></TR>
<TR>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: left">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: left"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Alternate conversion percentage is 75% if the alternate conversion is an alternate conversion event of default as a result of bankruptcy or default related to missed amortization payment, subject to a floor conversion price of $1.84 per share, 80% for all alternate event of default conversion, or 85% if such alternate conversion is an alternate optional conversion;</FONT></TD></TR>
<TR>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: left">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: left"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Redemption at the option of the Company at 15% premium at any time.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In January 2020, one investor received a legal judgement for
$500,000 plus default interest of $52,000. The judgement was paid in cash in January 2020, which included the repayment of $310,000
principal of the March 2019 Notes. Upon payment of the legal judgement, the litigation was resolved with this investor.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In January 2020, the Company settled all
legal claims with two investors by entering into settlement agreements and by payment of $2,047,000 in cash and the issuance of
103,593 shares of common stock. The settlements resulted in the elimination of combined default penalties, default interest, and
$2,194,000 of principal of the June 2018 Notes, the December 2018 Notes, and the March 2019 Notes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In January 2020, the Company reduced the
conversion price of the remaining June 2018 Notes and the December 2018 Notes payable to $12.20, and $500,000 of the June 2018
Notes and the December 2018 Notes were converted into 41,004 shares of common stock. An additional 4,207 shares of common stock
were issued in settlement of default interest of $51,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In January 2020, one investor converted
$130,000 of the March 2019 Note principal and $28,000 of accrued default interest at $12.20 per share into 12,915 shares of common
stock, and one investor converted $293,000 of the December 2019 Exchange Notes into 24,049 shares at a conversion price of $12.20
per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As a result of these settlements and conversions,
the Company recorded $567,000 of additional expense for debt conversion inducement representing the value of the shares issued
at market and the $12.20 per share conversion price on the date of issuance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>




<P STYLE="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company had previously recorded $1,800,000 of accrued interest
and penalties as of August 31, 2019. As a result of the settlements and resolution of litigation, the Company recorded a gain of
$760,000 for the quarter ended February 29, 2020 and the nine months ended May 31, 2020.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>March 2020 Warrant and Note Exchanges
and Note Conversions</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Between March 1, 2020 and March 22, 2020,
the conversion terms of the December 2019 Exchange Notes and March 2019 Notes were modified at the mutual agreement of the investors
and the Company to temporarily change the conversion price to a fixed conversion price of $9.20 per share. Three investors converted
$1,047,000 of the Company&rsquo;s Convertible Notes and $25,000 of accrued default interest into 135,508 shares of common stock
at a conversion price of $9.20 per share. The Company recorded an additional loss on note conversion of $413,000 representing the
pro rata portion of the unamortized note discount and deferred financing fees.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On March 23, 2020, the Company entered
into the following Amendment and Exchange Agreements (the &ldquo;Amendment and Exchange Agreements&rdquo;) with certain institutional
investors, pursuant to which the Company amended and restated certain existing March 2019 Notes including the capitalization of
$59,000 of accrued default interest (the &ldquo;Amended and Restated Notes&rdquo;) and issued (i) convertible notes in an aggregate
principal amount of $167,000 convertible into shares of common stock at a conversion price of $9.20 per share of common stock (the
&ldquo;Exchange Notes&rdquo;), (ii) warrants to purchase an aggregate of 162,950 shares of common stock at an exercise price of
$10.17 per share of common stock (the &ldquo;Exchange Warrants&rdquo;) and (iii) an aggregate of 82,654 shares of common stock:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">On March 23, 2020, the Company entered into an Amendment and Exchange Agreement with Alpha Capital Anstalt (&ldquo;Alpha&rdquo;) pursuant to which the Company (a) issued to Alpha an Amended and Restated Note in an aggregate principal amount of $723,000, including capitalization of $51,000 of accrued default interest, and (b) in exchange for outstanding warrants to purchase shares of common stock held by Alpha, issued to Alpha (i) 66,123 shares of common stock, (ii) a March 2020 Exchange Warrant to purchase 130,360 shares of common stock and (iii) a March 2020 Exchange Note in an aggregate principal amount of $145,000.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">On March 23, 2020, the Company entered into an Amendment and Exchange Agreement with Osher Capital Partners LLC (&ldquo;Osher&rdquo;) pursuant to which the Company (a) issued to Osher an Amended and Restated Note in an aggregate principal amount of $108,000, including the capitalization of $8,000 of accrued default interest and (b) in exchange for outstanding warrants to purchase shares of common stock held by Osher, issued to Osher (i) 16,531 shares of common stock, (ii) a March 2020 Exchange Warrant to purchase 32,590 shares of common stock and (iii) a March 2020 Exchange Note in an aggregate principal amount of $22,000.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On March 24, 2020, the Company entered
into an Exchange Agreement (the &ldquo;Exchange Agreement&rdquo; and, together with the Amendment and Exchange Agreements, the
&ldquo;March 2020 Agreements&rdquo;) with CVI Investments, Inc. (&ldquo;CVI&rdquo;) pursuant to which CVI exchanged its outstanding
senior convertible note due 2022 for (i) a warrant to purchase 260,719 shares of common stock (the &ldquo;CVI Exchange Warrant&rdquo;
and, together with the Exchange Warrants the &ldquo;March 2020 Exchange Warrants&rdquo;) and (b) a senior convertible note in an
aggregate principal amount of $1,829,000 convertible into shares of common stock at a conversion price of $9.20 per share (the
&ldquo;CVI Exchange Note&rdquo;, and together with the Exchange Notes, the &ldquo;March 2020 Exchange Notes&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company evaluated the March 2020 Agreements
as an exchange under ASC 470 and determined that the exchanges should be treated as debt extinguishments and reissuances. The Company
accelerated the remaining unamortized discount and deferred financing fees as of the date of the exchange and recorded the fair
value of the shares issued in exchange for the warrants cancelled as a loss on exchange of $1,592,000. The Company valued the revised
conversion features of the Amended and Restated Notes, the March 2020 Exchange Notes and the March 2020 Exchange Warrants using
the binomial method and recorded a discount of $2,825,000 on the exchange dates. The Company used the following assumptions to
value the conversion features and March 2020 Exchange Warrants:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>March 2020<BR>
        Conversion </B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Feature</B></P></TD>
    <TD STYLE="padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>March 2020<BR>
        Exchange</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;Warrants</B></P></TD>
    <TD STYLE="padding-bottom: 1pt; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>(unaudited)</B></FONT></TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>(unaudited)</B></FONT></TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Risk free rate</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">0.08-0.17</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">%</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">0.038</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">%</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Market price per share</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">6.63-6.68</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">6.63- 6.68</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Life of instrument in years</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">0.47-1.15</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">5.5</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Volatility</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">117-139</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">117</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">%</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Dividend yield</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">%</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Between March 24, 2020 and May 18,
2020 CVI converted $1,829,000 of its senior convertible notes into 198,756 shares of common stock, Alpha converted $868,000
of its senior convertible notes into 94,298 shares of common stock and Osher converted $130,000 of its senior convertible
notes into 14,023 shares of common stock. These conversions resulted in full acceleration of all unamortized debt discount to
expense of $2,419,000, recorded as other expense in the statement of operations as loss on conversion.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Certain conversions during the quarter
ended May 31, 2020 resulted in shares issued below the closing market price on the date of conversion. The Company recorded $57,000
of additional loss on conversion to the statement of operations for the three months ended May 31, 2020 representing the difference
in fair value between the closing share price and the conversion price on the date of issuance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following table rolls forward the Senior
Convertible Notes balances and related deferred financing costs and note discount balances from August 31, 2019 to May 31, 2020:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Gross<BR>
Principal</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Deferred<BR>
Financing<BR>
Costs</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Note <BR>
Discount</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Net</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="width: 48%; text-align: justify"><FONT STYLE="font-size: 10pt">Balance at August 31, 2019</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">6,808,000</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">(344,000</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">(3,113,000</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">3,351,000</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Repayments in cash</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(1,240,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(1,240,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Conversions to common stock</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(6,060,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">89,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">3,402,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(2,569,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Notes issued &ndash; December 2019 exchange</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">267,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">267,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Additional note discount issued &ndash; December 2019 exchange</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(467,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(467,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Acceleration of discount and deferred financing cost - extinguishment</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">88,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">960,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">1,048,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Additional notes issued &ndash; March 2020 exchange</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">166,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">166,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Interest capitalized &ndash; March 2020 exchange</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">59,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">59,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Additional note discount issued &ndash; March 2020 exchange</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(2,825,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(2,825,000</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-bottom: 1pt; text-align: justify"><FONT STYLE="font-size: 10pt">Amortization of interest expense</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">167,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">2,043,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">2,210,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding-bottom: 1pt; text-align: justify"><FONT STYLE="font-size: 10pt">Balance at May 31, 2020</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">During the three and nine months ended May 31, 2020, the Company
amortized $555,000 and $2,210,000, respectively, and for the three and nine months ended May 31, 2019, the Company amortized $722,000
and $1,433,000, respectively, to interest expense from the combined amortization of deferred financing costs and note discounts
recorded at issuance for the June 2018 Notes, the March 2019 Notes, March 2019 Exchange Notes, and the December 2019 Exchange Notes
(as defined above).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Note 6: Stockholders&rsquo; Equity</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I><U>Preferred Stock</U></I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As previously disclosed by the Company,
in September 2016, the founding shareholders of the Company were granted options to acquire preferred stock of the Company (the
&ldquo;Preferred Options&rdquo;). The number of Preferred Options granted were based upon the number of shares held at that time.&nbsp;
These Preferred Options are nontransferable and forfeited upon the sale of the related founding shares of common stock.&nbsp; Upon
the occurrence of certain specified events, such founding shareholders could exercise each Preferred Option to purchase one share
of preferred stock of the Company at an exercise price of $0.0001 per share. The preferred stock underlying the Preferred Options
does not include any rights to dividends or preference upon liquidation of the Company and is convertible into shares of common
stock on a one-for-one basis pursuant to the Restated Articles of Incorporation. The Preferred Options became exercisable to purchase
shares of preferred stock upon the Asset Sale in January 2020. On March 25, 2020 the Company recorded an expense related to preferred
options in other expense of $62.1 million representing the Black-Scholes value of 24,634,560 options exercisable and exchangeable
into an equal number of shares of common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company initially evaluated the preferred
options using the Level 1 market price on the March 25, 2020 date and concluded that the market price on that date represented
an illiquid market price and therefore not a reliable valuation metric. The Company then evaluated the preferred options on the
March 25, 2020 date and valued the preferred options using Level 2 inputs of an estimated market price based on the cash per share
received from the May 2020 Public Offering, as adjusted for the fair value of the warrants issued in conjunction with the May 2020
offering. The resulting allocated common share price was then discounted for a lack of marketability due to the lock-up provisions
of the shares issuable to arrive at a preferred option fair value of $2.52 per option. The Company used the following assumptions
to value the expense related to the preferred options:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Option life of 3.77 years, Risk free rate
of 0.47%, volatility of 134%, exercise price of $0.0001 per share and a fair value of $3.62 per common share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On June 4, 2020, Scott Absher, the
Company&rsquo;s Chief Executive Officer, exercised 12,500,000 Preferred Options for 12,500,000 shares of preferred stock.
Immediately thereafter, Mr. Absher converted all 12,500,000 shares of preferred stock into 12,500,000 shares of common stock.
These shares of common stock are subject to a two-year lockup from the date of the conversion. As of the date of this filing,
12,134,560 Preferred Options remain outstanding and exercisable. The right to exercise the options terminates on December 31,
2023. As stated above, the amount of the Preferred Options, and the number of shares of preferred stock issuable upon
exercise of such options, is based upon the number of shares of common stock held by such founding shareholders at the time
such options were issued. Accordingly, in order to confirm the original intent of the granting of up to 50,000,000 of such
options to two of our founding shareholders, Mr. Absher and Stephen Holmes, at some point in the future the Company intends
to adopt a second grant of options, exercisable upon the occurrence of certain specified events, granting an additional
12,500,000 options to each of Messrs. Absher and Holmes whereby each option permits the holder to acquire one share of
preferred stock of the Company for $0.0001 per share.&nbsp; Each share of preferred stock will be convertible into common
stock on a one-for-one basis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>The May 2020 Public Offering</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On May 20, 2020, the Company entered into
an underwriting agreement (the &ldquo;Underwriting Agreement&rdquo;) with A.G.P./Alliance Global Partners (&ldquo;A.G.P.&rdquo;),
in connection with a public offering (the &ldquo;May 2020 Offering&rdquo;) of an aggregate of (i) 1,898,850 shares of our common
stock, (ii) pre-funded warrants to purchase 323,310 shares of common stock (the &ldquo;Pre-Funded Warrants&rdquo;) and (iii) warrants
to purchase 1,277,580 shares of common stock (the &ldquo;May 2020 Common Warrants&rdquo;), which included the partial exercise
of A.G.P.&rsquo;s over-allotment option to purchase 166,500 additional Common Warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Each share of common stock and Pre-Funded
Warrant sold in the May 2020 Offering was sold together with a Common Warrant as a fixed combination, with each share of common
stock and Pre-Funded Warrant sold being accompanied by a Common Warrant to purchase 0.5 shares of common stock. The shares of common
stock and accompanying Common Warrants were sold at a price to the public of $5.40, less underwriting discounts and commissions
and the Pre-Funded Warrants and accompanying Common Warrants were sold at a price to the public of $5.399, less underwriting discounts
and commissions. The Common Warrants were immediately exercisable and will expire on May 26, 2025 and have an exercise price of
$5.40 per share, subject to anti-dilution and other adjustments for certain stock splits, stock dividends, or recapitalizations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The May 2020 Offering closed on May 26,
2020 for gross proceeds of approximately $12.0 million, prior to deducting $1.7 million of costs consisting of underwriting discounts
and commissions and offering expenses payable by the Company, which includes a partial exercise of the underwriter&rsquo;s over-allotment
option to purchase additional Common Warrants. All Pre-Funded Warrants issued or issuable were exercised on the closing date of
May 26, 2020. Pursuant to the Underwriting Agreement, the Company, upon closing of the Offering, issued to A.G.P. warrants to purchase
up to 111,108 shares of common stock (the &ldquo;Underwriter Warrants&rdquo;), which is 5.0% of the aggregate number of shares
of common stock and shares of common stock issuable upon exercise of the&nbsp;Pre-Funded&nbsp;Warrants sold in the May 2020 Offering.
The Underwriter Warrants are exercisable at any time and from time to time, in whole or in part, commencing from six months after
the closing date and ending five years from the closing date, at a price per share equal to $5.94, which is 110% of the public
offering price per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On June 11, 2020 the Company closed an
over-allotment option from the May 2020 Offering for additional gross proceeds of approximately $0.9 million, prior to deducting
underwriting discounts and commissions and offering expenses payable by the Company, representing the partial exercise of A.G.P.&rsquo;s
over-allotment option to purchase 166,500 shares of common stock at $5.40 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On July 7, 2020, the Company closed an over-allotment option
from the May 2020 Offering for additional gross proceeds of approximately $0.45 million, prior to deducting underwriting discounts
and commissions and offering expenses payable by us, representing the partial exercise of A.G.P.&rsquo;s over-allotment option
to purchase 83,840 shares of common stock at $5.40 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Common Stock and Warrants</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On December 17, 2019, the Company effected
a 1 for 40 reverse stock split. All common stock and common stock equivalents are presented retroactively to reflect the reverse
split.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During the nine months ended May 31, 2020,
the Company issued the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">2,222,160 shares of common stock were issued pursuant to the May 2020 Offering at $5.40 per share as described above.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">628,353 shares of common stock were issued for the conversion of $6,060,000 of June 2018 Notes, December 2018 Notes, March 2019 Notes, and December 2019 Exchange Notes payable and $178,000 of related default interest payable.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">82,653 shares of common stock valued at $552,000 were issued to two senior convertible note holders as an inducement to eliminate the March 2019 Warrants and as partial consideration to amend the senior notes to a fixed conversion price.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">21,750 shares of common stock valued at $200,000 was issued as an inducement to exchange $2.7 million of March 2019 Notes for $2.9 million of December 2019 Exchange Notes.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">6,275 shares of common stock were issued for a warrant exercise for cash proceeds of $33,000.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">856 shares of common stock were issued to two directors for services valued at $75,000.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Number</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>of</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>shares</B></P></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Weighted</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>average</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>remaining</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>life</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>(years)</B></P></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Weighted</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>average</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>exercise</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>price</B></P></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="width: 61%; text-align: justify"><FONT STYLE="font-size: 10pt">Warrants outstanding, August 31, 2019</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">107,409</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">4.3</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">83.21</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Issued</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">1,840,773</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">5.1</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">7.03</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">(Cancelled)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(45,698</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">4.3</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">78.13</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">(Exercised)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">(6,275</FONT></TD>
    <TD><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">3.6</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">5.29</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding-bottom: 1pt; text-align: justify"><FONT STYLE="font-size: 10pt">Warrants outstanding, May 31, 2020</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">1,896,209</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">5.0</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">8.42</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-bottom: 2.5pt; text-align: justify"><FONT STYLE="font-size: 10pt">Warrants exercisable, May 31, 2020</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">1,472,540</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">4.9</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">7.91</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The warrant reconciliation table above
excludes 323,310 &ldquo;pre-funded&rdquo; warrants that were originally subscribed to be issued in conjunction with the underwritten
offering closing on May 26, 2020. The &ldquo;pre-funded&rdquo; warrants were to be sold at $5.399 per share and exercisable at
$0.001 per share but were all exercised and fully paid prior to the May 26, 2020 closing. The 323,310 shares are included in the
2,222,160 common share count reported above for the underwritten public offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following tables summarize our warrants
outstanding as of May 31, 2020:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Warrants</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Outstanding</B></P></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Weighted&nbsp;average</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;Life of Outstanding Warrants in&nbsp;years</B></P></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Exercise </B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>price</B></P></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="width: 60%; text-align: justify"><FONT STYLE="font-size: 10pt">May 2020 Offering Common Warrants</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">1,277,580</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 13%; text-align: right"><FONT STYLE="font-size: 10pt">5.0</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">5.40</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">May 2020 Offering Underwriter Warrants</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">111,108</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">5.0</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">5.40</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">March 2020 Exchange Warrants (1)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">423,669</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">5.3</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">10.17</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Amended March 2019 Warrants (2)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">66,288</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">4.0</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">40.00</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">March 2019 Services Warrants</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">3,366</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">4.0</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">70.00</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">June 2018 Warrants</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">6,276</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">3.8</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">40.00</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">June 2018 Services Warrants</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">5,422</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">3.8</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">99.60</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-bottom: 1pt; text-align: justify"><FONT STYLE="font-size: 10pt">2017 PIPE Warrants</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">2,500</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">2.3</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">276.00</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding-bottom: 2.5pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">1,896,209</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">5.0</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">7.91</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-size: 10pt">(1)</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Warrants were issued in conjunction with the March 2020 Agreements as described in Note 5 above.&nbsp;&nbsp;Warrants are not exercisable until September 23, 2020.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-size: 10pt">(2)</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Warrants include 13,015 March 2019 Warrants that were amended in December 2019 to modify the exercise price to a fixed exercise price of $40.00 per share from $70 per share and an additional 53,273 warrants issued during the December 2019 Note exchange.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">All warrants outstanding and exercise prices have been adjusted
to reflect the 1:40 reverse split.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Note 7: Stock Based Compensation</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company granted no options during the
nine months ended May 31, 2020. The Company recognized approximately $75,000 and $745,000 of compensation expense for the three
and nine months ended May 31, 2020, respectively. During the nine months ended May 31, 2020, the Company fully vested all options
granted to personnel who were terminated as a result of the Asset Sale which resulted in the acceleration of 9,737 options and
$483,000 of stock-based compensation recorded in stock-based compensation &ndash; general and administrative.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">At May 31, 2020, the total unrecognized
deferred share-based compensation expected to be recognized over the remaining weighted average vesting periods of 0.9 years for
outstanding grants was $0.6 million.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">A summary of option activity was as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>




<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="10" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Options Outstanding and Exercisable</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Weighted</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Average</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Weighted</B></FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Number</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Remaining</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Average</B></FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>of</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Contractual</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Exercise</B></FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Options</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Life</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Price</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>(In years)</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="width: 58%; text-align: justify"><FONT STYLE="font-size: 10pt">Balance, August 31, 2019</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 11%; text-align: right"><FONT STYLE="font-size: 10pt">50,749</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 11%; text-align: right"><FONT STYLE="font-size: 10pt">9.0</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 11%; text-align: right"><FONT STYLE="font-size: 10pt">95.20</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Granted</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&ndash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&ndash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&ndash;</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Exercised</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&ndash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&ndash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&ndash;</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-bottom: 1pt; text-align: justify"><FONT STYLE="font-size: 10pt">Forfeited</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(7,343</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">8.5</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">69.85</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding-bottom: 2.5pt; text-align: justify"><FONT STYLE="font-size: 10pt">Balance at May 31, 2020</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">43,406</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">8.4</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">99.55</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Options outstanding as of May 31, 2020
had aggregate intrinsic value of $0.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Option vesting activity was as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Weighted</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Weighted</B></FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Number</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Remaining</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Average</B></FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>of</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Contractual</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Exercise</B></FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: black 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Options Vested</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Options</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Life</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Price</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>(In years)</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="width: 58%; text-align: justify"><FONT STYLE="font-size: 10pt">Balance, August 31, 2019</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 11%; text-align: right"><FONT STYLE="font-size: 10pt">10,291</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 11%; text-align: right"><FONT STYLE="font-size: 10pt">8.0</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 11%; text-align: right"><FONT STYLE="font-size: 10pt">152.80</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Vested</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">17,310</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">8.4</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">91.85</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Exercised</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&ndash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&ndash;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">&ndash;</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="background-color: white; padding-bottom: 1pt; text-align: justify"><FONT STYLE="font-size: 10pt">Forfeited</FONT></TD>
    <TD STYLE="background-color: white; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; background-color: white">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; background-color: white; text-align: right"><FONT STYLE="font-size: 10pt">(1,305</FONT></TD>
    <TD STYLE="background-color: white; padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="background-color: white; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; background-color: white">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">5.2</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; background-color: white; text-align: right"><FONT STYLE="font-size: 10pt">140.09</FONT></TD>
    <TD STYLE="background-color: white; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding-bottom: 2.5pt; text-align: justify"><FONT STYLE="font-size: 10pt">Balance at May 31, 2020</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">26,296</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">7.9</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">118.41</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following table summarizes information about stock options
outstanding and vested at May 31, 2020:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="10" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Options Outstanding and Exercisable</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="10" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Options Vested</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Weighted</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Average</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Weighted</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Weighted</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Weighted</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Number</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Remaining</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Average</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Number</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Remaining</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Average</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>of</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Contractual</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Exercise</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>of</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Contractual</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Exercise</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Exercise Prices</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Options</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Life</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Price</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Options</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Life</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Price</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>(In years)</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>(In years)</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: center"><FONT STYLE="font-size: 10pt">$18.80-$40.00</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">5,375</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">9.0</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">24.35</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">758</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">9.0</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">29.38</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: white">
    <TD STYLE="vertical-align: top; text-align: center"><FONT STYLE="font-size: 10pt">$40.01&ndash;$80.00</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">13,729</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">8.8</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">51.21</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">7,473</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">8.8</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">51.22</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: center"><FONT STYLE="font-size: 10pt">$80.01&ndash;$120.00</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">10,553</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">8.0</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">102.93</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">6,881</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">8.0</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">102.56</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: white">
    <TD STYLE="vertical-align: top; text-align: center"><FONT STYLE="font-size: 10pt">$120.01&ndash;$160.00</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">12,625</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">7.3</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">155.28</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">10,060</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">7.2</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">155.26</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: center"><FONT STYLE="font-size: 10pt">$160.01-$391.60</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">1,124</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">7.1</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">391.60</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">1,124</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">7.1</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">391.60</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: white">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">43,406</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">8.2</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">99.55</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">26,296</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">7.9</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">118.41</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The number of options and exercise prices
have been presented retroactively for the 1 for 40 December 17, 2019 reverse split.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Note 8: Related Parties</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">J. Stephen Holmes, our Sales Manager, is
an advisor to and significant shareholder of the Company. The Company incurred $180,000 and $540,000 in professional fees for management
consulting services in the three and nine months ended May 31, 2019 and $180,000 and $540,000 in the three and nine months ended
May 31, 2020, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On December 23, 2019, the Company issued
428 shares to each of Messrs. Higgins and White, both directors of the Company, in settlement of shares promised in December 2018
but not issued. The fair value on the date issued for the combined issuance of 856 shares was $75,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>




<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Note 9: Contingencies</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Certain conditions may exist as of the
date the financial statements are issued, which may result in a loss to the Company, but which will be resolved only when one or
more future events occur or fail to occur. The Company&rsquo;s management, in consultation with its legal counsel as appropriate,
assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During the ordinary course of business,
the Company is subject to various claims and litigation. Management believes that the outcome of such claims or litigation will
not have a material adverse effect on the Company&rsquo;s financial position, results of operations or cash flow.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Convertible Note Related Litigation</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During 2019, three of the Company&rsquo;s
note holders filed legal complaints. During the nine months ended May 31, 2020 all Convertible Note related litigation was resolved
as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Alpha Capital v. ShiftPixy, Inc.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On July 3, 2019, the Company was served
with a complaint filing by Alpha Capital Anstalt (&ldquo;ACA&rdquo;) in the United States District Court, Southern District of
New York alleging breach of contract in refusing to honor the conversion of certain convertible notes, specifically one for $310,000
submitted on June 20, 2019. ACA sought an injunction requiring the Company to issue 25,000 shares of common stock, damages for
the claimed breaches, and attorneys&rsquo; fees. In August 2019, the court denied the motion for a preliminary injunction but granted
accelerated discovery which was completed in September 2019. As of November 30, 2019, the Company had convertible notes outstanding
with ACA for approximately $1.7 million consisting of $0.3 million of the June 2018 Notes, $0.2 million of the December 2018 Notes
and $1.2 million of the March 2019 Notes. In January 2020, Alpha was awarded a judgement for $500,000 consisting of the $310,000
of notes and $190,000 of damages and accrued interest of $51,000. On January 16, 2020 Alpha Capital converted all remaining June
2018 Note and December 2018 Note balances at $12.20 per share. On January 20, 2020, the Company paid the damages award including
interest in cash and resolved the litigation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Dominion Capital LLC v. ShiftPixy, Inc.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On July 18, 2019, the Company was served
with a complaint filing by Dominion Capital LLC (&ldquo;Dominion&rdquo;) in the United States District Court, Southern District
of New York alleging breach of contract in refusing to honor the conversion of certain convertible notes. Dominion sought injunctive
relief, injunction to prohibit buyback, breach of contract on the June 2018 Notes, the December 2018 Notes, and the March 2019
Notes, and declaratory judgment. In August 2019, the court denied the motion for a preliminary injunction but granted accelerated
discovery which was completed in September 2019. On January 22, 2020, the Company settled all claims and repaid all remaining notes
and cancelled all related warrants by issuing 83,593 shares of common stock on the date of issuance and paid cash of $1,322,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>MEF I, LP v. ShiftPixy, Inc.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On August 27, 2019, MEF I, LP (&ldquo;MEF&rdquo;)
filed a complaint in the United States District Court, Southern District of New York. MEF sought monetary relief of $2.1 million
and to appoint themselves as receiver of the Company. As of August 31, 2019, the Company had convertible notes outstanding to MEF
at approximately $0.7 million face value consisting of approximately $0.5 million and $0.2 million for the June 2018 Notes and
the December 2018 Notes, respectively. In November 2019, the Company filed a motion in response to the receiver request. On January
17, 2020, the Company and MEF I settled all claims, pursuant to which the Company repaid all note principal remaining, accrued
damages, and accrued interest and cancelled the June 2018 Warrants with the issuance of 20,000 shares of common stock and payment
of $725,000 in cash.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">See also Note 5 above.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Kadima Ventures</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company is in a dispute with its
former software developer, Kadima Ventures (&ldquo;Kadima&rdquo;), over incomplete but paid for software development work. In
May 2016, the Company entered into a contract with Kadima for the development and deployment of user features that were
proposed by Kadima for an original build cost of $2.2 million to complete. This proposal was later revised upward to
approximately $7.2 million to add certain features to the original proposal. As of the date of this Report, the Company has
paid approximately $11 million to Kadima, but has never been provided access to the majority of the promised software. Kadima
refused to continue development work, denied access to developed software, and refuses to surrender to the Company any
software that it has developed unless the Company pays an additional $12.0 million above the $11.0 million already paid. In
addition to the non-delivery of the paid for user features, Kadima asserts that it is owed additional funds to turn over the
work completed. In April 2019, Kadima filed a complaint against the Company in the Superior Court of the State of Arizona,
Maricopa County, alleging claims for breach of contract, promissory estoppel and unjust enrichment, and seeking damages in
excess of $11.0 million. The Company vigorously disputes and denies each of Kadima&rsquo;s claims, including that it owes any
sums to Kadima, and further believes that it is entitled, at a minimum, to a refund of a substantial portion of the sums that
it has already paid, along with the release of the software modules currently being withheld. In June, 2020 the Company
engaged in mediation discussions with Kadima in an attempt to resolve the matter, which was unsuccessful. On July 14, 2020
the Company filed an answer to Kadima&rsquo;s complaint, which denied Kadima&rsquo;s claims and asserted counter-claims for
breach of contract and fraud.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I></I></B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Splond Litigation</I></B>&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On April 8, 2019, claimant, Corey Splond,
filed a class action lawsuit, on behalf of himself and other similarly situated individuals, in the Eighth Judicial District Court
for the State of Nevada, Clark County, naming the Company and its client as defendants, and alleging violations of certain wage
and hour laws. This lawsuit is in the initial stages, and the Company denies any liability. Even if the plaintiff ultimately prevails,
the potential damages recoverable will depend substantially upon whether the Court determines in the future that this lawsuit may
appropriately be maintained as a class action. &nbsp;Further, in the event that the Court ultimately enters a judgment in favor
of plaintiff, the Company believes that it would be contractually entitled to be indemnified by its client against at least a portion
of any damage award.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Note 10: Subsequent Events</B>&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Litigation:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On June 29, 2020, the Company was served
with a complaint filed by one of its former clients in the Superior Court of the State of California, Orange County, naming the
Company, two of its officers, and one of its former subsidiaries as defendants. The Complaint asserts multiple causes of action,
all of which stem from the former client&rsquo;s claim that the Company is obligated to reimburse it for sums it paid in settlement
of a separate lawsuit brought by one of its employees pursuant to the California Private Attorneys General Act of 2004. This underlying
lawsuit alleged that our former client was responsible for multiple violations of the California Labor Code. The Company and the
officers named as defendants deny the former client&rsquo;s allegations, and the Company intends to defend the lawsuit vigorously.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Employee Stock Option Plan Increase:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On July 1, 2020, the Board of Directors
unanimously approved an increase in the number of shares of common stock issuable under our of the Company&rsquo;s 2017 Stock Option/Stock
Issuance Plan from 250,000 to 3,000,000, subject to approval by a majority of the Company&rsquo;s shareholders no later than the
next regularly scheduled annual shareholders meeting. Also on July 1, 2020, our Board approved the award, primarily to current
employees, and subject to shareholder approval no later than the next regularly scheduled annual meeting, of grants of options
to purchase 1,235,159 shares of the Company&rsquo;s common stock at an exercise price of $5.40 per share, which was the closing
price of our stock as reported by Nasdaq at the close of trading on the day of the Board&rsquo;s action. Of the options awarded,
995,000 are designated as &ldquo;incentive stock options&rdquo;, and 280,159 are designated as &ldquo;non-qualifying&rdquo; or
&ldquo;non-statutory&rdquo; options under the Internal Revenue Code. These options have a 10-year life, and will vest over a four
year period, with 25% vesting on July 1, 2021, and the remainder vesting ratably on a quarterly basis over the following three
years.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Additional COVID-19 Lockdown:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On July 13, 2020 the Governor of the State
of California re-implemented additional COVID-19 related lockdown provisions in most of the counties in the state, including those
located in Southern California where most of our clients reside.&nbsp; These lockdown provisions will likely require that in-person
dining be prohibited for at least one month.&nbsp; We believe that the impact to our business will be primarily felt based upon
the negative effect on those clients that rely more heavily upon in-person dining, but we have not had an opportunity to evaluate
fully&nbsp;the probable impact of this lockdown development on our overall customer base as of the date of these condensed consolidated
financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Management has evaluated subsequent events
pursuant to the issuance of the interim unaudited consolidated financial statements and has&nbsp;determined that, other than listed
above, no other reportable subsequent events exist through the date of these condensed consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><A NAME="a_012"></A><FONT STYLE="text-transform: uppercase"><B>Report
of Independent Registered Public Accounting Firm</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">To the Shareholders and Board of Directors of</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">ShiftPixy, Inc.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Opinion on the Financial Statements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have audited the accompanying consolidated
balance sheets of ShiftPixy, Inc. (the &ldquo;Company&rdquo;) as of August 31, 2019 and 2018, the related consolidated statements
of operations, stockholders&rsquo; deficit and cash flows for each of the two years in the period ended August 31, 2019, and the
related notes (collectively referred to as the &ldquo;financial statements&rdquo;). In our opinion, the financial statements present
fairly, in all material respects, the financial position of the Company as of August 31, 2019 and 2018, and the results of its
operations and its cash flows for each of the two years in the period ended August 31, 2019, in conformity with accounting principles
generally accepted in the United States of America.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Explanatory Paragraph &ndash; Going Concern</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The accompanying consolidated financial
statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 4, the
Company has a significant working capital deficiency, has incurred significant losses and needs to raise additional funds to meet
its obligations and sustain its operations. These conditions raise substantial doubt about the Company's ability to continue as
a going concern. Management's plans in regard to these matters are also described in Note 4. The consolidated financial statements
do not include any adjustments that might result from the outcome of this uncertainty.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Basis for Opinion</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits.
We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (&quot;PCAOB&quot;)
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We conducted our audits in accordance with
the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have,
nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required
to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the
effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our audits included performing procedures
to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures
in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a
reasonable basis for our opinion.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%">
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; background-color: White; width: 50%">/s/
    Marcum <FONT STYLE="text-transform: uppercase">llp</FONT></TD>
    <TD STYLE="font: small-caps 10pt Times New Roman, Times, Serif; background-color: White">&nbsp;</TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Marcum <FONT STYLE="font-variant: small-caps">llp</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have served as the Company&rsquo;s auditor since 2017.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">New York, NY</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">December 13, 2019, except as to Note 16 as to which the date
is March 27, 2020 and Notes 3 and 13 as to which the date is May 19, 2020.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>ShiftPixy Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B><A NAME="a_013"></A>Consolidated Balance Sheets</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">August 31, <BR> 2019</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">August 31, <BR> 2018</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: center">ASSETS</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify">Current assets</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 74%; font-size: 10pt; font-weight: bold; text-align: justify; padding-left: 11.25pt">Cash</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">1,561,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">1,650,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-left: 11.25pt">Accounts receivable, net</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">86,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">36,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-left: 11.25pt">Unbilled accounts receivable</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1,402,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">547,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-left: 11.25pt">Deposit &ndash; workers&rsquo; compensation</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">235,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">83,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-left: 11.25pt">Prepaid expenses</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">349,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">445,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-left: 11.25pt">Other current assets</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">244,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">259,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-bottom: 1pt; padding-left: 11.25pt">Current assets of discontinued operations</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">10,154,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">7,427,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify">Total current assets</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">14,031,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">10,447,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-left: 11.25pt">Fixed assets, net</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">3,320,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2,990,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-left: 11.25pt">Deposits &ndash; workers&rsquo; compensation</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">754,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">110,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-left: 11.25pt">Deposits and other assets</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">124,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">121,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-bottom: 1pt; padding-left: 11.25pt">Non current assets of discontinued operations</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">5,567,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">2,134,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-bottom: 2.5pt">Total assets</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">23,796,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">15,802,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: center">LIABILITIES AND STOCKHOLDERS&rsquo; DEFICIT</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify">Current liabilities</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-left: 11.25pt">Accounts payable and other accrued liabilities</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">4,455,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">3,185,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-left: 11.25pt">Payroll related liabilities</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2,559,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">976,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-left: 11.25pt">Convertible notes, net</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">3,351,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">6,172,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-left: 11.25pt">Accrued workers&rsquo; compensation costs</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">235,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">15,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-left: 11.25pt">Default penalties accrual</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1,800,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">3,500,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-left: 11.25pt">Derivative liability</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">3,756,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-bottom: 1pt; padding-left: 11.25pt">Current liabilities of discontinued operations</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">16,032,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">8,808,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify">Total current liabilities</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">32,188,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">22,656,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify">Non-current liabilities</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-left: 11.25pt">Accrued workers&rsquo; compensation costs</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">525,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">45,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-bottom: 1pt; padding-left: 11.25pt">Non-current liabilities of discontinued operations</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">3,853,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">856,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-bottom: 1pt">Total liabilities</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">36,566,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">23,557,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify">Commitments and contingencies</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-left: 11.25pt">Stockholders&rsquo; deficit</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-left: 22.5pt">Preferred stock, 50,000,000 authorized shares; $0.0001 par value</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.125in; font-size: 10pt; font-weight: bold; text-align: justify; padding-left: 0.375in">&nbsp;Common stock, 750,000,000 authorized shares; $0.0001 par value; 907,048 and 721,295 shares issued as of August 31, 2019 and August 31, 2018</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-left: 22.5pt">Additional paid-in capital</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">32,505,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">18,468,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-left: 22.5pt">Treasury stock, at cost- 13,953 shares and 0 shares as of August 31, 2019 and August 31, 2018</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(325,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-bottom: 1pt; padding-left: 22.5pt">Accumulated deficit</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(44,950,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(26,223,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-bottom: 1pt; padding-left: 22.5pt">Total stockholders&rsquo; deficit</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(12,770,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(7,755,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-bottom: 2.5pt">Total liabilities and stockholders&rsquo; deficit</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">23,796,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">15,802,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The accompanying notes are an integral part of these consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>ShiftPixy Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><A NAME="a_014"></A><B>Consolidated Statements of Operations</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 10pt">&nbsp;<B>For the Years Ended </B></FONT></TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">August 31, <BR>
2019</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">August 31, <BR>
2018</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-indent: -0.125in; padding-left: 0.125in; width: 74%; font-size: 10pt; text-align: left">Revenues (gross billings of $39.3 million and $12.1 million less worksite employee payroll cost of $33.9 million and $10.3 million, respectively for the year ended)</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">5,423,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">1,819,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-bottom: 1pt">Cost of revenue</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">4,594,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">1,488,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">Gross profit</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">829,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">331,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left">Operating expenses:</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 12.1pt">Salaries, wages, and payroll taxes</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">4,670,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2.941,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; padding-left: 12.1pt">Commissions</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">200,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">93,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 12.1pt">Professional fees</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">3,918,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2,078,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 12.1pt">Software development</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1,209,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">3,828,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 12.1pt">General and administrative</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">6,502,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">4,189,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 24.2pt">Total operating expenses</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">16,499,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">13,129,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 24.2pt">Operating Loss</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(15,670,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(12,798,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left">Other (expense) income:</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 12.1pt">Interest expense</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(8,507,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(1,751,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 12.1pt">Loss on debt extinguishment</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(3,927,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 12.1pt">Change in fair value derivative and warrant liability</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2,569,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 12.1pt">Gain (Loss associated with note defaults, net</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">811,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(3,500,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 24.2pt">Total other (expense) income \</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(9,054,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(5,251,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;Loss from continuing operations</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(24,724,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(18,049,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">Total Income from discontinued operations, net of tax</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">5,997,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">1,226,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt; padding-left: 24.2pt">Net income (loss)</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">(18,727,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">(16,823,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">Net Income (Loss) per share, Basic and diluted</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left">Continuing operations</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(30.23</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(25.06</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">Discontinued operations</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">7.33</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">1.70</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">Net income (loss) per common share &ndash; Basic and diluted</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">(22.90</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">(23.36</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt">Weighted average common shares outstanding &ndash; Basic and diluted</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">817,720</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">720,253</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The accompanying notes are an integral part of these consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>ShiftPixy Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><A NAME="a_015"></A><B>Consolidated Statements of Stockholders&rsquo;
Deficit</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Common Stock</B></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Issued</B></P></TD><TD STYLE="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Additional</B></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Paid-In</B></P></TD><TD STYLE="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center">Treasury</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center">Accumulated</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Total</B></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Stockholders&rsquo;</B></P></TD><TD STYLE="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Shares</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Amount</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Capital</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">stock</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Deficit</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Deficit</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 34%; font-size: 10pt">Balance, August 31, 2017</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; font-size: 10pt; text-align: right">719,064</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 8%; font-size: 10pt; text-align: right">-</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 8%; font-size: 10pt; text-align: right">15,016,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 8%; font-size: 10pt; text-align: right">-</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 8%; font-size: 10pt; text-align: right">(9,400,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">)</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 8%; font-size: 10pt; text-align: right">5,616,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">Warrants exercised for cash</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">938</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">75,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">75,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left">Warrants issued with convertible debt</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">859,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">859,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">Intrinsic value due to beneficial conversion feature</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2,155,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2,155,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left">Stock-based compensation expense</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">200,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">200,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">Common stock issued for services rendered</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1,293</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">163,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">163,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">Net Loss</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(16,823,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(16,823,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt">Balance, August 31, 2018</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">721,295</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">18,468,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(26,223,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(7,755,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left">Warrants exercised for cash</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">6,688</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">660,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">660,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>

<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 34%; font-size: 10pt; text-align: left">Common stock issued for services rendered</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; font-size: 10pt; text-align: right">4,985</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; font-size: 10pt; text-align: right">-</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; font-size: 10pt; text-align: right">263,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; font-size: 10pt; text-align: right">-</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; font-size: 10pt; text-align: right">-</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; font-size: 10pt; text-align: right">263,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left">Stock-based compensation expense</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">369,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">369,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -0.125in; padding-left: 0.125in; font-size: 10pt; text-align: left">Reclass of derivative liability upon conversion of related convertible notes</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">12,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">12,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-indent: -0.125in; padding-left: 0.125in; font-size: 10pt; text-align: left">Common shares issued upon conversion of convertible notes and interest</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">105,776</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">8,904,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">8,904,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">Shares issued to induce debt conversion</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">68,304</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">3,829,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">3,829,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left">Treasury stock received for settlement of note receivable</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(325,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(325,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">Net Loss</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(18,727,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(18,727,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; padding-bottom: 1pt">Balance, August 31, 2019</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">907,048</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">32,505,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(325,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(44,950,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(12,770,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The accompanying notes are an integral part of these consolidated
financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>ShiftPixy Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B><A NAME="a_016"></A>Consolidated Statements of Cash Flows</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: justify">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>For the</B></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Years Ended</B></P></TD><TD STYLE="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; border-bottom: Black 1pt solid">OPERATING ACTIVITIES</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>August 31,</B></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>2019</B></P></TD><TD STYLE="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>August 31,</B></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>2018</B></P></TD><TD STYLE="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 74%; font-size: 10pt; text-align: justify">Net loss</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">(18,727,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">)</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">(16,823,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 1pt">Income from discontinued operations</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">5,997,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">1,226,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify">Net loss from continuing operations</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(24,724,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(18,049,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify">Adjustments to reconcile net loss to net cash used in operating activities:</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify; text-indent: 11.25pt">Depreciation and amortization</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">837,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">272,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify; text-indent: 11.25pt">Inducement loss on Note Conversions</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">3,829,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify; text-indent: 11.25pt">Excess of derivative liabilities over Notes at issuance</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2,588,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify; text-indent: 11.25pt">Amortization of note discount and financing costs</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">5,607,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">951,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify; text-indent: 11.25pt">Stock issued for services</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">263,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">163,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify; text-indent: 11.25pt">Stock based compensation</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">369,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">200,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-left: 11.25pt">Loss (Gain) associated with note defaults, net</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(811,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">3,500,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-left: 11.25pt">Interest paid in common shares</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">509,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-left: 11.25pt">Change in fair value derivative and warrant liability</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(2,569,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify">Changes in operating assets and liabilities</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-left: 22.5pt">Accounts receivable</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(50,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">289,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-left: 22.5pt">Unbilled accounts receivable</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(857,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(547,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-left: 22.5pt">Prepaid expenses</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">97,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(93,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-left: 22.5pt">Other current assets</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">15,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(243,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-left: 22.5pt">Deposits &ndash; workers&rsquo; compensation</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(794,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(124,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-left: 22.5pt">Deposits and other assets</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(3,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">6,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-left: 22.5pt">Accounts payable</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1,372,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">76,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-left: 22.5pt">Payroll related liabilities</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1,584,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">590,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-left: 22.5pt">Accrued workers&rsquo; compensation costs</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">700,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">60,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 1pt; padding-left: 22.5pt">Other current liabilities</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(25,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">1,677,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 1pt">Net cash used in continuing operating activities</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(12,063,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(11,352,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 1pt">Net cash provided by(used in) discontinued operating activities</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">9,978,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">1,815,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 1pt">Net cash used in operating activities</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(2,086,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(9,538,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify">INVESTING ACTIVITIES</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify">Purchase of fixed assets</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(1,167,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(3,019,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 1pt">Issuance of related party note receivable</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(325,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 1pt">Net cash used in investing activities</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(1,492,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(3,019,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify">FINANCING ACTIVITIES</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-left: 22.5pt">Proceeds from issuance of convertible notes</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">3,750,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">9,000,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-left: 22.5pt">Issuance costs related to convertible notes</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(485,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(765,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD></TR>

<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-left: 22.5pt">Repayment of convertible notes</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(436,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 1pt; padding-left: 22.5pt">Proceeds from exercise of warrants</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">660,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">75,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 1pt">Net cash provided by financing activities</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">3,489,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">8,310,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify">Net decrease in cash and cash equivalents</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(89,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(4,247,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 1pt">Cash - beginning of year</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">1,650,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">5,897,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 2.5pt">Cash - end of year</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">1,561,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">1,650,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify">SUPPLEMENTAL INFORMATION:</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify">Cash paid during the year for:</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify">Interest</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">226,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">133,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify">Income taxes</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">&ndash;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">&ndash;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify">Non-cash investing and financing activities:</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify">Conversion of debt and accrued interest into common stock</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">8,904,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">&ndash;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify">Additional principal to settle registration rights penalties</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">889,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">&ndash;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify">Discharge of related party note receivable for common shares</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">325,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">&ndash;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify">Allocated fair value of beneficial conversion feature</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">1,479,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">&ndash;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify">Allocated fair value of warrants included with convertible notes</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">2,271,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">&ndash;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify">Debt discount due to the intrinsic value of beneficial conversion feature</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">&ndash;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">924,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify">Debt discount due to warrants included with convertible notes</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">&ndash;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">859,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The accompanying notes are an integral part of these consolidated
financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>ShiftPixy. Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B><A NAME="a_017"></A>Notes to Consolidated Financial Statements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Note 1: Nature of Operations</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">ShiftPixy, Inc. (the &ldquo;Company&rdquo;)
was incorporated on June 3, 2015. The Company is a specialized staffing service provider that provides solutions for large contingent
part-time workforce demands, primarily in the restaurant, hospitality and maintenance service trades. The Company&rsquo;s focus
is on the restaurant industry in Southern California.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.4pt; text-align: justify">Both ShiftPixy, Inc and its wholly-owned
subsidiary, Shift Human Capital Management Inc. (&ldquo;SHCM&rdquo;), function as an employment administrative services (&ldquo;EAS&rdquo;)
provider including services such as administrative and processing services, performing functions in the nature of a payroll processor,
human resources consultant, administrator of workers&rsquo; compensation coverages and claims and provides workers compensation
coverage written in the names of the clients (as may be required by some states). The Company has built a human resources information
systems platform to assist in customer acquisition and hopes that this mechanism may become a way to onboard new clients into the
ShiftPixy Ecosystem when eligible clients recognize the value of the services provided by the parent Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.4pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Note 2: Summary of significant accounting
policies</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Basis of Presentation</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The consolidated financial statements of
the Company are prepared in conformity with accounting principles generally accepted in the United States of America (&ldquo;U.S.
GAAP&rdquo;) and the rules and regulations of the Securities and Exchange Commission (&ldquo;SEC&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Principles of Consolidation</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">The Company and its wholly-owned
subsidiary have been consolidated in the accompanying consolidated financial statements. All intercompany balances have been eliminated
in consolidation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Use of Estimates</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">The preparation of financial
statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Liability for legal contingencies;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Useful lives of software, property and equipment;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Assumptions made in valuing equity instruments;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Assumptions made in valuing embedded derivatives and freestanding equity-linked instrument classified
as liabilities;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Deferred income taxes and related valuation allowance; and</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&nbsp;</P>

<!-- Field: Split-Segment; Name: 16 -->

<P STYLE="font-size: 10pt; margin-top: 0; margin-bottom: 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Projected development of workers&rsquo; compensation claims.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Revenue and Direct Cost Recognition</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">The Company provides an array
of human resources and business solutions designed to help improve business performance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.05pt; text-align: justify">The Company accounts for its
EAS revenues in accordance with Accounting Standards Codification (&ldquo;ASC&rdquo;) 605-45, <I>Revenue Recognition, Principal
Agent Considerations</I>. EAS solutions revenue is primarily derived from the Company&rsquo;s gross billings, which are based on
(i) the payroll cost of the Company&rsquo;s worksite employees and (ii) a mark-up computed as a percentage of payroll costs for
payroll taxes and workers compensation premiums.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.05pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">The Company&rsquo;s revenues
are primarily attributable to fees for providing staffing solutions and EAS/HCM (&ldquo;Employment Administration Services&rdquo;/
&ldquo;Human Capital Management&rdquo;) services. The Company recognizes revenue when all of the following criteria are met: (i)
persuasive evidence of an arrangement exists; (ii) the services have been rendered to the customer; (iii) the sales price is fixed
or determinable, and (iv) collectability is reasonably assured. The Company enters into contracts with its clients for EAS services
based on a stated rate and price in the contract. Contracts generally have a term of 12 months but are cancellable at any time
by either party with 30 days&rsquo; notice. Contract performance obligations are satisfied as services are rendered and the term
between invoicing and when the performance obligations are satisfied is not significant. The Company does not have significant
financing components or significant payment terms for its customers and consequently has no material credit losses.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">Gross billings are invoiced to
each client concurrently with each periodic payroll of the Company&rsquo;s worksite employees which coincides with the services
provided and which is typically a fixed percentage of the payroll processed. Revenues, which exclude the payroll cost component
of gross billings and therefore consist solely of markup are recognized ratably over the payroll period as worksite employees perform
their service at the client worksite. Revenues that have been recognized but not invoiced are included in unbilled accounts receivable
on the Company&rsquo;s consolidated balance sheets and were $1,137,000 and $310,000 for the years ended August 31, 2019 and August
31, 2018, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">Consistent with the Company&rsquo;s
revenue recognition policy, direct costs do not include the payroll cost of its worksite employees. The cost of revenue associated
with the Company&rsquo;s revenue generating activities is primarily comprised of all other costs related to its worksite employees,
such as the employer portion of payroll-related taxes, employee benefit plan premiums and workers&rsquo; compensation insurance
costs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">The Company has evaluated its
revenue recognition policies in conjunction with its future expected business which may be migrating to a staffing business model.
For fiscal years 2018 and 2019, there were no revenues which should have been evaluated under a staffing business model. Such a
staffing business model would have included the payroll costs in revenues with a corresponding increase to cost of revenues for
payroll costs associated with staffing services.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company reviewed the costs associated
with acquiring its customers under ASC 340-10 <I>Other Assets and Deferred Costs</I> and determined that no such costs should be
capitalized. Costs relating to its customers are typically commissions paid as a percentage of some of the Company&rsquo;s revenue
components and are expensed as they are incurred because the terms of its contracts generally are cancellable by either party with
a 30-day notice. These costs are recorded in commissions in the Consolidated Statement of Operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Segment Reporting</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company operates as one reportable
segment under ASC 280, <I>Segment Reporting</I>. The Chief operating decision maker regularly reviews the financial information
of the Company at a consolidated level in deciding how to allocate resources and in assessing performances. The Company expects
to operate in multiple segments in the future as its business evolves and will evaluate these changes prospectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify"><B>Cash and Cash Equivalents</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.05pt; text-align: justify">The Company considers all highly
liquid investments with an original maturity of three months or less when purchased as cash equivalents. The Company had no such
investments as of August 31, 2019 or 2018.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.05pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Concentration of Credit Risk</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">The Company maintains cash with
a commercial bank, which is insured by the Federal Insurance Corporation (&ldquo;FDIC&rdquo;). At various times, the Company has
deposits in this financial institution in excess of the amount insured by the FDIC. The Company has not experienced any losses
related to these balances and believes its credit risk to be minimal. As of August 31, 2019, there were $2,354,000 of cash in excess
of the amounts insured by the FDIC.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.05pt; text-align: justify">The Company had no individual
client that represented more than 10% of its annual revenues for either fiscal years 2019 or 2018. Four clients represent 92% of
total accounts receivable at August 31, 2019, compared to four clients representing approximately 86% of its total accounts receivable
at August 31, 2018.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.05pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Fixed Assets</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Fixed assets are recorded at cost,
less accumulated depreciation and amortization. Expenditures for major additions and improvements are capitalized and minor
replacements, maintenance, and repairs are charged to expense as incurred. When fixed assets are retired or otherwise
disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included
in the results of operations for the respective period. Leasehold improvements are being amortized over the shorter of the
useful life or the initial lease term.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Fixed assets are recorded at cost and are
depreciated over the estimated useful lives of the related assets using the straight-line method. The estimated useful lives of
property and equipment for purposes of computing depreciation are as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" STYLE="width: 100%; margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt; width: 20%">Equipment:</TD>
    <TD STYLE="padding-left: 10pt; text-indent: -10pt; width: 80%">5 years</TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" BORDER="0" STYLE="width: 100%; margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt; width: 20%">Furnitures &amp; Fixtures:</TD>
    <TD STYLE="padding-left: 10pt; text-indent: -10pt; width: 80%">5 - 7 years</TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The amortization of these assets is included
in depreciation expense on the consolidated statements of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Computer Software Development</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">Software development costs relate
primarily to software coding, systems interfaces and testing of the Company&rsquo;s proprietary employer information systems and
are accounted for in accordance with Accounting Standards Codification (&ldquo;ASC&rdquo;) 350-40, Internal Use Software.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Internal software development costs are
capitalized from the time the internal use software is considered probable of completion until the software is ready for use. Business
analysis, system evaluation and software maintenance costs are expensed as incurred. The capitalized computer software development
costs are reported under the section fixed assets, net in the consolidated balance sheets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">The Company determined that there
were no material internal software development costs for the years ended August 31, 2018 or 2019. All capitalized software recorded
was purchased from third party vendors. Capitalized software development costs are amortized using the straight-line method over
the estimated useful life of the software, generally five years.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Impairment and Disposal of Long-Lived
Assets</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">The Company periodically evaluates
its long-lived assets for impairment in accordance with ASC 360-10, <I>Property, Plant, and Equipment</I>. ASC 360-10 requires
that an impairment loss be recognized for assets to be disposed of or held-for-use when the carrying amount of an asset is deemed
to not be recoverable. If events or circumstances were to indicate that any of its long-lived assets might be impaired, the Company
would assess recoverability based on the estimated undiscounted future cash flows to be generated from the applicable asset. In
addition, the Company may record an impairment loss to the extent that the carrying value of the asset exceeded the fair value
of the asset. Fair value is generally determined using an estimate of discounted future net cash flows from operating activities
or upon disposal of the asset.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Workers&rsquo; compensation</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Everest Program</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Up to July 2018, a portion of the Company&rsquo;s
workers&rsquo; compensation risk was covered by a retrospective rated policy, which calculates the final policy premium based on
the Company&rsquo;s loss experience during the term of the policy and the stipulated formula set forth in the policy. The Company
funds the policy premium based on standard premium rates on a monthly basis and based on the gross payroll applicable to workers
covered by the policy. During the policy term and thereafter, periodic adjustments may involve either a return of previously paid
premiums or a payment of additional premiums by the Company or a combination of both. If the Company&rsquo;s losses under that
policy exceed the expected losses under that policy, then the Company could receive a demand for additional premium payments.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company utilizes a third-party to estimate
its loss development rate, which is based primarily upon the nature of worksite employees&rsquo; job responsibilities, the location
of worksite employees, the historical frequency and severity of workers&rsquo; compensation claims, and an estimate of future cost
trends. Each reporting period, changes in the assumptions resulting from changes in actual claims experience and other trends are
incorporated into its workers&rsquo; compensation claims cost estimates. As of August 31, 2019, the Company classified $0.1 million
in short term accrued workers&rsquo; compensation and $0.1 million in long-term accrued workers&rsquo; compensation in the Company&rsquo;s
consolidated balance sheets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Sunz Program</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">Starting in July 2018, the Company&rsquo;s
workers&rsquo; compensation program for its worksite employees has been provided through an arrangement with United Wisconsin Insurance
Company (&ldquo;UWIC&rdquo;) and administered by Sunz. Under this program, the Company has financial responsibility for the first
$0.5 million of claims per occurrence. The Company provides and maintains a loss fund that will be used to pay claims and claim
related expenses. The workers&rsquo; compensation insurance carrier established monthly funding requirements comprised of premium
costs and funds to be set aside for payment of future claims (&ldquo;claim loss funds&rdquo;). The level of claim loss funds is
primarily based upon anticipated worksite employee payroll levels and expected worker&rsquo;s compensation loss rates, as determined
by the insurance carrier. Monies funded into the program for incurred claims expected to be paid within one year are recorded as
Deposit - workers&rsquo; compensation, a short-term asset, while the remainder of claim funds are included in deposits- workers&rsquo;
compensation, a long-term asset in its consolidated balance sheets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of August 31, 2019, the Company had
$0.2 million in deposit &ndash; workers&rsquo; compensation classified as a short-term asset and $0.8 million classified as a long-term
asset.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company&rsquo;s estimate of incurred
claim costs expected to be paid within one year is included in short-term liabilities, while its estimate of incurred claim costs
expected to be paid beyond one year is included in long-term liabilities on its consolidated balance sheets. As of August 31, 2019,
the Company had short term accrued workers&rsquo; compensation costs of $0.1 million and long-term accrued workers&rsquo; compensation
costs of $0.5 million.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">Because the Company bears the
financial responsibility for claims up to the level noted above, such claims, which are the primary component of its workers&rsquo;
compensation costs, are recorded in the period incurred. Workers&rsquo; compensation insurance includes ongoing health care and
indemnity coverage whereby claims are paid over numerous years following the date of injury. Accordingly, the accrual of related
incurred costs in each reporting period includes estimates, which takes into account the ongoing development of claims and therefore
requires a significant level of judgment. In estimating ultimate loss rates, the Company utilizes historical loss experience, exposure
data, and actuarial judgment, together with a range of inputs which are primarily based upon the worksite employee&rsquo;s job
responsibilities, their location, the historical frequency and severity of workers&rsquo; compensation claims, and an estimate
of future cost trends. For each reporting period, changes in the actuarial assumptions resulting from changes in actual claims
experience and other trends are incorporated into its workers&rsquo; compensation claims cost estimates. The estimated incurred
claims are based upon: (i) the level of claims processed during each quarter; (ii) estimated completion rates based upon recent
claim development patterns under the plan; and (iii) the number of participants in the plan.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Debt issuance Costs and Debt discount</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">Debt issuance costs and debt
discounts are being amortized over the lives of the related financings on a basis that approximates the effective interest method.
Costs and discounts are presented as a reduction of the related debt in the accompanying consolidated balance sheets. Portions
attributable to notes converted into equity are accelerated to interest expense upon conversion.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Beneficial Conversion Features</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The intrinsic value of a beneficial conversion
feature (&ldquo;BCF&rdquo;) inherent to a convertible note payable, which is not bifurcated and accounted for separately from the
convertible note payable and may not be settled in cash upon conversion, is treated as a discount to the convertible note payable.
This discount is amortized over the period from the date of issuance to the stated maturity using the straight-line method which
approximates the effective interest method. If the note payable is retired prior to the end of the contractual term, the unamortized
discount is expensed in the period of retirement to interest expense. In general, the BCF is measured by comparing the effective
conversion price, after considering the relative fair value of detachable instruments included in the financing transaction, if
any, to the fair value of the common shares at the commitment date to be received upon conversion.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Derivative financial instruments</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">When a Company issues debt that contains
a conversion feature, it first evaluates whether the conversion feature meets the requirement to be treated as a derivative: a)
the settlement amount is determined by one or more underlying, typically the price of the Company&rsquo;s stock, b) the settlement
amount is determined by one or more notional amounts or payments provisions or both, generally the number of shares upon conversion;
c) no initial net investment, which typically excludes the amount borrowed; and d) net settlement provision, which in the case
of convertible debt generally means the stock received upon conversion can be readily sold for cash. There are certain scope exceptions
from derivative treatment, but these typically exclude conversion features that provide for a variable number of shares. When ShiftPixy,
Inc., issues warrants to purchase its common stock, the Company evaluates whether they meet the requirements to be treated as derivative.
Generally, warrants would be treated as a derivative if the provisions of the warrants agreements create uncertainty as to a) the
number of shares to be issued upon exercise, or b) whether shares may be issued upon exercise. If the conversion feature within
convertible debt or warrants meet the requirements to be treated as a derivative, ShiftPixy estimates the fair value of the derivative
liability using the lattice-based option valuation model upon the date of issuance. If the fair value of the derivative liability
is higher than the face value of the convertible debt, the excess is immediately recognized as interest expense. Otherwise, the
fair value of the derivative is recorded as a liability with an offsetting amount recorded as a debt discount, which offsets the
carrying amount of the debt. The derivative liability is revalued at the end of each reporting period and any change in fair value
is recorded as a change in fair value in the consolidated statement of operations. The debt discount is amortized through interest
expense over the life of the debt. Derivative instrument liabilities and the host debt agreements are classified on the consolidated
balance sheets as current or non-current based on whether settlement of the derivative instrument could be required within twelve
months of the consolidated balance sheet date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The accounting treatment of derivative
financial instruments requires that the Company record the embedded conversion option and warrants at their fair values as of the
inception date of the agreement and at fair value as of each subsequent balance sheet date. Any change in fair value is recorded
as non-operating, non-cash income or expense for each reporting period at each balance sheet date. The Company reassesses the classification
of its derivative instruments at each balance sheet date. If the classification changes as a result of events during the period,
the contract is reclassified as of the date of the event that caused the reclassification.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Fair Value of Financial Instruments</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">FASB ASC 825, &ldquo;Financial
Instruments,&rdquo; requires entities to disclose the fair value of financial instruments, both assets and liabilities
recognized and not recognized on the balance sheet, for which it is practical to estimate fair value. FASB 825 defines fair
value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between
willing parties. At August 31, 2019 and August 31, 2018, the carrying value of certain financial instruments (cash, accounts
receivable and payable, and other financial instruments) approximates fair value due to the short-term nature of the
instruments. Convertible notes approximate fair value based on comparison of terms from similar instruments in the
marketplace.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company measures fair value under a
framework that utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.
The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level
1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of inputs which prioritize
the inputs used in measuring fair value are:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets
or liabilities in active markets that the Company has the ability to access.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Level 2: Inputs to the valuation methodology include:</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Quoted prices for similar assets or liabilities in active markets;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Quoted prices for identical or similar assets or liabilities in inactive markets</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Inputs other than quoted prices that are observable for the asset or liability;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Inputs that are derived principally from or corroborated by observable market data by correlation
or other means.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">If the asset or liability has a specified (contractual) term, the level 2 input must be observable
for substantially the full term of the asset or liability</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value
measurement.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">The Company did not have any
Level 1 or Level 2 assets and liabilities at August 31, 2019. The derivative liabilities associated with its March 2019 Convertible
Notes (see Note 9), consisted of conversion feature derivatives and warrants at August 31, 2019, are Level 3 fair value measurements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The table below sets forth a summary of
the changes in the fair value of the Company&rsquo;s derivative liabilities classified as Level 3 for the year ended August 31,
2019:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
<TD STYLE="white-space: nowrap; font-size: 10pt; text-align: justify">&nbsp;</TD>
<TD STYLE="white-space: nowrap; font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
<TD COLSPAN="2" STYLE="white-space: nowrap; font: 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid"><B>Conversion <BR>
</B> <B>Features</B></TD>
<TD STYLE="white-space: nowrap; padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
<TD STYLE="white-space: nowrap; font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
<TD COLSPAN="2" STYLE="white-space: nowrap; font: 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid"><B>Warrant <BR>
</B> <B>Liability</B></TD>
<TD STYLE="white-space: nowrap; padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
<TD STYLE="white-space: nowrap; font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
<TD COLSPAN="2" STYLE="white-space: nowrap; font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Total</TD>
<TD STYLE="white-space: nowrap; padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
<TD STYLE="font-size: 10pt; text-align: justify">Balance at August 31, 2018</TD>
<TD STYLE="font-size: 10pt">&nbsp;</TD>
<TD STYLE="font-size: 10pt; text-align: left">$</TD>
<TD STYLE="font-size: 10pt; text-align: right">-</TD>
<TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD>
<TD STYLE="font-size: 10pt">&nbsp;</TD>
<TD STYLE="font-size: 10pt; text-align: left">$</TD>
<TD STYLE="font-size: 10pt; text-align: right">-</TD>
<TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD>
<TD STYLE="font-size: 10pt">&nbsp;</TD>
<TD STYLE="font-size: 10pt; text-align: left">$</TD>
<TD STYLE="font-size: 10pt; text-align: right">-</TD>
<TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
<TD STYLE="width: 61%; font-size: 10pt; text-align: justify">Initial recognition</TD>
<TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
<TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD>
<TD STYLE="width: 10%; font-size: 10pt; text-align: right">2,421,000</TD>
<TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD>
<TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
<TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD>
<TD STYLE="width: 10%; font-size: 10pt; text-align: right">3,917,000</TD>
<TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD>
<TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
<TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD>
<TD STYLE="width: 10%; font-size: 10pt; text-align: right">6,338,000</TD>
<TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
<TD STYLE="font-size: 10pt; text-align: justify">Reclassification to equity</TD>
<TD STYLE="font-size: 10pt">&nbsp;</TD>
<TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD>
<TD STYLE="font-size: 10pt; text-align: right">(13,000</TD>
<TD STYLE="font-size: 10pt; text-align: left">)</TD>
<TD STYLE="font-size: 10pt">&nbsp;</TD>
<TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD>
<TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD>
<TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD>
<TD STYLE="font-size: 10pt">&nbsp;</TD>
<TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD>
<TD STYLE="font-size: 10pt; text-align: right">(13,000</TD>
<TD STYLE="font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
<TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 1pt">Change in fair value</TD>
<TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
<TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD>
<TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">444,000</TD>
<TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD>
<TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
<TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD>
<TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(3,013,000</TD>
<TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD>
<TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
<TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD>
<TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(2,569,000</TD>
<TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
<TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 2.5pt">Balance at August 31, 2019</TD>
<TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
<TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD>
<TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">2,852,000</TD>
<TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD>
<TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
<TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD>
<TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">904,000</TD>
<TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD>
<TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
<TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD>
<TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">3,756,000</TD>
<TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">At August 31, 2019, the Company
estimated the fair value of the conversion feature derivatives embedded in the convertible debentures based on weighted probabilities
of assumptions used in the Lattice-based option valuation model. The key valuation assumptions used consists, in part, of the price
of the Company&rsquo;s common stock, a risk free interest rate based on the average yield (1.76%) of a Treasury note and expected
volatility of the Company&rsquo;s common stock (100%) all as of the measurement dates, and the various estimated reset exercise
prices weighted by probability.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">At August 31, 2019, the Company estimated
the fair value of the warrant liabilities based on the Lattice-based option valuation model. The key valuation assumptions used
consists, in part, of the price of the Company&rsquo;s common stock, a risk-free interest rate based on the average yield of a
Treasury note (1.39%) and expected volatility of the Company&rsquo;s common stock (119%) all as of the measurement dates.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">When the Company changes its
valuation inputs for measuring financial assets and liabilities at fair value, either due to changes in current market conditions
or other factors, it may need to transfer those assets or liabilities to another level in the hierarchy based on the new inputs
used. The Company recognizes these transfers at the end of the reporting period that the transfers occur. For the periods ended
August 31, 2019 and August 31, 2018, there were no transfers of financial assets or financial liabilities between the hierarchy
levels.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Advertising Costs</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company expenses advertising costs
when incurred. Advertising costs incurred amounted to approximately $1.2 million and $0.5 million for the years ended August 31,
2019, and 2018, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Research and Development</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">During the years ended August
31, 2019 and 2018 the Company incurred research and development costs of approximately $2.3 million and $4.0 million, respectively.
All costs were related to internally developed and contracted software and related technology for the Company&rsquo;s HRIS system
and related mobile application. In addition, $0.9 million and $2.8 million of software costs were capitalized for the years ended
August 31, 2019 and 2018, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Income Taxes</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company accounts for income taxes pursuant
to Financial Accounting Standards Board (&ldquo;FASB&rdquo;) Accounting Standards Codification (&ldquo;ASC&rdquo;) 740, &ldquo;Income
Taxes.&rdquo; Under FASB ASC 740 deferred income taxes are provided on a liability method whereby deferred tax assets are recognized
for deductible temporary differences and operating loss carryforwards and deferred tax liabilities are recognized for taxable temporary
differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some
portion or all of the deferred tax assets will not be realized. The provision for income taxes represents the tax expense for the
period, if any, and the change during the period in deferred tax assets and liabilities. Deferred tax assets and liabilities are
adjusted for the effects of changes in tax laws and rates on the date of enactment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">FASB ASC 740 also provides criteria for
the recognition, measurement, presentation and disclosure of uncertain tax positions. Under FASB ASC 740, the impact of an uncertain
tax position on the income tax return may only be recognized at the largest amount that is more-likely-than-not to be sustained
upon audit by the relevant taxing authority.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Share-Based Compensation</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">At August 31, 2019 and 2018, the Company
has one stock-based compensation plan under which the Company may issue both share and stock option awards. The Company accounts
for this plan under the recognition and measurement principles of ASC 718, Compensation- Stock Compensation, which requires all
share-based payments to employees, including grants of employee stock options, to be recognized in the consolidated statements
of operations on their fair values. Share grants are valued at the closing market price on the date of issuance which approximates
fair value.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">For option grants, the grant
date fair value is determined using the Black-Scholes-Merton (&ldquo;Black-Scholes&rdquo;) pricing model. Option grants are typically
issued with vesting depending on a term of service. For all employee stock options granted, the Company recognizes expense over
the requisite service period over the employee&rsquo;s requisite service period (generally the vesting period of the equity grant).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">The Company&rsquo;s option pricing
model requires the input of highly subjective assumptions, including the expected stock price volatility and expected term. The
expected volatility is based on the historical volatility of the Company since its Initial Public Offering. Any changes in these
highly subjective assumptions significantly impact stock-based compensation expense.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Following the adoption of Accounting Standards
Update ASU 2016-09, the Company elected to account for forfeitures as they occur. Any compensation cost previously recognized for
an unvested award that is forfeited because of a failure to satisfy a service condition is reversed in the period of the forfeiture.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Earnings (Loss) Per Share</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company utilizes FASB ASC 260, &ldquo;Earnings
per Share.&rdquo; Basic loss per share is computed by dividing loss attributable to common stockholders by the weighted-average
number of common shares outstanding during the reporting period. Diluted loss per share is computed similar to basic loss per share
except that the denominator is increased to include additional common share equivalents available upon exercise of stock options
and warrants using the treasury stock method. Dilutive common share equivalents include the dilutive effect of in-the-money share
equivalents, which are calculated based on the average share price for each period using the treasury stock method, excluding any
common share equivalents if their effect would be anti-dilutive.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The table below shows earnings per common
share and diluted earnings per common share and reconciles the numerator and denominator of both earnings per common share calculations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: justify">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; font-size: 10pt; font-weight: bold; border-bottom: Black 1pt solid">For the year ended August 31,</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: justify">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2019</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2018</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify">Losses per common share:</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 74%; font-size: 10pt; font-weight: bold; text-align: justify; padding-left: 22.5pt">Loss from continuing operations</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">(24,724,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">)</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">(18,049,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; padding-bottom: 1pt; padding-left: 22.5pt">Income from continuing operations</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">5,997,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">1,226,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 2.5pt; padding-left: 11.25pt">Net loss allocated to common shareholders</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">(18,727,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">(16,823,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-left: 11.25pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-left: 11.25pt">Weighted average shares outstanding</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">817,720</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">720,253</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-left: 11.25pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-left: 11.25pt">Loss from continuing operations per common share</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(30.24</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">(25.06</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 2.5pt; padding-left: 11.25pt">Income from continuing operations per common share</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">7.34</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">1.70</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 2.5pt; padding-left: 11.25pt">Basic and Fully Diluted net loss per common share</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">(22.90</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">(23.36</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">)</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Securities that are excluded from the calculation
of weighted average dilutive common shares, because their inclusion would have been antidilutive are:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="white-space: nowrap; font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="white-space: nowrap; text-align: center; font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="white-space: nowrap; text-align: center; font-size: 10pt; font-weight: bold; border-bottom: Black 1pt solid">For the year<BR>
 ended<BR>
 August 31,&nbsp;2019</TD><TD STYLE="white-space: nowrap; text-align: center; padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="white-space: nowrap; text-align: center; font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="white-space: nowrap; text-align: center; font-size: 10pt; font-weight: bold; border-bottom: Black 1pt solid">For the year<BR>
 ended <BR>
August 31, 2018</TD><TD STYLE="white-space: nowrap; text-align: center; padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 74%; font-size: 10pt; text-align: justify">Options</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">50,749</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">33,594</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify">Senior Secured Convertible Notes (Note 9)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">491,868</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">100,402</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 1pt">Warrants</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">107,410</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">94,470</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 1pt">Total potentially dilutive shares</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">650,027</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">228,466</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Treasury Stock</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">Treasury stock represents shares
of common stock provided to the company in satisfaction of the related party advance, described in Note 12: Related Parties. Shares
provided are recorded at cost as treasury stock. The Company intends to retire all treasury stock outstanding as of August 31,
2019 in fiscal 2020. Any treasury stock retired is recorded to additional paid-in capital, limited to the amount previously credited
to additional paid-in capital, if any. Any excess is charged to accumulated deficit.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Revision of Financial Statements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During 2019, the Company determined that
it had improperly calculated the volatility of the Company&rsquo;s common stock, which had been used to calculate the relative
fair value of the warrants issued in connection with the June 2018 convertible notes. This resulted in an overstatement of the
net carrying amount of the convertible note by the understatement of the corresponding debt discount with the offset to additional
paid-in capital as of February 28, 2019. The Company assessed the materiality of the misstatements in accordance with Staff Accounting
Bulletin No. 99, &ldquo;Materiality&rdquo; and No. 108, &ldquo;Quantifying Misstatements&rdquo;, and concluded that this error
was not qualitatively material on the Company&rsquo;s consolidated balance sheet, statements of operations, statements of cash
flows, statement of stockholders&rsquo; deficit and net loss for the periods then ended.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The effect of this revision on the line
items within the Company&rsquo;s consolidated financial statements as of August 31, 2018, was as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: justify">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="10" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">August 31, 2018</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="white-space: nowrap; font-size: 10pt; text-align: center">&nbsp;</TD><TD STYLE="white-space: nowrap; text-align: center; font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="white-space: nowrap; text-align: center; font-size: 10pt; font-weight: bold; border-bottom: Black 1pt solid">As Previously<BR>
 Reported</TD><TD STYLE="white-space: nowrap; text-align: center; padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="white-space: nowrap; text-align: center; font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="white-space: nowrap; border-bottom: Black 1pt solid; font-size: 10pt; font-weight: bold; text-align: center">Adjustments</TD><TD STYLE="white-space: nowrap; text-align: center; padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="white-space: nowrap; text-align: center; font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="white-space: nowrap; border-bottom: Black 1pt solid; font-size: 10pt; font-weight: bold; text-align: center">As Restated</TD><TD STYLE="white-space: nowrap; text-align: center; padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 61%; font-size: 10pt; text-align: justify">Convertible note, net</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">7,156,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">(985,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">)</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">6,171,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify">Additional Paid-In Capital</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">17,234,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1,231,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">18,465,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 1pt">Accumulated deficit</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(25,977,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(246,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(26,223,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 2.5pt">Net Loss</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">(16,577,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">(246,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">(16,823,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 2.5pt">Net loss per share &ndash; Basic and diluted</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">(23.02</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">(23.36</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">)</TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Reclassifications</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Certain reclassifications have been made
to prior year&rsquo;s data to confirm to the current year&rsquo;s presentation. Such reclassifications had no impact on the Company&rsquo;s
financial condition, operating results, cash flows or stockholder&rsquo;s equity.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Significant Recent Accounting Standards</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">In May 2014, the FASB issued
ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which outlines a single comprehensive model for entities to
use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including
industry-specific guidance. The core principle of the revenue model is that &ldquo;an entity recognizes revenue to depict the transfer
of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled
in exchange for those goods or services.&rdquo; The standard provides enhancements to the quality and consistency of how revenue
is reported by companies, while also improving comparability in the financial statements of companies reporting using International
Financial Reporting Standards or U.S. GAAP. The new standard also will require enhanced revenue disclosures, provide guidance for
transactions that were not previously addressed comprehensively, and improve guidance for multiple-element arrangements. This accounting
standard becomes effective for the Company for reporting periods beginning after December 15, 2018, and interim reporting periods
within annual reporting periods beginning after December 15, 2019. Early adoption is permitted for annual reporting periods (including
interim periods) beginning after December 15, 2016. This new standard permits the use of either the retrospective or cumulative
effect transition method.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify"></P>

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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In March 2016, the FASB issued ASU No.
2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations. The purpose of this standard
is to clarify the implementation of guidance on principal versus agent considerations related to ASU 2014-09. The standard has
the same effective date as ASU 2014-09 described above.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In April 2016, the FASB issued ASU No.
2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which provides clarity
related to ASU 2014-09 regarding identifying performance obligations and licensing implementation. The standard has the same effective
date as ASU 2014-09 described above.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In May 2016, the FASB issued ASU 2016-12:
Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which provides narrow scope
improvements and practical expedients related to ASU 2014-09. The purpose of this standard is to clarify certain narrow aspects
of ASU 2014-09, such as assessing the collectability criterion, presentation of sales taxes, and other similar taxes collected
from customers, noncash considerations, contract modifications at transition, completed contracts are transition, and technical
correction. The standard has the same effective date as ASU 2014-09 described above.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In December 2016, the FASB issued ASU 2016-20:
Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers. The amendments in this standard affect
narrow aspects of guidance issued in ASU 2014-09. The standard has the same effective date as ASU 2014-09 described above. Topic
606 is effective for the company beginning with the fiscal year ending August 31, 2020. The Company has evaluated Topic 606 and
we plan to utilize the modified retrospective transition method upon the adoption of ASC 606. The Company is still in the process
of finalizing its evaluation for the adoption of ASC 606, however, no material difference is expected.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In February 2016, the FASB issued new accounting
guidance on leases ASU 2016-02, Leases. The new standard requires that a lessee recognize assets and liabilities on the balance
sheet for leases with terms longer than 12 months. The recognition, measurement and presentation of lease expenses and cash flows
by a lessee will depend on its classification as a finance or operating lease. The guidance also includes new disclosure requirements
providing information on the amounts recorded in the financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In March 2019, the FASB issued ASU 2019-01,
which added guidance to ASC 842 that is similar to the guidance in ASC 840-10-55-44 and states that, for lessors that are not manufacturers
or dealers, the fair value of the underlying asset is its cost, less any volume or trade discounts, as long as there isn&rsquo;t
a significant amount of time between acquisition of the asset and lease commencement. The amendments also clarify that lessors
in the scope of ASC 942 must classify principal payments received from sales-type and direct financing leases in investing activities
in the statement of cash flows. In addition, the amendments clarify that entities are not subject to the transition disclosure
requirements in ASC 250-10-50-3 related to the effect of an accounting change on certain interim period financial information.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In November 2019, the FASB issued ASU 2019-10,
which provides a one-year deferral of the effective dates of the new lease standard. The ASU is effective for fiscal years beginning
after December 15, 2020 and interim periods within fiscal years beginning after December 15, 2021. The Company is currently evaluating
the impact that this standard will have on its consolidated financial statement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In June 2018, the FASB issued ASU 2018-07,
which simplifies the accounting for nonemployee share-based payment transactions. The amendments specify that Topic 718 applies
to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor&rsquo;s
own operations by issuing share-based payment awards. The standard will be effective for the Company in the first quarter of fiscal
year 2020, although early adoption is permitted (but no sooner than the adoption of Topic 606). The Company does not expect that
the adoption of this ASU will have a significant impact on its consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In August 2018, the FASB issued ASU 2018-13,
Fair Value Measurement (Topic 820). The ASU eliminates such disclosures as the amount of and reasons for transfers between Level
1 and Level 2 of the fair value hierarchy. The ASU adds new disclosure requirements for Level 3 measurements. This ASU is effective
for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted
for any eliminated or modified disclosures. The Company is evaluating the effect of adopting this new accounting guidance to determine
the impact it may have on the Company&rsquo;s financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In November 2016, the FASB issued Accounting
Standards Update 2016-18, Statement of Cash Flows (Topic 230): Restricted cash (ASU 2016-18), which requires companies to include
amounts generally described as restricted cash and restricted cash equivalents in cash and cash equivalents when reconciling beginning-of-period
and end-of-period total amounts shown in the statement of cash flow. This guidance is effective for fiscal year beginning after
December 15, 2018 and early adoption is permitted. The Company does not expect the adoption of ASU 2016-18 to have a material impact
on the Company&rsquo;s financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Note 3 &ndash; Discontinued Operations</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On January 3, 2020, the Company
executed an asset purchase agreement assigning client contracts comprising approximately 88% of its quarterly revenue through
the date of the transaction, including 100% of its existing professional employer organization (&ldquo;PEO&rdquo;) business
effective as of December 31, 2019 and the transfer of $1.5 million of working capital assets, including cash balances and
certain operating assets associated with the assigned client contracts included in the agreement (the &ldquo;Asset
Sale&rdquo;). The following discloses the amounts disclosed as discontinued operations in the recast financial statements</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In accordance with the provisions of ASC
205-20, <I>Presentation of Financial Statements</I>, we have separately reported the assets and liabilities of the discontinued
operations in the consolidated balance sheets. The assets and liabilities have been reflected as discontinued operations in the
consolidated balance sheets as of August 31, 2019 and 2018 and consist of the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="white-space: nowrap; font-size: 10pt">&nbsp;</TD><TD STYLE="white-space: nowrap; font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="white-space: nowrap; font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">August 31, 2019</TD><TD STYLE="white-space: nowrap; padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="white-space: nowrap; font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="white-space: nowrap; font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">August 31, 2018</TD><TD STYLE="white-space: nowrap; padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify">Cash</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 74%; font-size: 10pt; text-align: justify">Accounts receivable and unbilled account receivable</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">8,261,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">5,721,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify">Prepaid expenses and other current assets</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">171,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">118,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 1pt">Deposits &ndash; workers&rsquo; compensation</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">1,722,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">1,588,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 1pt; padding-left: 11.25pt">Total current assets</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">10,154,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">7,427,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify">Fixed assets, net</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">40,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">42,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 1pt">Deposits &ndash; workers&rsquo; compensation</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">5,527,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">2,091,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 1pt; padding-left: 11.25pt">Total assets</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">15,721,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">9,560,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify">Accounts payable and other current liabilities</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">457,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">18,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify">Payroll related liabilities</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">13,853,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">8,501,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 1pt">Accrued workers&rsquo; compensation cost</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">1,722,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">290,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 1pt; padding-left: 13.5pt">Total current liabilities</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">16,032,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">8,808,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 1pt">Accrued workers&rsquo; compensation cost</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">3,853,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">856,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 1pt; padding-left: 11.25pt">Total liabilities</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">19,885,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">9,664,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 1pt; padding-left: 11.25pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 1pt; padding-left: 11.25pt">Net assets/(liability)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(4,164,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(104,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In accordance with the provisions of ASC 205-20, we have separately
reported the results of operations from in the results of continuing operations in the consolidated statements of operations. The
results of operations from discontinued operations for the years ended August 31, 2019 and 2018, have been reflected as discontinued
operations for the years ended December 31, 2019 and 2018, and consist of the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 10pt">&nbsp;<B>For the Year Ended </B></FONT></TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="white-space: nowrap; font-size: 10pt">&nbsp;</TD><TD STYLE="white-space: nowrap; font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="white-space: nowrap; font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">August 31, 2019</TD><TD STYLE="white-space: nowrap; padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="white-space: nowrap; font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="white-space: nowrap; font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">August 31, 2018</TD><TD STYLE="white-space: nowrap; padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 74%; font-size: 10pt; text-align: left">Revenues (gross billings of $313.3 million and $210.3 million less worksite employee payroll cost of $265.3 million and $177.2 million, respectively for the year ended)</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">48,013,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">33,139,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; padding-bottom: 1pt">Cost of revenue</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">36,452,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">27,970,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">Gross profit (loss)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">11,561,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">5,169,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left">Operating expenses:</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-left: 12.1pt">Salaries, wages and payroll taxes</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">3,032,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2,442,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; padding-bottom: 1pt; padding-left: 12.1pt">Commissions</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">2,532,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">1,501,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 24.2pt">Total operating expenses</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">5,564,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">3,943,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;Operating income from discontinued operations</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">5,997,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">1,226,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 24.2pt">Provision for income tax expense from discontinued operations</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 2.5pt; padding-left: 24.2pt">Net income from discontinued operations</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">5,997,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">1,226,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company utilized fully reserved net
operating loss carryforwards of approximately $7,223,000 to offset income from discontinuing operations as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 10pt">&nbsp;<B>For the Year Ended </B></FONT></TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="white-space: nowrap; font-size: 10pt">&nbsp;</TD><TD STYLE="white-space: nowrap; font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="white-space: nowrap; font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">August 31, 2019</TD><TD STYLE="white-space: nowrap; padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="white-space: nowrap; font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="white-space: nowrap; font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">August 31, 2018</TD><TD STYLE="white-space: nowrap; padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left">Provision of income tax expense:</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 74%; font-size: 10pt; text-align: left">Federal tax expense</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">1,260,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">265,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">State tax expense</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">540,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">92,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;Total tax expense</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1,800,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">357,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt">&nbsp;Tax benefit for utilization of tax loss carryforwards</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(1,800,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(357,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: left; padding-bottom: 1pt; padding-left: 24.2pt">Provision for income tax expense from discontinued operations</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">--</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">--</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Note 4: Going Concern</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of August 31, 2019, the Company had
cash of $1.6 million and a working capital deficiency of $15.9 million. During the year ended August 31, 2019, the Company used
approximately $2.1 million of cash in its operations, of which $9.5 million was used in continuing operations and $7.4 million
was provided by discontinued operations. Cash used in continuing operations consisted of a net loss of $24.7 million, reduced by
net non-cash charges of $10.6 million and working capital changes of $4.6 million. Cash provided by discontinued operations consisted
of income of $6.0 million and $1.4 million in working capital changes. For the most recent quarter ending August 31, 2019, cash
flows used in operations were $0.5 million. The Company has incurred recurring losses resulted in an accumulated deficit of $45
million as of August 31, 2019. These conditions raise substantial doubt as to the Company&rsquo;s ability to continue as going
concern within one year from issuance date of the financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The ability of the Company to continue
as a going concern is dependent upon generating profitable operations in the future and obtaining additional funds by way of public
or private offering to meet the Company&rsquo;s obligations and repay its liabilities when they become due. The Company has a recurring
revenue business model that generated $12.4 million of gross profit for the year of which $3.6 million is attributable to the fourth
fiscal quarter. Approximately 12% or of the recurring business gross profit represents continuing operations. On an annualized
basis, a projected twelve-month gross profit based solely on the fourth quarter would be $14.4 million in total or approximately
$1.7 million from continuing operations. For the year ended August 31, 2019, the Company had $17.0 million of continuing operating
expenses, of which $1.4 million was non-cash depreciation and share based compensation. Of the remaining $15.6 million, $4.9 million
was for software development and marketing related spending for the HRIS and mobile application systems, including licensing and
related salaries and consulting fees, with an additional $1.4 million for legal services, settlements and costs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company&rsquo;s plans and expectations
for the next 12 months include raising additional capital to help fund expansion of its operations, including the continued development
and support of its IT and HR platform and settling its outstanding debt as it comes due. The Company engaged an investment banking
firm to assist the Company in (i) preparing information materials, (ii) advising the Company concerning the structure, price and
conditions and (iii) organizing the marketing efforts with potential investors in connection with a financing transaction. With
the added development and marketing investment into the mobile application, the Company anticipates the need to raise additional
capital coupled with using its actual cash position and continue leveraging its payables until it reaches breakeven at about 25,000
worksite employees.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Historically, the Company&rsquo;s principal
source of financing has come through the sale of its common stock and issuance of convertible notes. The Company successfully completed
an Initial Public Offering (IPO) on NASDAQ on June 29, 2017, raising a total of $12 million ($10.9 million net of costs). In June
2018, the Company completed a private placement of 8% senior secured convertible notes to institutional investors raising $9 million
of gross proceeds ($8.4 million net of costs). In March 2019, the Company completed a private placement of senior secured notes
to institutional investors raising $3.75 million ($3.3 million net of costs).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.05pt; text-align: justify">The Company believes that its
current cash position, along with its revenue growth and the financing from potential institutional investors will be sufficient
to fund its operations for at least a year from the date these financials are available. If these sources do not provide the capital
necessary to fund the Company&rsquo;s operations during the next twelve months from the date of this report, the Company may need
to curtail certain aspects of its operations or expansion activities, consider the sale of its 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 terms advantageous to the Company or that any such additional financing would be available to the Company. As such, these conditions
raise substantial doubt as to its ability to continue as a going concern within one year from the issuance date of the financial
statements. These consolidated financial statements do not include any adjustments from this uncertainty.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.05pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Note 5: Accounts Receivable</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">Accounts receivables, which represent
outstanding gross billings to clients, are reported net of allowance for doubtful accounts. The Company establishes an allowance
for doubtful accounts based on management&rsquo;s assessment of the collectability of specific accounts and by making a general
provision, based on its past experiences, for other potentially uncollectible amounts. The provision for doubtful accounts during
the fiscal years ending August 31, 2019 and 2018 was not material.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">The Company makes an accrual
at the end of each accounting period for the obligations associated with the earned but unpaid wages of its worksite employees
and for the accrued gross billings associated with such wages. These accruals are included in unbilled accounts receivable. The
Company generally requires clients to pay invoices for service fees no later than 1 day prior to the applicable payroll date. As
such the Company generally does not require collateral.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify"></P>

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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<!-- Field: Split-Segment; Name: 17 -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Note 6: Fixed Assets</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Fixed assets consisted of the following
at August 31, 2019 and 2018:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; background-color: white; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>August 31,</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>2019</B></P></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>August 31,</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>2018</B></P></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Equipment</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">282,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">154,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Furniture &amp; fixtures</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">412,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">329,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Software </FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">3,737,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">2,797,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Leasehold improvements</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">41,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">41,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">4,472,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">3,321,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Accumulated depreciation &amp; amortization</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">(1,152,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">(331,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Fixed assets, net</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">3,320,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">2,990,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Depreciation and amortization expense for
the years ended August 31, 2019 and 2018, was $839,000 and $274,000, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">Software consists primarily of
customized software purchased from third party providers and which is incorporated into the Company&rsquo;s HRIS platform and related
mobile application.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Information related to capitalized software
costs is as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; background-color: white; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>August 31,</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>2019</B></P></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>August 31,</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>2018</B></P></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Software costs capitalized</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">3,737,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">2,797,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Software costs amortized</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(904,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(190,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Software costs, Net</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">2,833,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">2,607,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company has evaluated certain development
costs of its software solution in accordance with ASC Topic 350-40, Internal Use Software, which outlines the stages of computer
software development and specifies when capitalization of costs is required. Projects that are determined to be in the development
stage are capitalized and amortized over their useful lives of five years. Projects that are determined to be within the preliminary
stage are expensed as incurred. For the years ended August 31, 2019 and 2018 no internally developed software was capitalized.
A substantial portion of the capitalized software is attributable to a third party with whom the Company is in litigation. The
Company evaluated the asset value as of August 31, 2019 and determined that no asset impairment is required for this customized
third party software.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Amortization expense included in the depreciation
and amortization expense disclosed above for the years ended August 31, 2019 and 2018, was $714,000 and $190,000, respectively.
The weighted average remaining life of amortizable software assets was 3.56 years as August 31, 2019. Amortization expense for
capitalized software is expected to approximate the following for each of the next five fiscal years and thereafter:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; background-color: white; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Amount</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">2020</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify"><FONT STYLE="font-size: 10pt">$&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">814,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">2021</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">814,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">2022</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">744,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">2023</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">458,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">2024</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">3,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Note 7: Workers Compensation</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">The Company has two workers compensation
programs in effect during the years ended August 31, 2019 and 2018. The Everest program covered corporate and worksite employees
from July 1, 2017 until June 30, 2018 and the SUNZ program covered corporate and worksite employees since July 1, 2018. The following
table summarizes the workers&rsquo; compensation deposit for the years ended August 31, 2019 and 2018:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; background-color: white; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center; background-color: white"><B>Everest </B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center; background-color: white"><B>Program</B></P></TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center; background-color: white"><B>SUNZ</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center; background-color: white"><B>&nbsp;Program</B></P></TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Total</B></FONT></TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Workers&rsquo; Comp Deposit at August 31, 2017</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 0%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 0%; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 8%; text-align: right"><FONT STYLE="font-size: 10pt">2,335,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 0%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 0%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify"><FONT STYLE="font-size: 10pt">&nbsp;$</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 8%; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 0%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 0%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 0%; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 8%; text-align: right"><FONT STYLE="font-size: 10pt">2,335,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 0%; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Premiums paid</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">(819,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">(819,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Paid in deposits</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">2,386,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">2,386,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Claim losses</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">(28,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">(28,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Workers&rsquo; Comp Deposit at August 31, 2018</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">1,516,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">2,358,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">3,874,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Premiums paid</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">(144,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">(144,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>

<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Paid in deposits</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">7,730,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">7,730,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Claim losses</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">(149,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">(1,850,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">(1,999,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Deposit refund</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(1,223,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(1,223,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Workers&rsquo; Comp Deposit at August 31, 2019</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">8,238,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">8,238,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Less Current Amount</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(1,957,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(1,957,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Long Term Balance at August 31, 2019</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">6,281,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">6,281,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following reconciles the workers comp
deposits for continuing and discontinued operations as of August 31, 2018 and 2019:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Everest </B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Program</B></P></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SUNZ</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;Program</B></P></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Total</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="width: 58%; text-align: justify"><FONT STYLE="font-size: 10pt">Workers&rsquo; comp deposit at August 31, 2018</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 11%; text-align: right"><FONT STYLE="font-size: 10pt">1,516,000</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">&nbsp;$</FONT></TD>
    <TD STYLE="width: 11%; text-align: right"><FONT STYLE="font-size: 10pt">2,358,000</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 11%; text-align: right"><FONT STYLE="font-size: 10pt">3,874,000</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-bottom: 1pt; text-align: justify"><FONT STYLE="font-size: 10pt">Workers&rsquo; comp deposit from discontinued operations (See Note 3)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(1,441,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(2,240,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(3,681,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding-bottom: 1pt; text-align: justify"><FONT STYLE="font-size: 10pt">Workers&rsquo; comp deposit from continuing operations</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">75,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">118,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">193,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-bottom: 1pt; text-align: justify"><FONT STYLE="font-size: 10pt">Less Current Amount</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(32,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(51,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(83,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding-bottom: 2.5pt; text-align: justify"><FONT STYLE="font-size: 10pt">Long Term Balance at August 31, 2018</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">43,000</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">&nbsp;$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">67,000</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">110,000</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-bottom: 2.5pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Everest </B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Program</B></P></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SUNZ</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;Program</B></P></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Total</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Workers&rsquo; comp deposit at August 31, 2019</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">&nbsp;$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">8,238,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">8,238,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-bottom: 1pt; text-align: justify"><FONT STYLE="font-size: 10pt">Workers&rsquo; comp deposit from discontinued operations (See Note 3)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(7,249,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(7,249,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding-bottom: 1pt; text-align: justify"><FONT STYLE="font-size: 10pt">Workers&rsquo; comp deposit from continuing operations</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">989,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">989,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-bottom: 1pt; text-align: justify"><FONT STYLE="font-size: 10pt">Less Current Amount</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(235,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(235,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding-bottom: 2.5pt; text-align: justify"><FONT STYLE="font-size: 10pt">Long Term Balance at August 31, 2019</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">&nbsp;$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">754,000</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">754,000</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following table summarizes the accrued
workers&rsquo; compensation liability for the years ended August 31, 2019 and 2018:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; background-color: white; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>Everest </B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>Program</B></P></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>SUNZ </B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>Program</B></P></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Total</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Workers&rsquo; Comp Liability at August 31, 2017</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify"><FONT STYLE="font-size: 10pt">$&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify"><FONT STYLE="font-size: 10pt">$&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify"><FONT STYLE="font-size: 10pt">$&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Claim loss development</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">572,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">662,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">1,234,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Paid in losses</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">(28,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">(28,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Workers&rsquo; Comp Liability at August 31, 2018</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">572,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">634,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">1,206,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Claim loss development</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">7,129,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">7,129,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Paid in losses</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">(149,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">(1,850,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">(1,999,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Workers&rsquo; Comp Liability at August 31, 2019</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">423,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">5,913,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">6,336,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Less Current Amount</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(159,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(1,798,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(1,957,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Long Term Balance at August 31, 2019</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">264,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">4,115,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">4,379,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following reconciles the workers comp
liabilities for continuing and discontinued operations as of August 31, 2018 and 2019:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; background-color: white; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>Everest </B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>Program</B></P></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>SUNZ</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>&nbsp;Program</B></P></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Total</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Workers&rsquo; comp liability at August 31, 2018</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">572,000</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">$634,000</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">1,206,000</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 1pt; text-align: justify"><FONT STYLE="font-size: 10pt">Workers&rsquo; comp liability from discontinued operations (See Note 3)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(544,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(602,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(1,145,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding-bottom: 1pt; text-align: justify"><FONT STYLE="font-size: 10pt">Workers&rsquo; comp liability from continuing operations</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">28,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">32,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">60,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 1pt; text-align: justify"><FONT STYLE="font-size: 10pt">Less Current Amount</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(7,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(8,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(15,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding-bottom: 2.5pt; text-align: justify"><FONT STYLE="font-size: 10pt">Long Term Balance at August 31, 2018</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">21,000</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">24,000</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">45,000</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>Everest </B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>Program</B></P></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>SUNZ</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>&nbsp;Program</B></P></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Total</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Workers&rsquo; comp liability at August 31, 2019</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">423,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">$5,913,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">6,336,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 1pt; text-align: justify"><FONT STYLE="font-size: 10pt">Workers&rsquo; comp liability from discontinued operations (See Note 3)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(372,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(5,204,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(5,576,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding-bottom: 1pt; text-align: justify"><FONT STYLE="font-size: 10pt">Workers&rsquo; comp liability from continuing operations</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">51,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">709,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">760,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 1pt; text-align: justify"><FONT STYLE="font-size: 10pt">Less Current Amount</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(16,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(219,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(235,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding-bottom: 2.5pt; text-align: justify"><FONT STYLE="font-size: 10pt">Long Term Balance at August 31, 2019</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">35,000</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">490,000</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">525,000</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify"><B>Note 8: Accrued Payroll and
Related Liabilities</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Accrued payroll liabilities consisted of
the following at August 31, 2019 and 2018:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>August 31,</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>2019</B></P></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>August 31,</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>2018</B></P></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="width: 72%; text-align: justify"><FONT STYLE="font-size: 10pt">Accrued Payroll</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 11%; text-align: right"><FONT STYLE="font-size: 10pt">899,000</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 11%; text-align: right"><FONT STYLE="font-size: 10pt">459,000</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Accrued Payroll Taxes</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">1,297,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">230,000</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding-bottom: 1pt; text-align: justify"><FONT STYLE="font-size: 10pt">Corporate employee accrued paid time off</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">363,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">287,000</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-bottom: 2.5pt; text-align: justify"><FONT STYLE="font-size: 10pt">Accrued Payroll and related liabilities</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">2,559,000</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">976,000</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">Accrued payroll and accrued payroll
taxes represent payroll liabilities associated with its client worksite employees as well as corporate employees of the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify"><B>Note 9: Senior Secured Convertible
Notes Payable (in default)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">The Company has issued three
series of senior secured convertible notes payable. In general, each series is convertible into common shares of the Company. Senior
Secured Convertible Notes Payable consist of the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; background-color: white; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>August 31,</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>August 31,</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>2019</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>2018</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Senior Secured Convertible notes, Principal</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">6,808,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">10,000,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Less debt discount and deferred financing costs</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(3,457,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(3,829,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Total outstanding convertible notes, net</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">3,351,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">6,171,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Less current portion of convertible notes payable</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">3,351,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(6,171,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Long-term convertible notes payable</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">The following table rolls forward
the Convertible Notes Payable balances from August 31, 2018 to August 31, 2019:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; background-color: white; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>Gross</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>&nbsp;Principal</B></P></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>Deferred</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>&nbsp;Financing
        </B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>Costs</B></P></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>Note </B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>Discount</B></P></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Net</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Balance at August 31, 2018</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">10,000,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify"><FONT STYLE="font-size: 10pt">&nbsp;$</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">(617,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify"><FONT STYLE="font-size: 10pt">&nbsp;$</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">(3,212,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">6,171,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Issuance of Notes Payable</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">5,639,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">(485,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">(4,750,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">404,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Conversion of Principal into Equity</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">(8,395,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">(8,395,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Amortization of Interest Expense</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">758,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">4,849,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">5,607,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Repayment of Principal in cash</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(436,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(436,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Balance at August 31, 2019</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">6,808,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt">&nbsp;$</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(344,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt">&nbsp;$</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(3,113,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">3,351,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Less Current Amount</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(6,808,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">344,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">3,113,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(3,351,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Long Term Balance at August 31, 2019</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: justify"><FONT STYLE="font-size: 10pt">&nbsp;$</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: justify"><FONT STYLE="font-size: 10pt">&nbsp;$</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following table outlines the gross
principal balance rollforward for each series from August 31, 2018 to August 31, 2019. Each series is described in further detail
below.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; background-color: white; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>June 2018 </B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>Notes</B></P></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="white-space: nowrap; border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>December 2018<BR>
Notes</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>March 2019</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>&nbsp;Notes</B></P></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Total</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Gross Balance at August 31, 2018</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">10,000,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify"><FONT STYLE="font-size: 10pt">&nbsp;$</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify"><FONT STYLE="font-size: 10pt">$&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">10,000,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Issuance of Notes Payable</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">889,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">4,750,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">5,639,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Repayment of Principal in cash</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">(436,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">(436,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Conversion of Principal into Equity</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(8,098,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(22,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(275,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(8,395,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Gross Balance at August 31, 2019</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">1,466,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">&nbsp;$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">867,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">4,475,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">6,808,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Less Discount and Debt Issuance Costs:</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Debt Issuance Costs</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">(27,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">(317,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">(344,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Deferred Financing Costs</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(5,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(3,108,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(3,113,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Carrying Balance at August 31, 2019</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">1,434,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt">&nbsp;$</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">867,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt">$&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">1,050,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">3,351,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Less Current Amount</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(1,434,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(867,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(1,050,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(3,351,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Long Term Balance at August 31, 2019</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: justify"><FONT STYLE="font-size: 10pt">&nbsp;$</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: justify"><FONT STYLE="font-size: 10pt">&nbsp;$</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During the years ended August 31, 2019
and 2018 the Company amortized $5,607,000 and $951,000, respectively, to interest expense from the combined amortization of deferred
financing costs and note discounts recorded at issuance for the June 2018 and March 2019 Notes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<!-- Field: Split-Segment; Name: 19 -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">During the year ended August
31, 2019, investors converted $8,395,000 of principal and $509,000 of interest expense into approximately 172,500 shares of common
stock of the company. The Company has been converting the convertible notes in its shares of common stock at a fifteen percent
(15%) discount to the lowest volume weighted average price (&ldquo;VWAP&rdquo;) whereas the terms of the agreement state that such
discount to the original conversion price of $99.60 should have been initiated on or after the maturity date of the convertible
notes or September 4, 2019. The accounting standards require the recognition through earnings of an inducement charge equal to
the fair value of the consideration delivered in excess of the consideration issuable under the original conversion terms. Included
in the 172.500 shares issued for the 2019 conversions were approximately 67,500 shares valued at $3.9 million on the date of issuance
at fair value and issued related to consideration delivered in excess of the consideration issuable under the original conversion
terms. This resulted in a non-cash charge of $3.9 million for the year ended August 31, 2019 recorded as loss on debt extinguishment
in the statement of operations. There were no conversions of convertible notes during fiscal 2018.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">On June 3, 2019, one of its institutional
investors filed claim in the United States District Court, Southern District of New York seeking preliminary injunctive relief
against the Company to immediately deliver one million shares of the Company&rsquo;s common stock and to honor all future conversion
requests duly submitted in accordance with the terms of the notes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">On June 7, 2019, and June 10,
2019, the Company received notices from two of its institutional investors that the Company was in default due to missed principal
and interest payments under the terms of the Notes. On June 27, 2019, the Company reported that is has informed its convertible
note holders that it will cease honoring conversion requests of the 2018 and 2019 Notes forcing a voluntary default of these instruments.
The Company is pursuing a renegotiation and amendment of these instruments in an effort to avoid litigation. The Company is requesting
to amend the terms of the notes to remove the conversion features and revise the cash amortization, among other items.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">See also Note 14 for litigation
related to the Convertible Notes Payable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">From June 10, 2019 until year
end, the Company has accrued interest at the default interest rate for all note series representing approximately $0.3 million
of additional interest payable. The Company has accrued an additional $1.8 million to accrued default liabilities as of August
31, 2019 and charged to a loss on note default on the statement of operations for the year ending August 31, 2019, representing
potential liability associated with the default of the notes payable for default premium, potential liquidating damages, and other
costs associated with the notes in default.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>June 2018 Senior Convertible Notes
(in default)</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">On June 4, 2018, the Company
issued $10 million of senior convertible notes (&ldquo;June 2018 Notes&rdquo;) to institutional investors with an original issue
discount of $1 million for a purchase price of $9 million. The notes bear interest at a rate of 8%, with one year&rsquo;s interest
guaranteed, and have a maturity date of September 4, 2019. The Notes remain outstanding as of November 22, 2019. The company received
cash proceeds of $8.4 million representing the $9 million purchase price, reduced by approximately $0.6 million of financing costs
directly related to the issuance of the June 2018 Notes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">Concurrent with the sale of the
June 2018 Notes, the Company granted warrants to purchase 25,100 shares of common stock to its institutional investors and warrants
to purchase 5,422 shares of common stock to its investment banker as placement fees, at an exercise price of $99.60, subject to
down round price protection adjustment, as defined in the agreements. The warrants were valued at the date of issuance using the
lattice-based option pricing model at $86.80 per warrant. Both the June 2018 Notes and the related warrants were issued with registration
rights, whereby the Company was obligated to register the shares underlying the June 2018 Notes or was subject to registration
rights penalties. During the year ended August 31, 2018, the Company accrued a loss of $3,500,000 for penalties associated with
the registration rights penalties. With the issuance of the December 2018 Notes described below, the Company reduced the loss accrual
to $889,000 and recorded a gain of $2,611,000 to the statement of operations during the year ended August 31, 2019. Combined with
the $1.8 million loss described above for the 2019 default loss estimate resulted in a net gain of $811,000 for the year ended
August 31, 2019.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The terms of June 2018 notes are summarized
as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Term: September 4, 2019;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Coupon: 8%; Default interest rate: 18%;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Convertible at the option of the holder at any time;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Conversion price is initially set at $99.60 but subject to down round price protection. After maturity,
the conversion price will be set subsequently at the lesser of the then conversion price and 85% of the volume weighted average
price for the trading date immediately prior to the application conversion date; and</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Monthly amortization of principal either in cash at a 10% premium or in stock, subject to equity
conditions, at a 15% discount to the lowest volume weighted average price, at the option of the Company.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Debt issuance costs</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company paid approximately $0.8 million
of incremental issuance costs directly attributable to the issuance of the senior secured convertible notes. These costs were recorded
as a discount to the convertible notes and they are amortized straight line over the term to interest expense, which approximates
the effective interest method.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I>Debt Discount</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">During the year ended August
31, 2018, the Company recorded an aggregate debt discount of $4.1 million for the June 2018 Notes. The debt discount includes an
initial $1 million resulting from the original issuance discount on the convertible notes and an initial $2.2 million resulting
from the fair value of the warrants and $0.9 million resulting from the beneficial conversion feature on the non-detachable conversion
option. The Company evaluated the warrants and determined that the warrants did not qualify for derivative accounting as the warrants
contained a set exercise price with an adjustment only based upon customary items including stock dividends and splits, subsequent
rights offering and pro rata distributions and subject to down round price protection. The Company reviewed the guidance under
ASC 470 Debt and allocated the proceeds from the sale of a debt instrument with stock purchase warrants based on the relative fair
values of the debt instrument without the warrants and of the warrants themselves at time of issuance. As a result, the Company
allocated $2.2 million to the warrants and was recorded as a debt discount with an offset to additional paid in capital in the
accompanying financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">The Company valued the issued
warrants using the Lattice pricing model at $52.80 per warrant 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 122%. The debt discount is amortized straight-line
over the stated life of the obligation, which approximates the effective interest method. Any conversions results in a pro-rata
acceleration of unamortized debt discount and debt issuance costs to interest expense on the date of conversion.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Event of default &ndash; August 2018</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">At the June 2018 issuance, the Company
executed registration rights agreements with each of its institutional investors. These registration rights agreements require,
among other things, that the initial registration statement should be (a) filed within 30 days of June 4, 2018, and (b) declared
effective within 90 days of June 4, 2018. The Company&rsquo;s registration statement was filed on October 1, 2018 and it was declared
effective by the SEC on October 29, 2018; thus, both the filing and effectiveness deadlines were missed.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company recorded in its consolidated
financial statements the mandatory default amount as stipulated in the convertible note agreements. As of August 31, 2018, the
Company recorded approximately $3.5 million, which is reported under current liabilities in its consolidated statement of operations,
and a further $0.6 million of accrued interest.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On December 20, 2018, the Company entered
into settlement agreements with its institutional investors, which resolved all disputes relating to technical defaults by the
Company in failing to meet deadlines for filing a registration statement and for having a registration statement effective by the
SEC. As a result of such settlement, the Company increased the principal amount of the convertible notes by issuing $889,000 of
December 2018 Notes in full settlement of the previously accrued $3.5 million default. The Company accrued an additional $1.8 million
in liquidating damages and recognized an $811,000 gain on recovery of these accrued penalties.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>December 2018 Notes (in default)</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">On December 20, 2018, the Company
entered into settlement agreements with its institutional investors, which resolved all disputes relating to technical defaults
by the Company in failing to meet deadlines for filing a registration statement and for having a registration statement effective
by the SEC. As a result of such settlement, the Company issued additional notes (&ldquo;December 2018 Notes&rdquo; in the amount
of $889,000 on substantially the same terms as the June 2018 Notes except that the stated interest rate was 0% and the term of
the December 2018 Notes was December 31, 2019. There was no recorded discount or deferred financing costs for the December 2018
Notes issued.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>March 2019 Bridge Financing (in default)</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">On March 12, 2019, the
Company issued convertible notes in the principal amount of $4,750,000 with an original issue discount of $1 million for a
purchase price of $3,750,000 to certain of its existing institutional investors (&ldquo;March 2019 Notes&rdquo;) and mature
on September 12, 2020. The Company received net cash proceeds of $3.3 million to be used for mobile application development
and working capital. The Company incurred approximately $0.5 million of debt issuance costs that are incremental costs
directly related to the issuance of the bridge financing senior convertible notes payable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The terms of the March 2019 convertible
notes are summarized as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Term: September 12, 2020;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Coupon: 0%;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Default interest rate: 18%;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Original issue discount: $1,000,000;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Convertible at the option of the holder at any time;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Initial conversion price is set at $66.80 but subject to down round price protection;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Alternate conversion price at the greater of the floor price of $12.40 and the lower of the conversion
price in effect and alternate conversion percentage of the lowest VWAP of the common share during the 10 consecutive trading day
prior to the applicable conversion date;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Alternate conversion percentage is 75% if the alternate conversion is an alternate conversion event
of default as a result of bankruptcy or 80% for all alternate event of default conversion or 85% is such alternate conversion is
an alternate optional conversion;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Redemption at the option of the Company at 15% premium at any time after 45 days from March 12,
2019.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">In connection with the note,
the Company issued 74,390 warrants (&ldquo;March 2019 Warrants&rdquo;), exercisable at $70.00, with a five-year term. The Company
evaluated the warrants issued and determined that they were derivative liabilities. The Company estimated the fair value of the
warrants using the Lattice pricing model. The key valuation assumptions used consist, in part, of the price of the Company&rsquo;s
common stock of $63.60, a risk-free interest rate of 2.49% and expected volatility of the Company&rsquo;s common stock of 122%,
resulting in a fair value of $3,917,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company estimated the aggregate fair
value of the conversion feature derivative embedded in the debenture (&ldquo;March 2019 Conversion Feature&rdquo;) at issuance
at $2,421,000 based on weighted probabilities of assumptions using the Lattice pricing model. The key valuation assumptions used
consist, in part, of the price of the Company&rsquo;s common stock of $63.60, a risk-free interest rate of 2.49% and expected volatility
of the Company&rsquo;s common stock of 122%, and the various estimated reset exercise prices weighted by probability.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">This resulted in the calculated fair value
of the debt discount resulted from bifurcating the warrants and the conversion feature being greater than the face amount of the
debt and the original issue discount, and the excess amount of $2.6 million was immediately expensed as financing costs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><U>March 2019 Derivative Liabilities:</U></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Both the March 2019 Warrants and the March
2019 Conversion Feature are accounted for as derivative liabilities. As such, each derivative is marked to market at each reporting
date. Prior to March 2019, the Company had no derivative liabilities. The following table provides the activity for the Company&rsquo;s
derivative liabilities for the year ended August 31, 2019.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; background-color: white; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>March 2019</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>Conversion</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>&nbsp;Feature</B></P></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>March 2019</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>Warrant</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>&nbsp;Liability</B></P></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Total</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Balance at August 31, 2018</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify"><FONT STYLE="font-size: 10pt">$&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Initial recognition </FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">2,421,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">3,917,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">6,338,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Reclassification to equity</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">(13,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">(13,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Change in fair value</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">444,000</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(3,013,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(2,569,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Balance at August 31, 2019</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">2,852,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: justify"><FONT STYLE="font-size: 10pt">$&nbsp;</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">904,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">3,756,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company used the following assumptions
to estimate fair value of the derivatives as of August 31, 2019, using the default rate of 75% of market price as a conversion
price:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; background-color: white; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>March 2019<BR>
        Conversion </B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>Feature</B></P></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>March 2019<BR>
        Warrant</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>&nbsp;Liability</B></P></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Risk free rate</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 0%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 0%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 8%; text-align: right"><FONT STYLE="font-size: 10pt">1.76</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify"><FONT STYLE="font-size: 10pt">%</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 0%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 0%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 8%; text-align: right"><FONT STYLE="font-size: 10pt">1.39</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify"><FONT STYLE="font-size: 10pt">%</FONT></TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Market price per share</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">19.04</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">19.04</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Life of instrument in years</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">1.04</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">4.47</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Volatility</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">100</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">%</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">119</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">%</FONT></TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Dividend yield</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">%</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">0</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">%</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Note 10: Stockholders&rsquo; Equity</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I><U>Preferred Stock</U></I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">In September 2016, the Company
issued options to purchase preferred stock at $0.0001 per share. This issuance was approved by its shareholders. 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, which
accounts for approximately 25.6 million shares, or (b) the number of shares of common stock held by such shareholder on date of
the shareholder&rsquo;s exercise of the aforesaid option. The preferred stock that is the subject of such contingent option provides
a right to 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 contingent 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&rsquo;s common stock is changed or exchanged), or sale of
at least 50% of the Corporation&rsquo;s assets or earning power (other than a reincorporation). The right to exercise the option
terminates on December 31, 2023.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I><U>Common Shares</U></I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During the year ended August 31, 2019,
the Company issued 6,688 shares of common stock following the exercise of warrants and received gross proceeds of $660,000. During
the year ended August 31, 2018, the Company issued 938 shares of common stock following the exercise of warrants with an exercise
price of $80.00 and received gross proceeds of $75,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As described more fully in Note 9, during
the year ended August 31, 2019, the Company issued 174,081 shares of common stock in satisfaction of principal and accrued interest
following conversion of convertible notes into shares of common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I><U>Issuances of common shares to
directors for services</U></I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.05pt; text-align: justify">The Company awards shares of
common stock to its independent directors under its 2017 Stock Option / Stock Issuance Plan (the &ldquo;Plan&rdquo;) as compensation
for their services as directors. These awards are typically valued at market value on the date of the award. For the year ended
August 31, 2019 the Company issued 4,985 shares valued at $263,000 to its directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.05pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Treasury Stock</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">In June 2019, the Company advanced
$325,000 in cash to Steven Holmes, a significant shareholder and service provider to the Company. In July 2019, Mr. Holmes repaid
the advance by returning 13,954 shares of Mr. Holmes common share holdings, valued at $23.28 per share in full settlement of the
advance and which was the market value on the date of settlement. The shares were retired in fiscal 2019 in accordance with company
policy. See also Note 12.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I><U>Common Stock Warrants</U></I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.05pt; text-align: justify">During the year ended August
31, 2018, the Company issued warrants to purchase 30,523 shares of common stock to investors in connection with the senior secured
convertible notes, with exercise price of $99.60 per warrant with expiration date of 5 years and subject to down round price protection
and reset the warrant price to $70.00 in 2019 concurrent with the March 2019 Note financing warrant issuance. The Company valued
the warrants at issuance using the Lattice 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 120%. The Company valued the revised warrants
on March 12, 2019 using the Lattice option-pricing model with the following assumptions: dividend yield of zero, years to maturity
of 4.2 years, risk free rates of 2.41 percent, and annualized volatility of 122%.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.05pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During the year ended August 31,
2019, the Company issued warrants to purchase 74,390 shares of common stock in connection with the March 2019 Notes, with
exercise price of $70.00 per warrant with expiration date of 5 years. The Company valued the issued warrants using the
Black-Scholes option-pricing model at $52.80 per warrant with the following assumptions: dividend yield of zero, years to
maturity of 5 years, risk free rates of 2.49%, and annualized volatility of 122%. The fair value of the warrants issued were
incorporated into the financing loss and March 2019 Notes discount described in Note 9 above.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">The following tables summarize
the Company&rsquo;s warrants outstanding as of August 31, 2019 and 2018:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; background-color: white; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>Number of </B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>shares</B></P></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>Weighted</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>&nbsp;average</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>&nbsp;remaining
        </B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>life (years)</B></P></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>Weighted </B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>average </B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>exercise price</B></P></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Warrants outstanding, August 31, 2017</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">64,887</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">1.5</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">119.60</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Issued</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">30,526</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">5.3</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">99.60</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">(Exercised)</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">(938</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">1.2</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">80.00</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">(Cancelled)</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">(Expired)</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Warrants outstanding, August 31, 2018</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">94,475</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">2.13</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">113.60</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Issued</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">74,390</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">5.0</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">70</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">(Exercised)</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">(6,688</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">0.45</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">98.80</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">(Cancelled)</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">(Expired)</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(54,761</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">114.80</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Warrants outstanding, August 31, 2019</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">107,416</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">4.42</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">74.80</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following table summarizes information
about warrants outstanding as of August 31, 2019:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; background-color: white; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>Exercise </B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>price</B></P></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Warrants<BR>
Outstanding</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>Weighted</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>&nbsp;average</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>&nbsp;life of
        </B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>outstanding<BR>
        warrants in</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>&nbsp;years</B></P></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">March 2019 Notes Warrants</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">70.00</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">74,390</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">4.6</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">June 2018 Notes Warrants</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">70.00</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">30,526</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">3.8</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">2017 PIPE Warrants</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">276.00</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">2,500</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">2.9</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">107,416</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">4.4</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Note 11: Share based compensation</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">In March 2017, the Company adopted
the 2017 Stock Option / Stock Issuance Plan (the &ldquo;Plan&rdquo;). The Plan provides incentives to eligible employees, officers,
directors and consultants in the form of incentive stock options (&ldquo;ISOs&rdquo;), non-qualified stock options (&ldquo;NQs&rdquo;),
each of which is exercisable into shares of common stock (&ldquo;Options&rdquo;) or shares of common stock (&ldquo;share grants&rdquo;).
The Company has reserved a total of 250,000 shares of common stock for issuance under the Plan as of August 31, 2019.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Of these shares, as of August 31, 2019, approximately 82,500
options and 7,500 shares have been designated by the Board of Directors for issuance and approximately 32,500 of the options have
been forfeited and returned to the option pool under the Plan due to employment terminations. As of August 31, 2019, approximately
195,000 shares remain issuable of which 167,500 are eligible to be issued as ISOs and 195,000 are eligible to be issued as either
share grants or NQ stock options.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During 2018 and 2019 both common share
grants and stock options were issued to employees and non-officer directors of the Company. Shares issued for services for 2019
and 2018 consist solely of grants to non-officer directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For all options granted thus far to August
31, 2019, each option is immediately exercisable and has a term of service vesting provision over a period of time as follows:
25% vest after a 12-month service period following the award, and the balance vest in equal monthly installments over the next
36 months of service. All options granted to date have a ten year term.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Share grants are issued at fair value,
considered to be the market price on the grant date. The fair value of option awards is estimated on the grant date using the Black-Scholes
stock option pricing model and the following assumptions:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; background-color: white; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>2019</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>2018</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Expected life</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right"><FONT STYLE="font-size: 10pt">4.0 years</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right"><FONT STYLE="font-size: 10pt">4.0 years</FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; width: 80%; text-align: justify"><FONT STYLE="font-size: 10pt">Estimated volatility</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 7%; text-align: right"><FONT STYLE="font-size: 10pt">119</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify"><FONT STYLE="font-size: 10pt">%</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 7%; text-align: right"><FONT STYLE="font-size: 10pt">121</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify"><FONT STYLE="font-size: 10pt">%</FONT></TD></TR>

<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Risk-free interest rate</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">1.70%-2.90</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">%</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">2.01%-2.83</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">%</FONT></TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Dividends</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Estimates of fair value are not intended
to predict actual future events or the value ultimately realized by employees who receive equity awards, and subsequent events
are not indicative of the reasonableness of the original estimates of fair value made by us.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Following the adoption of Accounting Standards
Update ASU 2016-09, the Company elected to account for forfeitures as they occur. Any compensation cost previously recognized for
an unvested award that is forfeited because of a failure to satisfy a service condition is reversed in the period of the forfeiture.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Share based compensation expense consisted
of the following for the years ended August 31, 2019 and 2018:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; background-color: white; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>Year ended </B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>August 31,</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>&nbsp;2019</B></P></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>Year ended </B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>August 31, </B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; background-color: white"><B>2018</B></P></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Shares issued for services</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">263,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">163,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Employee stock options</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">369,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">200,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Balance at August 31, 2019</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">632,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">363,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">At August 31, 2019, the total unrecognized
deferred share-based compensation expected to be recognized over the remaining weighted average vesting periods of 1.7 years for
outstanding grants was $1.6 million.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">A summary of option activity was as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; background-color: white; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="10" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Options Outstanding and Exercisable</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Weighted</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Average</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Weighted</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Number</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Remaining</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Average</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>of</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Contractual</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Exercise</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Options</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Life</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Price</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>(In years)</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Balance, August 31, 2017</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">19,750</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">9.58</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">184.80</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Granted</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">23,719</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">10.0</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">105.60</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Exercised</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">&ndash;</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">&ndash;</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">&ndash;</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Forfeited</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(9,750</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">8.49</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">154.80</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Balance, August 31, 2018</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">33,719</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">9.77</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">138.00</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Granted</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">36,073</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">10.0</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">63.60</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Exercised</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">&ndash;</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">&ndash;</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">&ndash;</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Forfeited</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(19,042</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">8.06</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">111.20</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Balance at August 31, 2019</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">50,750</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">8.95</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">95.20</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Options outstanding as of August 31, 2019
and 2018 had aggregate intrinsic value of $575,000 and $1,000 respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Option vesting activity was as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; background-color: white; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Weighted</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Weighted</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Number</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Remaining</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Average</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>of</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Contractual</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Exercise</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: black 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Options Vested</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Options</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Life</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Price</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>(In years)</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Balance, August 31, 2017</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">--</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">--</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">-</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Vested</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">5,364</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">8.83</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">184.80</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Exercised</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">&ndash;</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">&ndash;</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">&ndash;</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Forfeited</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(850</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">8.54</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">177.20</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Balance, August 31, 2018</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">4,514</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">8.57</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">182.40</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Vested</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">7,410</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">&ndash;</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">137.20</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Exercised</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">&ndash;</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">&ndash;</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">&ndash;</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Forfeited</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">(1,633</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">)</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">8.10</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">164.40</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Balance at August 31, 2019</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">10,291</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">8.04</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">152.80</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following table summarizes information
about stock options outstanding and vested at August 31, 2019:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; background-color: white; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="10" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Options Outstanding and Exercisable</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Options Vested</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Weighted</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Average</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Weighted</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Weighted</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Weighted</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Number</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Remaining</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Average</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Number</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Remaining</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Average</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>of</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Contractual</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Exercise</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>of</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Contractual</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>Exercise</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Exercise Prices</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Options</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Life</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Price</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Options</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Life</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Price</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>(In years)</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><FONT STYLE="font-size: 10pt"><B>(In years)</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: center"><FONT STYLE="font-size: 10pt">$18.80-40.00</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">8,125</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">9.77</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">22.40</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">&ndash;</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">&ndash;</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">&ndash;</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: center"><FONT STYLE="font-size: 10pt">$40.01&ndash;$80.00</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">15,761</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">9.59</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">51.60</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">&ndash;</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">&ndash;</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">&ndash;</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: center"><FONT STYLE="font-size: 10pt">$80.01&ndash;$120.00</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">12,864</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">8.67</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">104.00</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">4,202</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">8.63</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">105.20</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: center"><FONT STYLE="font-size: 10pt">$120.01&ndash;$160.00</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">12,625</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">8.04</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">155.20</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">5,373</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">7.60</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">158.40</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: center"><FONT STYLE="font-size: 10pt">$160.01-$391.60</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">1,375</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">7.88</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">391.60</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">716</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">7.88</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">391.60</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">50,750</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">8.95</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">95.20</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">10,291</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">8.04</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">152.80</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Note 12: Related Parties</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Scott Absher, Chief Executive Officer,
Director, and a significant shareholder of the Company became a Company employee on April 1, 2016. During the year ended August
31, 2019 and 2018, the Company recorded $750,000 and $750,000, respectively as compensation for his role as CEO in accordance with
his employment agreement. On March 15, 2017, Scott Absher was granted 1,250 options to purchase common stock as part of the 2017
Plan, exercisable on March 15, 2017, with an expiration date of March 14, 2027, at an exercise price of $160.00.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">J. Stephan Holmes is an advisor
to and a significant shareholder of the Company. The Company incurred $720,000 and $700,000 in such professional fees to J. Stephen
Holmes for management consulting services for the year ended August 31, 2019 and 2018, respectively and recorded in professional
fees on the statement of operations. On March 15, 2017, Stephan Holmes was granted 1,250 options to purchase common stock as part
of the 2017 Plan, exercisable on March 15, 2017, with expiration date of March 14, 2027, at an exercise price of $160.00.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.05pt; text-align: justify">In June 2019 the Company advanced
Mr. Holmes $325,000 in cash and recorded the advance as a short term note receivable. In July 2019, Mr. Holmes provided 13,954
shares of common stock of the Company valued at $23.20 per share in satisfaction of the cash advance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.05pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On May 15, 2017, Mark Absher, Director,
In-House Counsel, and brother of Scott Absher, was granted 1,250 options to purchase common stock as part of the 2017 Plan, exercisable
on March 15, 2017 with expiration date of March 14, 2027, at an exercise price of $160.00. On May 10, 2018, Mark Absher was also
granted an additional 1,250 options to purchase common stock at an exercise price of $100.00 and exercisable in May 2018 with expiration
date in May 2028. During the year ended August 31, 2019 and 2018, the Company recorded $275,000 and $300,000, respectively as compensation
for his role as Registered In-House Counsel in accordance with his employment agreement. Mark Absher resigned in February 2019
and all options granted were cancelled during the fiscal year ending August 31, 2019.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.05pt; text-align: justify">For the year ended August 31,
2019 the following issuances were made to the Company&rsquo;s directors:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.05pt; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Date Issued</B></FONT></TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Shares</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Issue Price</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;per Share</B></P></TD>
    <TD STYLE="white-space: nowrap">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Value</B></FONT></TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Ken Weaver</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 15%; text-align: center"><FONT STYLE="font-size: 10pt">August 2019</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">1,995</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">18.80</FONT></TD>
    <TD STYLE="white-space: nowrap; vertical-align: bottom; width: 1%; text-align: justify"><FONT STYLE="font-size: 10pt">(A)</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">37,500</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: white">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Ken Weaver</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">May 2019</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">1,202</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">31.20</FONT></TD>
    <TD STYLE="white-space: nowrap; vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">(B)</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">37,500</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Ken Weaver</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">November 2018</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">308</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">122.00</FONT></TD>
    <TD STYLE="white-space: nowrap; vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">(C)</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">37,500</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: white">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Sean Higgins</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">September 2018</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">329</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">114.00</FONT></TD>
    <TD STYLE="white-space: nowrap; vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">(D)</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">37,500</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Sean Higgins</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">April 2019</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">412</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">91.20</FONT></TD>
    <TD STYLE="white-space: nowrap; vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">(E)</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">37,500</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: white">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Whitney White</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">September 2018</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">329</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">114.00</FONT></TD>
    <TD STYLE="white-space: nowrap; vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">(D)</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">37,500</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Whitney White</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 10pt">April 2019</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">412</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">91.20</FONT></TD>
    <TD STYLE="white-space: nowrap; vertical-align: bottom; text-align: justify"><FONT STYLE="font-size: 10pt">(E)</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">37,500</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD></TR>
<TR STYLE="background-color: white">
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-top: black 1pt solid; border-bottom: black 2.25pt double; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-top: black 1pt solid; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">4,987</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD>
    <TD STYLE="white-space: nowrap; vertical-align: bottom">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-top: black 1pt solid; border-bottom: black 2.25pt double; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-top: black 1pt solid; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">262,500</FONT></TD>
    <TD STYLE="vertical-align: bottom">&nbsp;</TD></TR>
</TABLE>
<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(A)</TD><TD>Represents share grant for services performed between June 1, 2019 and November 30, 2019 and awarded in August 2019.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(B)</TD><TD>Represents share grant for services performed between December 1, 2019 and May 31, 2019 and awarded in May 2019.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(C)</TD><TD>Represents share grant for services performed between June 1, 2018 and November 30, 2018 and awarded by the Board of Directors
in August 2018.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"></P>

<!-- Field: Split-Segment; Name: 19 -->
<P STYLE="margin-top: 0; margin-bottom: 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(D)</TD><TD>On September 28, 2017 the Company awarded two directors 658 shares of common stock of which 50% vested on the date marking
their six-month service anniversary and 50% for the remaining service through November 28, 2018.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(E)</TD><TD>Represents share grant for services performed between September 29, 2018 and March 28, 2019 and awarded in March 2019</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Note 13: Income Taxes</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Current income taxes are based upon the
year&rsquo;s income taxable for federal and state tax reporting purposes. Deferred income taxes (benefits) are provided for certain
income and expenses, which are recognized in different periods for tax and financial reporting purposes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Deferred tax assets and liabilities are
computed for differences between the financial statements and tax bases of assets and liabilities that will result in taxable or
deductible amounts in the future based on enacted tax laws and rates applicable to the period in which the differences are expected
to affect taxable income. The Company&rsquo;s deferred income taxes arise from the temporary differences between financial statement
and income tax recognition of net operating losses. These loss carryovers would be limited under the Internal Revenue Code should
a significant change in ownership occur within a three-year period.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">As of August 31, 2019, and 2018,
the Company had cumulative net operating loss carryforwards of approximately $30,686,000 and $26,673,000 respectively, which begin
to expire in 2029. The deferred tax assets primarily comprise net operating loss carryforwards and other net temporary deductible
differences such as stock-based compensation, deferred rent, depreciation and workers&rsquo; compensation accrual. The ultimate
realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those
temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, the projected
future taxable income and tax planning strategies in making this assessment. Based on management&rsquo;s analysis, they concluded
that it was more likely than not that the deferred tax asset would not be realized. Therefore, the Company established a full valuation
allowance against the deferred tax assets. The change in the valuation allowance in 2019 and 2018 was approximately $3,359,000
and $3,163,000, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Significant components of the net deferred
tax assets as reflected on the Consolidated Balance Sheets are as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: justify">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">August 31,</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: justify">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2019</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2018</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: justify">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; text-align: center">in thousands</TD><TD STYLE="font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify">Deferred tax liabilities:</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 74%; font-size: 10pt; text-align: justify">Depreciation</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">(122,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">)</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">(21,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 1pt">Software development costs</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(845,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(835,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify">Total deferred tax liabilities</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(967,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(856,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify">Deferred tax assets:</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify">Net operating loss carryforward</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">7,000,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">7,653,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify">Business interest</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">2,539,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify">Workers&rsquo; compensation accruals</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1,763,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">360,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify">Stock-based compensation</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">354,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">172,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 1pt">Deferred rent</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">15,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">16,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify">Total deferred tax assets</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">11,671,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">8,201,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 1pt">Valuation allowance</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(10,704,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(7,345,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 1pt">Total net deferred tax assets</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">967,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">856,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 2.5pt">Net deferred tax assets</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Income tax expense consists of the following</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: justify">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: center">For the Year Ended</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: justify">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">August 31,</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2019</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2018</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify">Current</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 0.125in; font-size: 10pt; text-align: justify">Federal</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">$</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-left: 0.125in; font-size: 10pt; text-align: justify; padding-bottom: 1pt">State</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 1pt; padding-left: 22.5pt">Total current</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify">Deferred</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 74%; font-size: 10pt; text-align: justify; padding-left: 11.25pt">Federal</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">3,162,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">2,729,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 1pt; padding-left: 11.25pt">State</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">197,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">407,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 1pt; padding-left: 22.5pt">Total deferred</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">3,359,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">3,136,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 1pt">Change in valuation allowance</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(3,359,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(3,136,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 2.5pt">Total Income Tax Expense (Benefit)</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The reconciliation of the statutory federal
rate to the Company&rsquo;s effective income tax rate is as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: justify">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center">August 31,</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center">August 31,</TD><TD STYLE="font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; text-align: justify">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2019</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-size: 10pt; font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2018</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 74%; font-size: 10pt; text-align: justify">Pre-tax book loss</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">2,673,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">3,880,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify">Non-deductible penalties and other permanent differences</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(430,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(177,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify">State taxes (8.84%)</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1,116,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1,374,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify">Redetermination of prior year taxes</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify">Enactment of the 2017 Tax Reform Act</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">-</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">(1,941,000</TD><TD STYLE="font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 1pt">Change in valuation allowance</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(3,359,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">(3,136,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 2.5pt">Net income tax provision</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In December 2017, the Tax Cuts and Jobs
Act was enacted, which reduces the U.S. statutory corporate tax rate from a maximum rate of 35% to 21% for the tax years beginning
after December 31, 2017. For a corporation whose fiscal year begins before December 31, 2017 and ends after December 31, 2017,
the IRS has issued guidance, in notice 2018-38, regarding the calculation of a blended current year tax rate. The Company followed
this guidance in the calculation of the prior year tax benefit for the fiscal year ended August 31, 2018. The Calculation resulted
in a 25% effective tax rate for fiscal year 2018. The Tax Cuts and Jobs Act resulted in the re-measurement of the federal portion
of the Company&rsquo;s deferred tax assets and valuation allowance as of August 31, 2018 from 35% to the new 21% tax rate. As a
result, the reduction of the corporate tax rate resulted in a write-down of the gross deferred tax assets of approximately $1,277,000
and a corresponding write-down of the valuation allowance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company&rsquo;s continuing practice
is to recognize interest and/or penalties related to income tax matters in income tax expense. As of August 31, 2019, and 2018,
the Company had no accrued interest and penalties related to uncertain tax positions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.05pt; text-align: justify">The Company&rsquo;s net operating
losses (&ldquo;NOL&rdquo;) may be limited by the provisions of IRC Section 382, for which the Company has not performed an analysis
of the potential limitations. These limitations will be imposed when the Company attains taxable income against which the NOL will
be utilized. The company had a NOL of $3,843,000 during the period ending August 31, 2019. This NOL has an indefinite life but
are limited to 80%. As explained above, the Company has determined that it is more likely than not that the Company&rsquo;s deferred
tax assets related to NOL Carryforwards will not be utilized.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.05pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">The Company is subject to taxation
in the U.S. The tax years for 2016 and forward are subject to examination by tax authorities. The Company is not currently under
examination by any tax authority.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Management has evaluated tax positions
in accordance with FASB ASC 740, and has not identified any tax positions, other than those discussed above, that require disclosure.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Note 14: Commitments and Contingencies</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Software License</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company licenses software from a third
party for utilization in its mobile application and HRIS system. The license agreement is for three years and contains an annual
escalation beginning in May 2020. The license is month to month and is cancelable but is subject to a cancellation penalty calculated
as 30% of the remaining contracted license payments if cancelled by the Company. Future minimum license payments under the license
agreement at August 31, 2019, are as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: justify; border-bottom: Black 1pt solid">Years ended August 31,</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-size: 10pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 87%; font-size: 10pt; text-align: justify">2020</TD><TD STYLE="width: 1%; font-size: 10pt">&nbsp;</TD>
    <TD STYLE="width: 1%; font-size: 10pt; text-align: left">$</TD><TD STYLE="width: 10%; font-size: 10pt; text-align: right">922,000</TD><TD STYLE="width: 1%; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; text-align: justify">2021</TD><TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="font-size: 10pt; text-align: right">1,015,000</TD><TD STYLE="font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; text-align: justify; padding-bottom: 1pt">2022</TD><TD STYLE="font-size: 10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-size: 10pt; text-align: right">817,000</TD><TD STYLE="padding-bottom: 1pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-size: 10pt; font-weight: bold; font-style: italic; text-align: justify; padding-bottom: 2.5pt">Total minimum payments</TD><TD STYLE="font-size: 10pt; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-size: 10pt; text-align: right">2,754,000</TD><TD STYLE="padding-bottom: 2.5pt; font-size: 10pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Operating Lease</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>




<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">Effective April 15, 2016, the
Company entered into a non-cancelable five-year operating lease for its Irvine facility. On July 25, 2017, the Company entered
into a non-cancelable operating lease for expansion space at its Irvine offices with a termination date that coincides with the
termination date of the prior lease and extended the terms of the original lease to extend until 2022. The leases for certain facilities
contain escalation clauses relating to increases in real property taxes as well as certain maintenance costs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Future minimum lease payments under non-cancelable
operating leases at August 31, 2019, are as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; background-color: white; border-collapse: collapse">
<TR>
    <TD STYLE="vertical-align: top; border-bottom: black 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Years ended August 31,</B></FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">2020</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 9%; text-align: right"><FONT STYLE="font-size: 10pt">382,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 1%; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">2021</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right"><FONT STYLE="font-size: 10pt">382,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">2022</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">319,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt"><B><I>Total minimum payments</I></B></FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: justify"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="vertical-align: bottom; border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">1,083,000</FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: justify">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Non-contributory 401(k) Plan</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company has a non-contributory 401(k)
Plan (the &ldquo;401(k) Plan&rdquo;). The 401(k) Plan covers all non-union employee who are at least 21 years of age and have completed
3 months of service. There were no employer contributions to the Plan for the years ended August 31, 2019 and 2018.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify"><B>Share Repurchase Plan</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.05pt; text-align: justify">On July 9, 2019, the Company&rsquo;s
Board of Directors authorized the repurchase of up to 250,000 shares of its outstanding common shares as market conditions warrant
over a period of 18 months. The Company has not implemented the share repurchase plan to date and has not repurchased any shares
under the plan.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.05pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Litigation</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Certain conditions may exist as of the
date the financial statements are issued, which may result in a loss to the Company, but which will be resolved only when one or
more future events occur or fail to occur. The Company&rsquo;s management, in consultation with its legal counsel as appropriate,
assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During the ordinary course of business,
the Company is subject to various claims and litigation. Management believes that the outcome of such claims or litigation will
not have a material adverse effect on the Company&rsquo;s financial position, results of operations or cash flow.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">Convertible Note related litigation:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.05pt; text-align: justify">During 2019, three of the Company&rsquo;s
note holders have filed complaints:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.05pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">Alpha Capital v. ShiftPixy, Inc.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">On July 3, 2019 ShiftPixy was
served with a complaint filing by Alpha Capital Anstalt (ACA) in the United States District Court, Southern District of New York
alleging breach of contract in refusing to honor the conversion of certain convertible notes, specifically one for $310,000 submitted
on June 20, 2019. ACA sought an injunction requiring the Company to issue 25,000 common shares, damages for the claimed breaches,
and attorney&rsquo;s fees. In August 2019, the court denied the motion for a preliminary injunction but granted accelerated discovery
which was completed in September 2019. As of August 31, 2019, the Company had convertible notes outstanding with ACA for approximately
$1.7 million consisting of $0.3 million of the June 2018 series, $0.2 million of the December 2018 series and $1.2 million of the
March 2019 series.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">Dominion Capital LLC v. ShiftPixy;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.05pt; text-align: justify">On July 18, 2019 ShiftPixy was
served with a complaint filing by Dominion Capital LLC in the United States District Court, Southern District of New York alleging
breach of contract in refusing to honor the conversion of certain convertible notes. Dominion sought injunctive relief, injunction
to prohibit buyback, breach of contract on the June 2018, December 2018, and March 2019 notes, and declaratory judgment. In August
2019, the court denied the motion for a preliminary injunction but granted accelerated discovery which was completed in September
2019. As of August 31, 2019, the Company had convertible notes outstanding with Dominion for approximately $1.5 million consisting
of $0.7 million of the June 2018 series, $0.2 million of the December 2018 series and $0.6 million of the March 2019 series.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.05pt; text-align: justify">&nbsp;</P>




<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.05pt; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.05pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.05pt; text-align: justify">Both ACA and Dominion have filed
for summary judgment on their cases. The court referred those motions to a magistrate judge for a report and recommendation, and
the magistrate judge filed his report on November 22, 2019, recommending that the court enter judgment for money damages in both
cases consistent with the amounts accrued for by the Company, denying permanent injunctive relief, and granting declaratory relief
with respect to the stock buyback program. The Company is awaiting a response from the court as of the date of this filing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.05pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">MEF I, LP v. ShiftPixy, Inc.;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On August 27, 2019 MEF filed a complaint
in the United States District Court, Southern District of New York based upon the Company&rsquo;s refusal to convert June 2018
notes. MEF seeks monetary relief of $2.1 million and seeks to appoint themselves as receiver of the Company. As of August 31, 2019
the Company had convertible notes outstanding to MEF at approximately $0.7 million face value consisting of approximately $0.5
million and $0.2 million for the June 2018 and December 2018 notes respectively. In November 2019 the Company filed a motion in
response to the receiver request. A hearing on the receiver matter was conducted on November 20, 2019 and the Company is awaiting
a response from the court on the hearing as of the date of this filing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Lyons Capital, LLC Litigation</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">On June 21, 2018, ShiftPixy was
served with a summons and complaint in connection with a claim by Lyons Capital, LLC, arising out of a contract wherein ShiftPixy,
Inc., agreed to pay Lyons Capital, LLC, a total of 210,000 shares of the company&rsquo;s common stock in exchange for introductions
to brokers, research coverage, funds, investment banking firms, and market makers as well as board representation and business
opportunities and for promotion of the company at Lyons Capital, LLC&rsquo;s annual conference. This lawsuit was settled during
fiscal 2019 for an immaterial amount which was included in general and administrative expenses on the statement of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.7pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B><I>Kadima Ventures</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company is in dispute with its software
developer, Kadima Ventures, over incomplete but paid for software development work. In May 2016, the Company entered into a contract
with Kadima Ventures for the development and deployment of user features that were proposed by Kadima for an original build cost
of $8.5 million to complete. As of the date of this filing, the Company has spent approximately $11 million but has not received
the majority of certain software modules. In addition to the non-delivery of the paid for user features, Kadima Ventures asserts
that it is owed additional funds to turn over the work completed. The Company initiated litigation to force the delivery of the
software modules paid for through fiscal 2019 and exit the development engagement. In April 2019, Kadima filed a complaint against
ShiftPixy in the County of Maricopa, AZ alleging breach of contract, promissory estoppel and unjust enrichment and has demands
for an additional $10 million prior to releasing the remaining features. The parties agreed to a transfer of the matter to an Arizona
Commercial Court with the expectation that the matter would be sent to arbitration or mediation. In October 2019, Kadima provided
the software code to a third party for technical evaluation of the software in question. The Company expects to enter into mediation
once the technical evaluation is completed later in fiscal 2020. An answer to the Complaint is due January 31, 2020.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.05pt; text-align: justify"><B><I>Splond Litigation</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1.05pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On April 8, 2019, claimant, Corey Splond,
filed a class action lawsuit, naming ShiftPixy, Inc. and its client as defendants, claiming that he was scheduled to work for more
than 8 hours during 24-hour periods without being paid overtime, to which he was entitled. In addition, claimant is seeking waiting
time penalties for the delay in payment. This lawsuit is in the initial stages; the financial impact to the Company, if any, cannot
be estimated. No liability has been recorded for this matter at this time. In the event of an unfavorable outcome the Company&rsquo;s
client is contractually obligated to indemnify the Company for misreported hours and portions of the claim would be covered under
the Company&rsquo;s employment practices liability insurance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Note 15: Subsequent Events</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On November 14, the Company filed a preliminary
proxy requesting a 1 for 40 reverse split of our common shares. We have received the majority shareholder approval for the reverse
split and the Company expects the reverse split to be effective on December 16, 2019.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On December 4, 2019 the Company received
a notice from the Nasdaq Capital Market stating that the Company will be delisted on December 13, 2019 unless the Company files
for a hearing by December 11, 2019. The Company requested a hearing on December 9, 2019 and has a hearing scheduled for January
23, 2020.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On December 5, 2019, the Company
entered into an exchange agreement with the holder of a majority of its March 2019 Convertible Notes. The exchange agreement
and the related revised March 2019 note agreement revised the conversion price to $40.00 per share, extended the term of the
March 2019 notes to March 1, 2022, provided for a revised quarterly amortization schedule beginning April 1, 2020, and
removed certain anti-dilution terms of the related March 2019 warrants. The holder also exchanged $222,000 of December 2018
Notes by extending the term to coincide with the revised term of the March 2019 notes and for the revised amortization
schedule. The Company agreed to issue an additional $200,000 of consideration to the holder, payable in common stock, as
consideration for this exchange and agreed to increase the principal outstanding on the notes exchanged by 10% from $222,000
for the December 2018 notes to $244,000 and from $2,445,000 for the March 2019 notes to $2,890,000. On December 11, 2019, the
Company issued 21,750 shares of common stock to the holder in satisfaction of the additional $200,000 of consideration.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Management has evaluated subsequent events
pursuant to the issuance of the consolidated financial statements and has determined that no additional subsequent events occurred
through the date of this filing that would require disclosure.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Note 16: Reverse Stock Split</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On December 17, 2019, the Company implemented a 1 for 40 reverse
stock split for all common share and common share equivalents including, options, warrants, and convertible notes. All common shares
and common share equivalents are presented retroactively to reflect the reverse split.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<!-- Field: Rule-Page --><DIV STYLE="margin-top: 12pt; margin-bottom: 3pt; width: 100%"><DIV STYLE="font-size: 1pt; border-top: Black 2pt solid; border-bottom: Black 1pt solid">&nbsp;</DIV></DIV><!-- Field: /Rule-Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in"><B>Shares of Common
Stock</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: center; text-indent: 0.5in"><B>Pre-Funded
Warrants to Purchase Shares of Common Stock</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: center; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Warrants to Purchase Shares of Common
Stock</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><IMG SRC="tm2025554d1_s1img001.jpg" ALT=""><FONT STYLE="font-size: 10pt"></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Prospectus</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><I>Sole Book-Running Manager</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 18pt"><B>A.G.P.</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in"><B>, 2020</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in">&nbsp;</P>




<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><A NAME="T_001"></A><B>PART II</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><A NAME="T_002"></A><B>INFORMATION NOT REQUIRED IN PROSPECTUS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 42pt; text-indent: -42pt"><B>Item 13. Other Expenses of Issuance
and Distribution</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 42pt; text-indent: -42pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following table sets forth all costs
and expenses, other than underwriting discounts and commissions, expected to be incurred by us in connection with the sale of the
common stock being registered. All amounts shown are estimates except for the SEC registration fee and the FINRA filing fee.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Amount Paid<BR>
or to be Paid</B></FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="width: 87%; padding-left: 10pt; text-indent: -10pt"><FONT STYLE="font-size: 10pt">SEC registration fee</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="width: 10%; text-align: right"><FONT STYLE="font-size: 10pt">4,770</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt"><FONT STYLE="font-size: 10pt">FINRA filing fee</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">*</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt"><FONT STYLE="font-size: 10pt">Printing and engraving expenses</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">*</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt"><FONT STYLE="font-size: 10pt">Legal fees and expenses</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">*</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt"><FONT STYLE="font-size: 10pt">Accounting fees and expenses</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">*</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt"><FONT STYLE="font-size: 10pt">Non-accountable expenses</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">*</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt"><FONT STYLE="font-size: 10pt">Transfer agent and registrar fees and expenses</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 10pt">*</FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-bottom: 1pt; padding-left: 10pt; text-indent: -10pt"><FONT STYLE="font-size: 10pt">Miscellaneous fees and expenses</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-size: 10pt">*</FONT></TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding-bottom: 2.5pt; padding-left: 10pt"><FONT STYLE="font-size: 10pt">Total</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-size: 10pt">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-size: 10pt">*</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="background-color: white">*</FONT>&nbsp;<FONT STYLE="background-color: white">To
be filed by amendment.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Item 14. Indemnification of Directors and Officers</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Sections 17-16-851
through -856 of the Wyoming Statutes (the &ldquo;Applicable Statutes&rdquo;) provide that directors and officers of Wyoming corporations
may, under certain circumstances, be indemnified against expenses (including attorneys&rsquo; fees) and other liabilities actually
and reasonably incurred by them as a result of any suit brought against them in their capacity as a director or officer, if they
acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interests of the corporation,
and, with respect to any criminal action or proceeding, if they had no reasonable cause to believe their conduct was unlawful.
The Applicable Statutes also provide that directors and officers may also be indemnified against expenses (including attorneys&rsquo;
fees) incurred by them in connection with a derivative suit if they acted in good faith and in a manner they reasonably believed
to be in or not opposed to the best interests of the corporation, except that no indemnification may be made without court approval
if such person was adjudged liable to the corporation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Further, Article V
of our articles of incorporation, as amended, also provides as follows regarding our indemnification of our directors, officers,
employees and agents:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&ldquo;[t]o the fullest extent
permitted by the Wyoming Business Corporation Act or any other applicable law as now in effect or as it may hereafter be amended,
no person who is or was a director of the Corporation shall be personally liable to the Corporation or its shareholders for monetary
damages for breach of fiduciary duty as a director, except for liability for (A) the amount of financial benefit received by a
director to which he or she is not entitled; (B) an intentional infliction of harm on the Corporation or the Shareholders; (C)
a violation of Section 17-16-833 of the Wyoming Business Corporation Act; or (D) an intentional violation of criminal law. If the
Wyoming Business Corporation Act is amended after the effective date of this Amendment to authorize corporate action further eliminating
or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited
to the fullest extent permitted by the Wyoming Business Corporation Act, as so amended.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The Corporation shall indemnity
to the fullest extent permitted by the Wyoming Business Corporation Act, as the same may be amended and supplemented from time
to time, any and all persons whom it shall have power to indemnify under the Wyoming Business Corporation Act. The indemnification
provided for herein shall not be exclusive of any other rights to which those seeking indemnification may be entitled as a matter
of law under any Bylaw, agreement, vote of shareholders or disinterested directors of the Corporation, or otherwise, both as to
action in such indemnified person&rsquo;s official capacity and as to action in another capacity while serving as a director, officer,
employee, or agent of the Corporation, and shall continue as to a person who has ceased to be a director, officer, employee, or
agent of the Corporation, and shall inure to the benefit of the heirs, executors and administrators of such person.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">Any repeal or modification of
this Article V or amendment to the Wyoming Business Corporation Act shall not adversely affect any right or protection of a director,
officer, agent, or other person existing at the time of or increase the liability of any director, officer, agent, or other person
of the Corporation with respect to any acts or omissions of such director, officer, or agent occurring prior to, such repeal, modification,
or amendment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&nbsp;</P>




<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">The Corporation shall have the
power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation
or is or was serving at the request of the Corporation as a director, officer, employee or agent to another corporation, partnership,
joint venture, trust or other enterprise, against any liability asserted against such person and incurred by such person in any
such capacity or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against
liability under the provisions of this Article V.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Further, Article XIV
of our Bylaws also provides as follows regarding our indemnification of our directors, officers, employees and agents:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&ldquo;The corporation shall
indemnify any person acting on its behalf in accord with the law of Wyoming. The indemnification provided hereby shall not be deemed
exclusive of any other right to which anyone seeking indemnification thereunder may be entitled under any bylaw, agreement, or
otherwise, both as to action in his official capacity and as to action in another capacity while holding such office. The corporation
may purchase and maintain insurance on the behalf of any Director, officer, agent, employee or former Director or officer or other
person, against any liability asserted against them and incurred by him.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Item 15. Recent Sales of Unregistered
Securities</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In the three years preceding the filing
of this registration statement, the Registrant has issued the following securities that were not registered under the Securities
Act:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">On September 18, 2017 we issued 625 shares of common stock to a non-employee director in connection
with services rendered.</TD></TR></TABLE>

<P STYLE="text-align: justify; margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="text-align: justify; width: 0.5in"></TD><TD STYLE="text-align: justify; width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">On September 28, 2017 we issued 329 shares of common stock to a non-employee director in connection
with services rendered.</TD></TR></TABLE>

<P STYLE="text-align: justify; margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="text-align: justify; width: 0.5in"></TD><TD STYLE="text-align: justify; width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">On September 28, 2017 we issued 329 shares of common stock to a non-employee director in connection
with services rendered.</TD></TR></TABLE>

<P STYLE="text-align: justify; margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="text-align: justify; width: 0.5in"></TD><TD STYLE="text-align: justify; width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">On February 26, 2018 we issued 625 shares of common stock to a non-employee director in connection
with services rendered.</TD></TR></TABLE>

<P STYLE="text-align: justify; margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="text-align: justify; width: 0.5in"></TD><TD STYLE="text-align: justify; width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">On June 4, 2018, we completed an offer and sale to certain accredited investors in a private placement
of (i) the June 2018 Notes, convertible into 250,000 shares of our common stock and (ii) warrants to purchase an aggregate of 30,526
shares of our common stock.</TD></TR></TABLE>

<P STYLE="text-align: justify; margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="text-align: justify; width: 0.5in"></TD><TD STYLE="text-align: justify; width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">On August 9, 2018 we issued 615 shares of common stock to a non-employee director in connection
with services rendered.</TD></TR></TABLE>

<P STYLE="text-align: justify; margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="text-align: justify; width: 0.5in"></TD><TD STYLE="text-align: justify; width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">On September 28, 2018 we issued a total of 329 shares of common stock to a non-employee director
in connection with services rendered.</TD></TR></TABLE>

<P STYLE="text-align: justify; margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="text-align: justify; width: 0.5in"></TD><TD STYLE="text-align: justify; width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">On September 28, 2018 we issued a total of 329 shares of common stock to a non-employee director
in connection with services rendered.</TD></TR></TABLE>

<P STYLE="text-align: justify; margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="text-align: justify; width: 0.5in"></TD><TD STYLE="text-align: justify; width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">On December 20, 2018, we issued the December 2018 Notes, convertible into 17,778 shares of our
common stock, to certain holders of the June 2018 Notes pursuant to the terms of that certain Limited Settlement Agreement and
Mutual Release, dated December 20, 2018.</TD></TR></TABLE>

<P STYLE="text-align: justify; margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="text-align: justify; width: 0.5in"></TD><TD STYLE="text-align: justify; width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">On March 12, 2019, we completed an offer and sale to certain accredited investors in a private
placement of (i) the March 2019 Notes, convertible into 389,345 shares of our common stock and (ii) warrants to purchase up to
an aggregate of 74,390 shares of our common stock.</TD></TR></TABLE>

<P STYLE="text-align: justify; margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="text-align: justify; width: 0.5in"></TD><TD STYLE="text-align: justify; width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">On April 16, 2019 we issued we issued 407 shares of common stock to a non-employee director in
connection with services rendered.</TD></TR></TABLE>

<P STYLE="text-align: justify; margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="text-align: justify; width: 0.5in"></TD><TD STYLE="text-align: justify; width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">On April 16, 2019 we issued we issued 407 shares of common stock to a non-employee director in
connection with services rendered.</TD></TR></TABLE>

<P STYLE="text-align: justify; margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="text-align: justify; width: 0.5in"></TD><TD STYLE="text-align: justify; width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">On May 15, 2019 we issued 1,202 shares of common stock to a non-employee director in connection
with services rendered.</TD></TR></TABLE>

<P STYLE="text-align: justify; margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="text-align: justify; width: 0.5in"></TD><TD STYLE="text-align: justify; width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">On August 19, 2019 we issued 1,995 shares of common stock to a non-employee director in connection
with services rendered.</TD></TR></TABLE>

<P STYLE="text-align: justify; margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="text-align: justify; width: 0.5in"></TD><TD STYLE="text-align: justify; width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">On December 5, 2019 we issued 21,750 shares of common stock to CVI Investments, Inc. (&ldquo;CVI&rdquo;)
pursuant to that certain Exchange Agreement dated December 5, 2019.</TD></TR></TABLE>

<P STYLE="text-align: justify; margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="text-align: justify; width: 0.5in"></TD><TD STYLE="text-align: justify; width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">On January 8, 2020 we issued 27,178 shares of common stock to Alpha Capital Anstalt (&ldquo;Alpha&rdquo;)
pursuant to conversions of the June 2018 Notes held by Alpha.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>




<P STYLE="margin-top: 0; margin-bottom: 0"></P>

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<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

<!-- Field: Split-Segment; Name: 20 -->
<P STYLE="font-size: 10pt; margin-top: 0; margin-bottom: 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="font-size: 10pt; vertical-align: top">
<TD STYLE="font-size: 10pt; width: 0.5in"></TD><TD STYLE="font-size: 10pt; width: 0.25in"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD><TD STYLE="font-size: 10pt; text-align: justify"><FONT STYLE="font-size: 10pt">On
                                         January 9, 2020 we issued 24,049 shares of common stock to CVI pursuant to conversions
                                         of the December 2018 Notes and March 2019 Notes held by CVI.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="font-size: 10pt; vertical-align: top">
<TD STYLE="font-size: 10pt; width: 0.5in"></TD><TD STYLE="font-size: 10pt; width: 0.25in"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD><TD STYLE="font-size: 10pt; text-align: justify"><FONT STYLE="font-size: 10pt">On
                                         January 14, 2020 we issued 12,915 shares of common stock to Osher Capital Partners LLC
                                         (&ldquo;Osher&rdquo;) pursuant to the conversion of March 2019 Notes held by Osher.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="font-size: 10pt; vertical-align: top">
<TD STYLE="font-size: 10pt; width: 0.5in"></TD><TD STYLE="font-size: 10pt; width: 0.25in"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD><TD STYLE="font-size: 10pt; text-align: justify"><FONT STYLE="font-size: 10pt">On
                                         January 17, 2020 we issued 18,033 shares of common stock to Alpha pursuant to the conversion
                                         of December 2018 Notes held by Alpha.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="font-size: 10pt; vertical-align: top">
<TD STYLE="font-size: 10pt; width: 0.5in"></TD><TD STYLE="font-size: 10pt; width: 0.25in"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD><TD STYLE="font-size: 10pt; text-align: justify"><FONT STYLE="font-size: 10pt">On
                                         January 17, 2020 we issued 20,000 shares of common stock to MEF I, LP (&ldquo;MEF&rdquo;)
                                         pursuant to the conversion of June 2018 Notes held by MEF.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="font-size: 10pt; vertical-align: top">
<TD STYLE="font-size: 10pt; width: 0.5in"></TD><TD STYLE="font-size: 10pt; width: 0.25in"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD><TD STYLE="font-size: 10pt; text-align: justify"><FONT STYLE="font-size: 10pt">On
                                         January 22, 2020 we issued 83,543 shares of common stock to Dominion Capital, LLC pursuant
                                         to that certain Settlement Agreement and Mutual Release, dated January 22, 2020.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="font-size: 10pt; vertical-align: top">
<TD STYLE="font-size: 10pt; width: 0.5in"></TD><TD STYLE="font-size: 10pt; width: 0.25in"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD><TD STYLE="font-size: 10pt; text-align: justify"><FONT STYLE="font-size: 10pt">On
                                         March 23, 2020 we issued (i) 66,123 shares of common stock, (ii) warrants to purchase
                                         130,360 common stock, (iii) an amended and restated senior convertible note convertible
                                         into 78,582 shares of common stock and (iv) a senior convertible note convertible into
                                         15,717 shares of our common stock to Alpha pursuant to that certain Amendment and Exchange
                                         Agreement with Alpha, dated March 23, 2020.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="font-size: 10pt; vertical-align: top">
<TD STYLE="font-size: 10pt; width: 0.5in"></TD><TD STYLE="font-size: 10pt; width: 0.25in"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD><TD STYLE="font-size: 10pt; text-align: justify"><FONT STYLE="font-size: 10pt">On
                                         March 23, 2020 we issued (i) 16,531 shares of common stock, (ii) warrants to purchase
                                         32,590 shares of common stock, (iii) an amended and restated senior convertible note
                                         convertible into 11,687 shares of common stock and (iv) a senior convertible note convertible
                                         into 2,338 shares of our common stock to Osher Capital Partners LLC (&ldquo;Osher&rdquo;)
                                         pursuant to that certain Amendment and Exchange Agreement with Osher, dated March 23,
                                         2020.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="font-size: 10pt; vertical-align: top">
<TD STYLE="font-size: 10pt; width: 0.5in"></TD><TD STYLE="font-size: 10pt; width: 0.25in"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD><TD STYLE="font-size: 10pt; text-align: justify"><FONT STYLE="font-size: 10pt">On
                                         March 24, 2020 we issued (i) warrants to purchase 260,719 shares of common stock and
                                         (ii) a senior convertible note convertible into 198,756 shares of our common stock to
                                         CVI pursuant to that certain Exchange Agreement with CVI, dated March 24, 2020.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="font-size: 10pt; vertical-align: top">
<TD STYLE="font-size: 10pt; width: 0.5in"></TD><TD STYLE="font-size: 10pt; width: 0.25in"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD><TD STYLE="font-size: 10pt; text-align: justify"><FONT STYLE="font-size: 10pt">On
                                         June 4, 2020, Scott W. Absher, our Chief Executive Officer, exercised 12,500,000 Preferred
                                         Options to purchase 12,500,000 shares of our preferred stock for $1,250. Immediately
                                         following the exercise of the Preferred Options described above, Mr. Absher elected to
                                         convert the 12,500,000 shares of preferred stock into 12,500,000 shares of our common
                                         stock, which are subject to a 24-month lock-up period during which such shares may not
                                         be traded.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><FONT STYLE="font-size: 10pt"></FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 0.5in">&nbsp;</TD>
    <TD STYLE="width: 0.25in; font-size: 10pt"><FONT STYLE="font-family: Symbol; font-size: 10pt">&middot;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">On July 20, 2020, certain holders of our Preferred Options exercised 209,030 Preferred Optinos to purchase 209,030 shares of our preferred stock for $209.03.&nbsp;&nbsp;Immediately following the exercise of the Preferred Options described above, such holders elected to convert the 209,030 shares of preferred stock into 209,030 shares of our common stock, which are subject to a six-month lock-up period during which such shares may not be traded.</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><FONT STYLE="font-size: 10pt"></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt"><B>Item 16. Exhibits and Financial
Statement Schedules</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-indent: -24pt"><FONT STYLE="font-size: 10pt">(a)
Exhibits</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-indent: -24pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-size: 10pt">The following
documents are filed as exhibits to this registration statement.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="font-size: 10pt; vertical-align: bottom">
    <TD STYLE="font-size: 10pt; width: 8%; border-top: black 1pt solid; border-bottom: black 1pt solid; padding-right: 3pt; padding-bottom: 2.25pt"><FONT STYLE="font-size: 10pt"><B>Exhibit&nbsp;No.</B></FONT></TD>
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; width: 90%; border-top: black 1pt solid; border-bottom: black 1pt solid; padding-bottom: 2.25pt; text-align: center"><FONT STYLE="font-size: 10pt"><B>Description</B></FONT></TD></TR>
<TR STYLE="font-size: 10pt; vertical-align: top; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt; padding-left: 10pt; text-indent: -10pt"><FONT STYLE="font-size: 10pt">1.1*</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt"><FONT STYLE="font-size: 10pt">Form of Underwriting Agreement.</FONT></TD></TR>
<TR STYLE="font-size: 10pt; background-color: White">
    <TD STYLE="font-size: 10pt; vertical-align: top; padding-bottom: 2.25pt; padding-left: 10pt; text-indent: -10pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793216010647/0001477932-16-010647-index.html" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">3.1</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793216010647/0001477932-16-010647-index.html" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">Articles of Incorporation of ShiftPixy, Inc. (incorporated by reference from Exhibit 2.1 to our Offering Circular, filed with the SEC on Form 1-A on May 31, 2016).</FONT></A></TD></TR>
<TR STYLE="font-size: 10pt; vertical-align: top; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt; padding-left: 10pt; text-indent: -10pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793216012993/0001477932-16-012993-index.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">3.2</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793216012993/0001477932-16-012993-index.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">Amendment to Articles of Incorporation of ShiftPixy, Inc., dated September 28, 2016 (incorporated by reference from Exhibit 2.6 to our Form 1-A/A, filed with the SEC on October 18, 2016).</FONT></A></TD></TR>
<TR STYLE="font-size: 10pt; vertical-align: top; background-color: White">
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793220000353/pixy_ex3.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">3.3</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793220000353/pixy_ex3.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">Amendment to Articles of Incorporation of ShiftPixy, Inc.,
    dated January 7, 2020 (incorporated by reference from Exhibit 3 to our current Report on Form 8-K, filed with the SEC on January
    23, 2020).</FONT></A></TD></TR>
<TR STYLE="font-size: 10pt; vertical-align: top; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000110465920038474/tm2013851d1_ex3-1.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">3.4</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000110465920038474/tm2013851d1_ex3-1.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">Amended and Restated Articles of Incorporation of ShiftPixy,
    Inc., dated March 20. 2020 (incorporated by reference from Exhibit 3.1 to our Current Report on Form 8-K, filed with the SEC
    on March 26, 2020).</FONT></A></TD></TR>
<TR STYLE="font-size: 10pt; background-color: White">
    <TD STYLE="font-size: 10pt; vertical-align: top; padding-bottom: 2.25pt; padding-left: 10pt; text-indent: -10pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793218000981/pixy_ex32.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">3.5</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793218000981/pixy_ex32.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">Bylaws of ShiftPixy, Inc., as amended through February 16,
    2018 (incorporated by reference from Exhibit 3.2 to our 8-K, filed with the SEC on February 22, 2018).</FONT></A></TD></TR>
<TR STYLE="font-size: 10pt; vertical-align: top; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt; padding-left: 10pt; text-indent: -10pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793216011968/0001477932-16-011968-index.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">3.6</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793216011968/0001477932-16-011968-index.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">Articles of Incorporation of Shift Human Capital Management Inc. (incorporated by reference from Exhibit 2.4 to our Form 1-A/A, filed with the SEC on August 16, 2016).</FONT></A></TD></TR>
<TR STYLE="font-size: 10pt; background-color: White">
    <TD STYLE="font-size: 10pt; vertical-align: top; padding-bottom: 2.25pt; padding-left: 10pt; text-indent: -10pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793216011968/0001477932-16-011968-index.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">3.7</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-size: 10pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793216011968/0001477932-16-011968-index.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">Bylaws of Shift Human Capital Management Inc.&nbsp;(incorporated by reference from Exhibit 2.5 to our Form 1-A/A, filed with the SEC on August 16, 2016)<I>.</I></FONT></A></TD></TR>
<TR STYLE="font-size: 10pt; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; vertical-align: top; padding-bottom: 2.25pt; padding-left: 10pt; text-indent: -10pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793216012993/0001477932-16-012993-index.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">4.1</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-size: 10pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793216012993/0001477932-16-012993-index.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">Amended Principal Shareholder Option (incorporated by reference as Exhibit 3.5 to our 1-A/A, filed with the SEC on October 18, 2016).</FONT></A></TD></TR>
<TR STYLE="font-size: 10pt; vertical-align: top; background-color: White">
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt; padding-left: 10pt; text-indent: -10pt"><FONT STYLE="font-size: 10pt">4.2*</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt"><FONT STYLE="font-size: 10pt">Form of Pre-Funded Warrant.</FONT></TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="font-size: 10pt; vertical-align: top; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt; padding-left: 10pt; text-indent: -10pt"><FONT STYLE="font-size: 10pt">4.3*</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt"><FONT STYLE="font-size: 10pt">Form of Underwriter Warrant.</FONT></TD></TR>
<TR STYLE="font-size: 10pt; vertical-align: top; background-color: White">
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt; padding-left: 10pt; text-indent: -10pt"><FONT STYLE="font-size: 10pt">4.4*</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt"><FONT STYLE="font-size: 10pt">Form of Common Stock Purchase Warrant.</FONT></TD></TR>
<TR STYLE="font-size: 10pt; vertical-align: top; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt; padding-left: 10pt; text-indent: -10pt"><FONT STYLE="font-size: 10pt">5.1*</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt"><FONT STYLE="font-size: 10pt">Opinion of Bailey, Stock, Harmon, Cottam, Lopez LLP.</FONT></TD></TR>
<TR STYLE="font-size: 10pt; vertical-align: top; background-color: White">
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793217001502/pixy_ex38.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">10.1&dagger;</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793217001502/pixy_ex38.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">2017 Stock Option and Share Issuance Plan (incorporated by
    reference as Exhibit 3.8 to our 1-A POS, filed with the SEC on April 4, 2017).</FONT></A></TD></TR>
<TR STYLE="font-size: 10pt; vertical-align: top; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt; padding-left: 10pt; text-indent: -10pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793218002952/pixy_ex41.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">10.2</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793218002952/pixy_ex41.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">Form of 8% Senior Secured Convertible Note Due September
    4, 2019, dated June 4, 2018 (incorporated by reference from Exhibit 4.1 to our Current Report on Form 8-K, filed with the
    SEC on June 8, 2018).</FONT></A></TD></TR>
<TR STYLE="font-size: 10pt; vertical-align: top; background-color: White">
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793218002952/pixy_ex42.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">10.3</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793218002952/pixy_ex42.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">Form of Security Agreement, dated June 4, 2018 (incorporated
    by reference from Exhibit 4.2 to our Current Report on Form 8-K, filed with the SEC on June 8, 2018).</FONT></A></TD></TR>
<TR STYLE="font-size: 10pt; vertical-align: top; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt; padding-left: 10pt; text-indent: -10pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793218002952/pixy_ex43.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">10.4</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793218002952/pixy_ex43.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">Form of Common Stock Purchase Warrant, dated June 4, 2018
    (incorporated by reference from Exhibit 4.3 to our Current Report on Form 8-K, filed with the SEC on June 8, 2018).</FONT></A></TD></TR>
<TR STYLE="font-size: 10pt; vertical-align: top; background-color: White">
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793218002952/pixy_ex101.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">10.5</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793218002952/pixy_ex101.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">Form of Securities Purchase Agreement, dated June 4, 2018
    (incorporated by reference from Exhibit 10.1 to our Current Report on Form 8-K, filed with the SEC on June 8, 2018).</FONT></A></TD></TR>
<TR STYLE="font-size: 10pt; vertical-align: top; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt; padding-left: 10pt; text-indent: -10pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793218002952/pixy_ex102.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">10.6</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793218002952/pixy_ex102.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">Form of Registration Rights Agreement, dated June 4, 2018
    (incorporated by reference from Exhibit 10.2 to our Current Report on Form 8-K, filed with the SEC on June 8, 2018).</FONT></A></TD></TR>
<TR STYLE="font-size: 10pt; vertical-align: top; background-color: White">
    <TD STYLE="font-size: 10pt; width: 8%; padding-bottom: 2.25pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793218004943/pixy_ex107.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">10.7&dagger;</FONT></A></TD>
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; width: 90%; padding-bottom: 2.25pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793218004943/pixy_ex107.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">First Amendment to Director Agreement, by and
    between Shift Pixy, Inc. and Kenneth W. Weaver Agreement, dated August 1, 2017 (incorporated by reference from Exhibit 10.7
    to our Annual Report on form 10-K/A, Amendment No. 2, filed with the SEC on October 18, 2018).</FONT></A></TD></TR>
<TR STYLE="font-size: 10pt; vertical-align: top; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt; padding-left: 10pt; text-indent: -10pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793218006129/pixy_ex101.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">10.8</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793218006129/pixy_ex101.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">Form of Limited Settlement Agreement and Mutual Release,
    dated December 20, 2018 (incorporated by reference from Exhibit 10.1 to our Current Report on Form 8-K, filed with the SEC
    on December 21, 2018).</FONT></A></TD></TR>
<TR STYLE="font-size: 10pt; vertical-align: top; background-color: White">
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt; padding-left: 10pt; text-indent: -10pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793218006129/pixy_ex41.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">10.9</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793218006129/pixy_ex41.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">Form of 8% Senior Secured Convertible Note Due December 31,
    2019, dated December 20, 2018 (incorporated by reference from Exhibit 4.1 to our Current Report on Form 8-K, filed with the
    SEC on December 24, 2018).</FONT></A></TD></TR>
<TR STYLE="font-size: 10pt; vertical-align: top; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt; padding-left: 10pt; text-indent: -10pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793219000941/pixy_ex41.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">10.10</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793219000941/pixy_ex41.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">Form of Senior Convertible Note (incorporated by reference
    from Exhibit 4.1 to our Current Report on Form 8-K, filed with the SEC on March 12, 2019).</FONT></A></TD></TR>
<TR STYLE="font-size: 10pt; vertical-align: top; background-color: White">
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793219000941/pixy_ex42.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">10.11</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793219000941/pixy_ex42.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">Form of Warrant to Purchase Common Stock (incorporated by
    reference from Exhibit 4.2 to our Current Report on Form 8-K, filed with the SEC on March 12, 2019).</FONT></A></TD></TR>
<TR STYLE="font-size: 10pt; vertical-align: top; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt; padding-left: 10pt; text-indent: -10pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793219000941/pixy_ex101.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">10.12</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793219000941/pixy_ex101.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">Form of Securities Purchase Agreement, dated March 11, 2019
    (incorporated by reference from Exhibit 10.1 to our Current Report on Form 8-K, filed with the SEC on March 12, 2019).</FONT></A></TD></TR>
<TR STYLE="font-size: 10pt; vertical-align: top; background-color: White">
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793219000941/pixy_ex102.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">10.13</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793219000941/pixy_ex102.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">Form of Registration Rights Agreement (incorporated by reference
    from Exhibit 10.2 to our Current Report on Form 8-K, filed with the SEC on March 12, 2019).</FONT></A></TD></TR>
<TR STYLE="font-size: 10pt; vertical-align: top; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt; padding-left: 10pt; text-indent: -10pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793219000941/pixy_ex103.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">10.14</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793219000941/pixy_ex103.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">Form of Amendment Agreement (incorporated by reference from
    Exhibit 10.3 to our Current Report on Form 8-K, filed with the SEC on March 12, 2019).</FONT></A></TD></TR>
<TR STYLE="font-size: 10pt; vertical-align: top; background-color: White">
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793219000941/pixy_ex104.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">10.15</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793219000941/pixy_ex104.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">Form of Amended and Restated 8% Senior Secured Convertible
    Note, dated June 4, 2018 (incorporated by reference from Exhibit 10.4 to our Current Report on Form 8-K, filed with the SEC
    on March 12, 2019).</FONT></A></TD></TR>
<TR STYLE="font-size: 10pt; vertical-align: top; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt; padding-left: 10pt; text-indent: -10pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793219000941/pixy_ex105.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">10.16</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793219000941/pixy_ex105.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">Form of Amended and Restated 8% Senior Secured Convertible
    Note Due December 31, 2019, dated December 20, 2018 (incorporated by reference from Exhibit 10.5 to our Current Report on
    Form 8-K, filed with the SEC on March 12, 2019).</FONT></A></TD></TR>
<TR STYLE="font-size: 10pt; vertical-align: top; background-color: White">
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt; padding-left: 10pt; text-indent: -10pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793219004449/pixy_ex101.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">10.17&dagger;</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793219004449/pixy_ex101.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">Offer Letter to Domonic Carney, dated July 16, 2019 (incorporated
    by reference from Exhibit 10.1 to our Current Report on Form 8-K, filed with the SEC on August 1, 2019).</FONT></A></TD></TR>
<TR STYLE="font-size: 10pt; vertical-align: top; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793219006984/pixy_ex41.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">10.18</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793219006984/pixy_ex41.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">Form of Amended and Restated 8% Senior Secured Convertible
    Note, dated June 4, 2018 (incorporated by reference from Exhibit 4.1 to our Current Report on Form 8-K, filed with the SEC
    on December 6, 2019).</FONT></A></TD></TR>
<TR STYLE="font-size: 10pt; vertical-align: top; background-color: White">
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt; padding-left: 10pt; text-indent: -10pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793219006984/pixy_ex42.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">10.19</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793219006984/pixy_ex42.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">Senior Secured Convertible Note, dated March 12, 2019 (incorporated
    by reference from Exhibit 4.2 to our Current Report on Form 8-K, filed with the SEC on December 6, 2019).</FONT></A></TD></TR>
<TR STYLE="font-size: 10pt; vertical-align: top; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793219006984/pixy_ex101.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">10.20</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793219006984/pixy_ex101.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">Form of Exchange Agreement, dated December 5, 2019 (incorporated
    by reference from Exhibit 10.1 to our Current Report on Form 8-K, filed with the SEC on December 6, 2019).</FONT></A></TD></TR>
<TR STYLE="font-size: 10pt; vertical-align: top; background-color: White">
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793220000080/pixy_ex101.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">10.21</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793220000080/pixy_ex101.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">Asset Purchase Agreement, dated January 3, 2020, by and between
    ShiftPixy, Inc. and Shiftable HR Acquisition, LLC, dated January 3, 2020 (incorporated by reference from Exhibit 10.1 to our
    Current Report on Form 8-K, filed with the SEC on January 7, 2020).</FONT></A></TD></TR>
<TR STYLE="font-size: 10pt; vertical-align: top; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793220000343/pixy_ex101.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">10.22</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000147793220000343/pixy_ex101.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">Settlement Agreement and Mutual Release, dated January 22,
    2020, by and between ShiftPixy, Inc. and Dominion Capital LLC (incorporated by reference from Exhibit 10.1 to our Current
    Report on Form 8-K, filed with the SEC on January 23, 2020).</FONT></A></TD></TR>
<TR STYLE="font-size: 10pt; vertical-align: top; background-color: White">
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000110465920039721/tm2010895d1_ex10-23.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">10.23</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000110465920039721/tm2010895d1_ex10-23.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">Settlement Agreement, dated January 16, 2020, by and between
    ShiftPixy, Inc. and MEF I, LP (incorporated by reference from Exhibit 10.23 to our registration statement on Form S-1, filed
    with the SEC on March 30, 2020).</FONT></A></TD></TR>
<TR STYLE="font-size: 10pt; vertical-align: top; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000110465920037483/tm2013572d1_ex10-1.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">10.24</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000110465920037483/tm2013572d1_ex10-1.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">Amendment and Exchange Agreement, dated March 23, 2020, by
    and between ShiftPixy, Inc. and Alpha Capital Anstalt (incorporated by reference from Exhibit 10.1 to our Current Report on
    Form 8-K, filed with the SEC on March 24, 2020).</FONT></A></TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt"></FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="font-size: 10pt; vertical-align: top; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000110465920037483/tm2013572d1_ex10-2.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">10.25</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-size: 10pt; padding-bottom: 2.25pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000110465920037483/tm2013572d1_ex10-2.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">Amendment and Exchange Agreement, dated March 23, 2020, by
    and between ShiftPixy, Inc. and Osher Capital Partners LLC (incorporated by reference from Exhibit 10.2 to our Current Report
    on Form 8-K, filed with the SEC on March 24, 2020).</FONT></A></TD></TR>
<TR STYLE="font-size: 10pt; vertical-align: top; background-color: White">
    <TD STYLE="font-size: 10pt; width: 8%; padding-left: 10pt; text-indent: -10pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000110465920037953/tm2013697d1_ex10-1.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">10.26</FONT></A></TD>
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="font-size: 10pt; width: 90%"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000110465920037953/tm2013697d1_ex10-1.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">Exchange Agreement, dated March 24, 2020, by and between ShiftPixy, Inc.
    and CVI Investments, Inc. (incorporated by reference from Exhibit 10.1 to our Current Report on Form 8-K, filed with the SEC
    on March 25, 2020).</FONT></A></TD></TR>
<TR STYLE="font-size: 10pt; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; vertical-align: top; padding-left: 10pt; text-indent: -10pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000110465920037483/tm2013572d1_ex4-1.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">10.27</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-size: 10pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000110465920037483/tm2013572d1_ex4-1.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">Form of Amended and Restated Note issued to Alpha Capital Anstalt and Osher Capital Partners
    on March 23, 2020 (incorporated by reference from Exhibit 4.1 to our Current Report on Form 8-K, filed with the SEC on March
    23, 2020).</FONT></A></TD></TR>
<TR STYLE="font-size: 10pt; background-color: White">
    <TD STYLE="font-size: 10pt; vertical-align: top; padding-left: 10pt; text-indent: -10pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000110465920037483/tm2013572d1_ex4-2.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">10.28</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-size: 10pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000110465920037483/tm2013572d1_ex4-2.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">Form of Exchange Note issued to Alpha Capital Anstalt and Osher Capital Partners on March
    23, 2020 (incorporated by reference from Exhibit 4.2 to our Current Report on Form 8-K, filed with the SEC on March 23, 2020).</FONT></A></TD></TR>
<TR STYLE="font-size: 10pt; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; vertical-align: top; padding-left: 10pt; text-indent: -10pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000110465920037483/tm2013572d1_ex4-3.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">10.29</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-size: 10pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000110465920037483/tm2013572d1_ex4-3.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">Form of Exchange Warrant issued to Alpha Capital Anstalt and Osher Capital Partners on March
    23, 2020 (incorporated by reference from Exhibit 4.3 to our Current Report on Form 8-K, filed with the SEC on March 23, 2020).</FONT></A></TD></TR>
<TR STYLE="font-size: 10pt; background-color: White">
    <TD STYLE="font-size: 10pt; vertical-align: top; padding-left: 10pt; text-indent: -10pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000110465920037483/tm2013572d1_ex4-3.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">10.30</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-size: 10pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000110465920037483/tm2013572d1_ex4-3.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">Form of Exchange Warrant issued to CVI Capital Investments, Inc. on March 24, 2020 (incorporated
    by reference from Exhibit 4.1 to our Current Report on Form 8-K, filed with the SEC on March 24, 2020).</FONT></A></TD></TR>
<TR STYLE="font-size: 10pt; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; vertical-align: top; padding-left: 10pt; text-indent: -10pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000110465920037483/tm2013572d1_ex4-2.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">10.31</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-size: 10pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000110465920037483/tm2013572d1_ex4-2.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">Form of Exchange Note issued to CVI Capital Investments, Inc. on March 24, 2020 (incorporated
    by reference from Exhibit 4.2 to our Current Report on Form 8-K, filed with the SEC on March 24, 2020).</FONT></A></TD></TR>
<TR STYLE="font-size: 10pt; background-color: White">
    <TD STYLE="font-size: 10pt; vertical-align: top; padding-left: 10pt; text-indent: -10pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000110465920063856/tm2018551d1_ex4-2.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">10.32</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-size: 10pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000110465920063856/tm2018551d1_ex4-2.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">Form of Pre-Funded Warrant (incorporated by reference as Exhibit 4.2 to Amendment No. 1
    to our Registration Statement on Form S-1, filed with the SEC on May 19, 2020).</FONT></A></TD></TR>
<TR STYLE="font-size: 10pt; vertical-align: top; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; padding-left: 10pt; text-indent: -10pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000110465920063856/tm2018551d1_ex4-3.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">10.33</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-size: 10pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000110465920063856/tm2018551d1_ex4-3.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">Form of Underwriter Warrant (incorporated by reference as Exhibit 4.3 to Amendment No. 1
    to our Registration Statement on Form S-1, filed with the SEC on May 19, 2020).</FONT></A></TD></TR>
<TR STYLE="font-size: 10pt; vertical-align: top; background-color: White">
    <TD STYLE="font-size: 10pt; padding-left: 10pt; text-indent: -10pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000110465920063856/tm2018551d1_ex4-4.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">10.34</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-size: 10pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000110465920063856/tm2018551d1_ex4-4.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">Form of Common Stock Purchase Warrant (incorporated by reference as Exhibit 4.4 to Amendment
    No. 1 to our Registration Statement on Form S-1, filed with the SEC on May 19, 2020).</FONT></A></TD></TR>
<TR STYLE="font-size: 10pt; vertical-align: top; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; padding-left: 10pt; text-indent: -10pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000110465920039721/tm2010895d1_ex10-27.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">10.25&dagger;</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-size: 10pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000110465920039721/tm2010895d1_ex10-27.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">Offer Letter to Scott W. Absher, dated March 23, 2016 (incorporated by reference from Exhibit
    10.27 to our registration statement on Form S-1, filed with the SEC on March 30, 2020).</FONT></A></TD></TR>
<TR STYLE="font-size: 10pt; vertical-align: top; background-color: White">
    <TD STYLE="font-size: 10pt; padding-left: 10pt; text-indent: -10pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000110465920039721/tm2010895d1_ex21-1.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">21.1</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-size: 10pt"><A HREF="http://www.sec.gov/Archives/edgar/data/1675634/000110465920039721/tm2010895d1_ex21-1.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">List of subsidiaries of ShiftPixy, Inc. (incorporated by reference from Exhibit 21.1 to
    our registration statement on Form S-1, filed with the SEC on March 30, 2020).</FONT></A></TD></TR>
<TR STYLE="font-size: 10pt; vertical-align: top; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; padding-left: 10pt; text-indent: -10pt"><A HREF="tm2025554d1_ex23-1.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">23.1</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-size: 10pt"><A HREF="tm2025554d1_ex23-1.htm" STYLE="-sec-extract: exhibit"><FONT STYLE="font-size: 10pt">Consent of Marcum, LLP, Independent Registered Public Accounting Firm.</FONT></A></TD></TR>
<TR STYLE="font-size: 10pt; vertical-align: top; background-color: White">
    <TD STYLE="font-size: 10pt; padding-left: 10pt; text-indent: -10pt"><FONT STYLE="font-size: 10pt">23.2*</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">Consent of Bailey, Stock, Harmon, Cottam, Lopez LLP (included in Exhibit 5.1).</FONT></TD></TR>
<TR STYLE="font-size: 10pt; vertical-align: top; background-color: rgb(204,238,255)">
    <TD STYLE="font-size: 10pt; padding-left: 10pt; text-indent: -10pt"><A HREF="#poa"><FONT STYLE="font-size: 10pt">24.1</FONT></A></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-size: 10pt"><A HREF="#poa"><FONT STYLE="font-size: 10pt">Power of Attorney (included on signature page to this Registration Statement).</FONT></A></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 24pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">*&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT STYLE="background-color: white">To
be filed by amendment.</FONT></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt; background-color: white">&dagger;</FONT><FONT STYLE="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT STYLE="background-color: white">Indicates
a management contract or compensatory plan or arrangement.</FONT></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><FONT STYLE="font-size: 10pt">(b)
Financial statement schedules</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-size: 10pt">Schedules
not listed above have been omitted because the information required to be set forth therein is not applicable or is shown in the
financial statements or notes thereto.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 42pt; text-align: justify; text-indent: -42pt"><FONT STYLE="font-size: 10pt"><B>Item
17. Undertakings</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 42pt; text-align: justify; text-indent: -42pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-size: 10pt">The
undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing
of the registrant&rsquo;s annual report pursuant to section 13(a) or section 15(d) of the Exchange Act (and, where applicable,
each filing of an employee benefit plan&rsquo;s annual report pursuant to section 15(d) of the Securities Exchange Act of 1934)
that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering
thereof.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-size: 10pt">The
undersigned registrant hereby undertakes that:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="font-size: 10pt; vertical-align: top">
<TD STYLE="font-size: 10pt; width: 0"></TD><TD STYLE="font-size: 10pt; width: 0.25in"><FONT STYLE="font-size: 10pt">1.</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">For purposes of determining any liability
                                         under the Securities Act, the information omitted from the form of prospectus filed as
                                         part of this registration statement in reliance upon Rule 430A and contained in a form
                                         of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under
                                         the Securities Act shall be deemed to be part of this registration statement as of the
                                         time it was declared effective.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="font-size: 10pt; vertical-align: top">
<TD STYLE="font-size: 10pt; width: 0"></TD><TD STYLE="font-size: 10pt; width: 0.25in"><FONT STYLE="font-size: 10pt">2.</FONT></TD><TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">For the purpose of determining any
                                         liability under the Securities Act, each post-effective amendment that contains a form
                                         of prospectus shall be deemed to be a new registration statement relating to the securities
                                         offered therein, and the offering of such securities at that time shall be deemed to
                                         be the initial bona fide offering thereof.</FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-size: 10pt">Insofar
as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the
SEC such indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer, or controlling person of the Registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt"><B>SIGNATURES</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-size: 10pt">Pursuant
to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Irvine, CA on the day of July 27, 2020.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font: bold 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">ShiftPixy,
    Inc.</FONT></TD></TR>
<TR STYLE="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; width: 50%"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: italic 10pt Times New Roman, Times, Serif; width: 3%"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">By: </FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; font: italic 10pt Times New Roman, Times, Serif; width: 47%"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">/s/ Scott W. Absher</FONT></TD></TR>
<TR STYLE="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Name:&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"> <FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Scott W. Absher</FONT></TD></TR>
<TR STYLE="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Title:</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"> <FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Chief Executive Officer</FONT></TD></TR>
<TR STYLE="font: 10pt Times New Roman, Times, Serif; vertical-align: bottom">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">(Principal
    Executive Officer)</FONT></TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4in"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-size: 10pt"><A NAME="poa"></A>KNOW
ALL MEN BY THESE PRESENTS, that each of the undersigned directors and officers of ShiftPixy, Inc. constitutes and appoints Scott
W. Absher, his or her true and lawful attorney-in-fact and agent, with full powers of substitution and resubstitution, for him
or her and in his or her name, place and stead, in any and all capacities, to sign any or all amendments (including post-effective
amendments) to this registration statement and to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, with full power to act
alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about
the premises, as fully to all intents and purposes as he or she might or could do in person, and hereby ratifying and confirming
all that the said attorney-in-fact and agent, or his substitute or substitute, may lawfully do or cause to be done by virtue hereof.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 33.75pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-size: 10pt">Pursuant
to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="font-size: 10pt; vertical-align: top">
    <TD STYLE="font-size: 10pt; width: 33%; border-bottom: black 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt"><B>Signature</B></FONT></TD>
    <TD STYLE="font-size: 10pt; width: 1%; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Title</B></FONT></TD>
    <TD STYLE="font-size: 10pt; width: 1%; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; width: 21%; border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font-size: 10pt"><B>Date</B></FONT></TD></TR>
<TR STYLE="font-size: 10pt; vertical-align: top">
    <TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: justify"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size: 10pt; vertical-align: top">
    <TD STYLE="font-size: 10pt; border-bottom: black 1pt solid; text-align: justify"><FONT STYLE="font-size: 10pt"><I>/s/ Scott W. Absher</I></FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: justify"><FONT STYLE="font-size: 10pt">Chief Executive Officer and Director</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: justify"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">July 27, 2020</FONT></TD></TR>
<TR STYLE="font-size: 10pt">
    <TD STYLE="font-size: 10pt; vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Scott W. Absher</FONT></TD>
    <TD STYLE="font-size: 10pt; vertical-align: top; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">(Principal Executive Officer)</FONT></TD>
    <TD STYLE="font-size: 10pt; vertical-align: top"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size: 10pt; vertical-align: top">
    <TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: justify"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size: 10pt">
    <TD STYLE="font-size: 10pt; vertical-align: top; border-bottom: black 1pt solid"><FONT STYLE="font-size: 10pt"><I>/s/ Domonic Carney</I></FONT></TD>
    <TD STYLE="font-size: 10pt; vertical-align: top; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Chief Financial Officer</FONT></TD>
    <TD STYLE="font-size: 10pt; vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: right">July 27, 2020</TD></TR>
<TR STYLE="font-size: 10pt">
    <TD STYLE="font-size: 10pt; vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Domonic Carney</FONT></TD>
    <TD STYLE="font-size: 10pt; vertical-align: top; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">(Principal Financial Officer and Principal
    Accounting Officer)</FONT></TD>
    <TD STYLE="font-size: 10pt; vertical-align: top"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size: 10pt; vertical-align: top">
    <TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: justify"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size: 10pt">
    <TD STYLE="font-size: 10pt; vertical-align: top; border-bottom: black 1pt solid"><FONT STYLE="font-size: 10pt"><I>/s/ Kenneth Weaver</I></FONT></TD>
    <TD STYLE="font-size: 10pt; vertical-align: top; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Director</FONT></TD>
    <TD STYLE="font-size: 10pt; vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">July 27, 2020</FONT></TD></TR>
<TR STYLE="font-size: 10pt">
    <TD STYLE="font-size: 10pt; vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Kenneth Weaver</FONT></TD>
    <TD STYLE="font-size: 10pt; vertical-align: top"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; vertical-align: top"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; vertical-align: top"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size: 10pt; vertical-align: top">
    <TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: justify"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size: 10pt">
    <TD STYLE="font-size: 10pt; vertical-align: top; border-bottom: black 1pt solid"><FONT STYLE="font-size: 10pt"><I>/s/ Whitney White</I></FONT></TD>
    <TD STYLE="font-size: 10pt; vertical-align: top; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">Director</FONT></TD>
    <TD STYLE="font-size: 10pt; vertical-align: top; text-align: justify"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">July 27, 2020</FONT></TD></TR>
<TR STYLE="font-size: 10pt; vertical-align: top">
    <TD STYLE="font-size: 10pt; text-align: justify"><FONT STYLE="font-size: 10pt">Whitney White</FONT></TD>
    <TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: justify"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size: 10pt; vertical-align: top">
    <TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: justify"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size: 10pt; vertical-align: top">
    <TD STYLE="font-size: 10pt; border-bottom: black 1pt solid"><FONT STYLE="font-size: 10pt"><I>/s/ Christopher Sebes</I></FONT></TD>
    <TD STYLE="font-size: 10pt; padding-bottom: 1pt; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: justify"><FONT STYLE="font-size: 10pt">Director</FONT></TD>
    <TD STYLE="font-size: 10pt; padding-bottom: 1pt; text-align: justify"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: right">July 27, 2020</TD></TR>
<TR STYLE="font-size: 10pt; vertical-align: top">
    <TD STYLE="font-size: 10pt; text-align: justify"><FONT STYLE="font-size: 10pt">Christopher Sebes</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: justify"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: justify"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size: 10pt; vertical-align: top">
    <TD STYLE="font-size: 10pt; text-align: justify"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: center"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: justify"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: justify"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="font-size: 10pt; vertical-align: top">
    <TD STYLE="font-size: 10pt; border-bottom: black 1pt solid"><FONT STYLE="font-size: 10pt"><I>/s/ Amanda Murphy</I></FONT></TD>
    <TD STYLE="font-size: 10pt; padding-bottom: 1pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: justify"><FONT STYLE="font-size: 10pt">Director</FONT></TD>
    <TD STYLE="font-size: 10pt; padding-bottom: 1pt; text-align: justify"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">July 27, 2020</FONT></TD></TR>
<TR STYLE="font-size: 10pt; vertical-align: top">
    <TD STYLE="font-size: 10pt; text-align: justify"><FONT STYLE="font-size: 10pt">Amanda Murphy</FONT></TD>
    <TD STYLE="font-size: 10pt"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: justify"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: justify"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: right"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><FONT STYLE="font-size: 10pt">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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{"company-data": {"conformed-name": "ShiftPixy, Inc.", "cik": "0001675634", "assigned-sic": "7361", "irs-number": "474211438", "state-of-incorporation": "WY", "fiscal-year-end": "0831"}, "filing-values": {"form-type": "S-1", "act": "33", "file-number": "333-240136", "film-number": "201051612"}, "business-address": {"street1": "1 VENTURE", "street2": "SUITE 150", "city": "IRVINE", "state": "CA", "zip": "92618", "phone": "888-798-9100"}, "mail-address": {"street1": "1 VENTURE", "street2": "SUITE 150", "city": "IRVINE", "state": "CA", "zip": "92618"}}
As filed with the Securities and Exchange
Commission on July 27, 2020
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ShiftPixy, Inc.
(Exact name of registrant as specified in
its charter)
Wyoming
3751
26-1449404
(State or other jurisdiction of
incorporation or organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer
Identification No.)
1 Venture, Suite 150
Irvine, CA 92618
(888) 798-9100
(Address, including zip code, and telephone
number, including area code, of
registrant's principal executive offices)
Scott Absher
Chief Executive Officer
1 Venture, Suite 150
Irvine, CA 92618
(888) 798-9100
(Name, address, including zip code, and
telephone number, including area code, of agent for service)
Copies to:
Ivan K. Blumenthal, Esq.
Daniel A. Bagliebter, Esq.
Mintz, Levin, Cohn, Ferris, Glovsky and
        Popeo, P.C.
666 Third Avenue
New York, NY 10017
(212) 935-3500
Oded Har-Even, Esq.
Ron Ben-Bassat, Esq.
Sullivan & Worcester LLP
1633 Broadway Street
New York, NY 10019
(212) 660-3000
Approximate date of commencement of proposed
sale to the public: As soon as practicable after the effective date of this registration statement.
If any of the securities being registered
on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the
following box.
x
If this Form is filed to register additional
securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement for the same offering.
¨
If this Form is a post-effective amendment
filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering.
¨
If this Form is a post-effective amendment
filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering.
¨
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.
See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company,"
and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
¨
Accelerated filer
¨
Non-accelerated filer
x
Smaller reporting company
x
Emerging growth company
x
If an emerging growth company, indicate
by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.
¨
CALCULATION OF REGISTRATION FEE
Title of Each Class of Securities to be Registered
Proposed
Maximum
Aggregate
Offering Price
(1)(2)(3)
Amount of
Registration Fee
Common stock, par value $0.0001 per share
$
13,800,000
$
1,791.240
Pre-funded warrants to purchase shares of common stock and common stock issuable upon exercise thereof
(4)
$
--
--
Warrants to purchase shares of common stock and shares of common stock issuable upon exercise thereof
(4)(5)(6)
$
7,590,000
$
985.19
Underwriter's warrants and shares of common stock issuable upon exercise thereof
(6)
$
660,000
$
85.67
Total
$
22,050,000
$
2,862.10
(1)
Includes additional shares of common stock and warrants that the underwriters have the option to purchase solely to cover over-allotments, if any.
(2)
Estimated solely for the purpose of calculating the amount of the registration fee pursuant to Rule 457(o) of the Securities Act of 1933, as amended.
(3)
The proposed maximum aggregate offering price of the common
stock proposed to be sold in the offering will be reduced on a dollar-for-dollar basis based on the aggregate offering price of
the pre-funded warrants offered and sold in the offering, and therefore the proposed aggregate maximum offering price of the common
stock and pre-funded warrants (including the common stock issuable upon exercise of the pre-funded warrants), if any, is $13,800,000.
(4)
Pursuant to Rule 416 of the Securities Act of 1933, as amended, the securities being registered hereunder include such indeterminate number of additional securities as may be issued after the date hereof as a result of stock splits, stock dividends or similar transactions.
(5)
The warrants to purchase common stock are exercisable at a per
share price equal to 110% of the public offering price of one share of common stock. The proposed maximum aggregate public offering
price of the shares of common stock issuable upon the exercise of the warrants to purchase common stock was calculated to be $7,590,000,
which is equal to 110% of $6,900,000 (which is equal to 50% of $13,800,000), since each share of common stock or each pre-funded
warrant will receive a warrant to purchase one-half of one share of common stock.
(6)
Estimated solely for the purpose of calculating the registration
fee pursuant to Rule 457(g) under the Securities Act of 1933, as amended. The underwriter's warrants are exercisable at a
per-share exercise price equal to 110% of the public offering price per share of common stock. The proposed maximum aggregate offering
price of the underwriter's warrants is $660,000, which is equal to 110% of $600,000 (5% of $12,000,000).
The Registrant hereby
amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such
date as the Securities and Exchange Commission, acting pursuant to Section 8(a), may determine.
The
information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration
statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell
nor does it seek an offer to buy these securities in any state or other jurisdiction where the offer or sale is not permitted.
PRELIMINARY PROSPECTUS
SUBJECT TO COMPLETION
DATED JULY 27,
    2020
Shares
of Common Stock
Pre-Funded
Warrants to Purchase Shares of Common Stock
Warrants
to Purchase Shares of Common Stock
We are offering                shares
of our common stock, par value $0.0001 per share and warrants to purchase up to                shares of our common stock (and the common stock
issuable from time to time upon the exercise of the warrants). Each share of our common stock is being sold together with a warrant,
or a purchase warrant, to purchase up to 0.5 shares of our common stock. Each purchase warrant will have an exercise price per
share of not less than 110% of the public offering price, will be exercisable immediately and will expire on the fifth anniversary
of the original issuance date.
We are also offering
to each purchaser, if any, whose purchase of shares of common stock in this offering would otherwise result in the purchaser, together
with its affiliates and certain related parties, beneficially owning more than 4.99% of our outstanding common stock immediately
following the consummation of this offering, the opportunity to purchase, if the purchaser so chooses, pre-funded warrants, in
lieu of shares of common stock that would otherwise result in the purchaser's beneficial ownership exceeding 4.99% (or at the election
of the purchaser, 9.99%) of our outstanding common stock. Each pre-funded warrant will be immediately exercisable for one share
of our common stock and may be exercised at any time until all of the pre-funded warrants are exercised in full. The purchase price
of each pre-funded warrant will equal the price per share at which the shares of common stock are being sold to the public in this
offering, minus $0.001, and the exercise price of each pre-funded warrant will be $0.001 per share. For each pre-funded warrant
we sell, the number of shares of common stock we are offering will be decreased on a one-for-one basis. Each pre-funded warrant
purchased in this offering in lieu of common stock is also being sold together with a purchase warrant. This offering also relates
to the shares of common stock issuable upon exercise of the purchase warrants and any pre-funded warrants sold in this offering.
Pursuant to this prospectus, we are also offering the shares of common stock issuable upon the exercise of the purchase warrants
and pre-funded warrants offered hereby.
The shares of common
stock and pre-funded warrants, if any, can each be purchased only with the accompanying purchase warrants (other than the over-allotment
option), but will be issued separately, and will be immediately separable upon issuance.
Our common stock is
listed on The Nasdaq Capital Market ("Nasdaq"), under the symbol "PIXY." On July          , 2020, the last reported
sale price of our common stock was $           per share.
The final public offering
price of the shares of common stock in this offering, including the price of any pre-funded warrant and accompanying purchase warrant,
and the exercise price for the accompanying purchase warrant will be determined through negotiation between us and the lead underwriter
in the offering and the recent market price used throughout this prospectus will not be indicative of the final offering price.
There is no established public trading market for the purchase warrants or pre-funded warrants, and we do not expect a market to
develop. In addition, we do not intend to apply for a listing of the purchase warrants or the pre-funded warrants on any national
securities exchange.
We are an "emerging
growth company," as defined in Section 2(a) of the Securities Act of 1933, as amended (the "Securities Act"),
and, as such, have elected to comply with certain reduced public disclosure requirements for this prospectus and future filings.
This prospectus complies with the requirements that apply to an issuer that is an emerging growth company. See "Prospectus
Summary — Implications of Being an Emerging Growth Company."
Investing in our
securities involves a high degree of risk. See "Risk Factors" beginning on page 9 of this prospectus to read about
factors you should consider before investing in our securities.
Per Share of Common Stock and accompanying Purchase Warrant
Per
Pre-Funded
Warrant and accompanying Purchase Warrant
Total
Public offering price
(1)
$
$
$
Underwriting discounts and commissions
(2)
$
$
$
Proceeds, before expenses, to us
$
$
$
(1)
The public offering price is $            per share of common stock and accompanying purchase warrant and $               per pre-funded warrant and
accompanying purchase warrant.
(2)
In addition, we have agreed to reimburse the underwriter for certain expenses and issue warrants to the underwriter in an amount
equal to 5% of the aggregate number of shares and shares issuable upon exercise of the pre-funded warrants. See "Underwriting."
Neither the Securities
and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
The offering is being
underwritten on a firm commitment basis. We have granted the underwriters a 45-day option from the date of this prospectus to purchase
up to               additional shares of our common stock and/or additional purchase warrants to purchase up to               shares of common stock
from us solely to cover over-allotments, if any.
The
underwriter expects
to deliver the shares of common stock, purchase warrants and any
pre-funded warrants to the purchasers on or about              , 2020.
Sole Book-Running Manager
A.G.P.
The date
of this prospectus is                  , 2020
TABLE OF CONTENTS
PROSPECTUS SUMMARY
1
THE OFFERING
7
RISK FACTORS
9
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
27
USE OF PROCEEDS
28
DIVIDEND POLICY
29
CAPITALIZATION
30
DILUTION
31
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
33
BUSINESS
53
MANAGEMENT
63
EXECUTIVE COMPENSATION
67
PRINCIPAL SHAREHOLDERS
70
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
71
DESCRIPTION OF CAPITAL STOCK
72
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
81
UNDERWRITING
86
LEGAL MATTERS
91
EXPERTS
91
WHERE YOU CAN FIND MORE INFORMATION
92
INDEX TO FINANCIAL STATEMENTS
F-1
You
should rely only on the information contained in this prospectus or in any free writing prospectus that we may provide to you in
connection with this offering. Neither we nor the
underwriter
has authorized anyone
to provide you with information different from, or in addition to, that contained in this prospectus or any such free writing prospectus.
If anyone provides you with different or inconsistent information, you should not rely on it. We can provide no assurance as to
the reliability of any other information that others may give you. Neither we nor the
underwriter
is
making an offer to sell or seeking offers to buy these securities in any jurisdiction where or to any person to whom the offer
or sale is not permitted. The information in this prospectus is accurate only as of the date on the front cover of this prospectus,
and the information in any free writing prospectus that we may provide you in connection with this offering is accurate only as
of the date of such free writing prospectus. Our business, financial condition, results of operations and prospects may have changed
since those dates.
Unless otherwise indicated,
information contained in this prospectus concerning our industry, competitive position and the markets in which we operate is based
on information from independent industry and research organizations, other third-party sources and management estimates. Management
estimates are derived from publicly available information released by independent industry analysts and other third-party sources,
as well as data from our internal research, and are based on assumptions we made upon reviewing such data and our experience in,
and knowledge of, such industry and markets, which we believe to be reasonable. In addition, projections, assumptions and estimates
of the future performance of the industry in which we operate and our future performance are necessarily subject to uncertainty
and risk due to a variety of factors, including those described in "Risk Factors" on page 9, "Cautionary Note
Regarding Forward-Looking Statements" on page 27 and elsewhere in this prospectus. These and other factors could cause results
to differ materially from those expressed in the estimates made by the independent parties and by us.
PROSPECTUS SUMMARY
This summary highlights
information contained in greater detail elsewhere and does not contain all of the information that you should consider before deciding
to invest in our common stock, pre-funded warrants or purchase warrants. You should read the entire prospectus carefully, including
the "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations"
and our financial statements and the related notes included in this prospectus, before making an investment decision. Unless otherwise
indicated in this prospectus or the context otherwise requires, all references to "we," "us," "our,"
and the "Company" refer to ShiftPixy, Inc.
Company Overview
Our current
business, and the primary source of our revenues to date, has been under a traditional staffing services business model. 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, including the light industrial, services, and food and hospitality markets. We provide
human resources, employment compliance, insurance, payroll, and operational employment services solutions for our business clients
("clients" or "operators") and shift work or "gig" opportunities for worksite employees ("WSEs"
or "shifters"). As consideration for providing these services, we receive administrative or processing fees 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 fiscal year ended August 31, 2019, including our discontinued operations related to the Vensure Asset Sale described
below, we processed over $350 million of payroll billings. Our business has significantly grown for each year since inception and
we expect to continue our track record of significant customer growth. However, we have experienced losses to date as we have invested
in both our technology solutions as well as the back-office operations required to service a large employee base under a traditional
staffing model.
We are currently focused
on clients in the restaurant and hospitality industries, traditionally market segments with high employee turnover and low pay
rates. We believe that our focus on these industries will be better served by our Human Resources Information System ("HRIS")
technology platform and related mobile application which provide payroll and human resources tracking for our clients and will
result in lower operating costs, improved customer experience and revenue growth acceleration. All of our clients enter into service
agreements with us or our wholly-owned subsidiary, ReThink Human Capital Management, Inc. ("ReThink").
Our revenues
for the fiscal year ended August 31, 2019 ("Fiscal 2019") and through the first nine months of the fiscal year ending
August 31, 2020 ("Fiscal 2020") primarily 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 applicable taxation authority, and workers'
compensation premiums billed to the client for which we facilitate workers' compensation coverage. Our costs of revenues
consist of accrued and paid payroll taxes and our costs to provide the workers' compensation coverage including premiums
and loss reserves. A significant portion of our assets and liabilities is for our workers' compensation reserves. Our cash
balances related to these reserves are carried as assets and our estimates of projected workers' compensation claims are
carried as liabilities. Since Fiscal 2019, we have provided a self-funded workers' compensation policy for up to $500,000
and purchased reinsurance for claims in excess of $500,000. We actively monitor and manage our clients and WSE's workers'
compensation claims which we believe allows us to provide a lower cost workers' compensation option for our clients than
they would otherwise be able to purchase on their own.
As of August 31, 2019, we had 246 clients with over 13,000 WSEs,
and processed payroll of over $350 million during our Fiscal 2019, an increase of nearly 60% over our year ended August 31, 2018
("Fiscal 2018"). Of these WSEs, approximately 60% represent workers in the restaurant industry. In addition, as of
August 31, 2019, there were an additional 12,000 inactive WSEs in our HRIS technology platform who are available for gig opportunities.
In January 2020, in connection with the Vensure Asset Sale described below, we assigned client contracts representing approximately
70% of our billable clients, which comprised approximately 88% of our quarterly revenue as of November 30, 2019, and certain operating
assets for $19.2 million in cash, of which $9.7 million was received at closing and $9.5 million is due over the next four years,
which was scheduled to commence in April 2020, subject to certain conditions, including the performance of the assigned contracts
and minimum working capital delivered. The payments have been delayed due to issues from the novel coronavirus disease ("COVID-19").
For further discussion on the delayed payment to us pursuant to the Vensure Asset Sale, see " – Recent Developments
– Vensure Asset Sale."
Following the Vensure
Asset Sale, our client count, client site count, and billed WSE count decreased by approximately 88% from pre- Vensure Asset Sale
metrics. On a comparative basis from May 31, 2019 to February 29, 2020 (our last reporting period before the COVID-19 pandemic
materially impacted our business operations), our continuing and remaining client count increased from 35 to 83 customers, representing
approximately 250 client locations, and our billed WSEs increased from an average of 1,600 to 3,100 at the end of February 2020.
The quarter ended February 29, 2020 represented an annualized growth rate of over 100% for both clients and WSEs since November
30, 2019.
1
The COVID-19 pandemic has had a significant impact upon and
delayed our expected growth, which we have observed through a decrease in our billed customers and WSEs beginning in mid-March
2020, when the State of California first implemented "lockdown" measures. Significantly, all of our February 29, 2020
billed WSEs worked for clients located in Southern California, and many of these clients were required to furlough or layoff employees
or, in some cases, completely close their operations. However, during the quarter ended May 31, 2020, we continued to close new
customer opportunities. The combination of our sales efforts and the opportunities our services provide to businesses impacted
by the COVID-19 pandemic resulted in additional business opportunities for new client location additions, but our WSE billings
per client location decreased as many clients were shut down, or reduced staffing during the quarter ended May 31, 2020. For the
month of May 2020, our billed client count decreased to 81 clients, but client locations increased by 24% to over 300 client locations
compared to February 2020. Monthly "normalized" gross client billings decreased 23% from February 2020 to May 2020
as a result of the reduced staffing levels. ("Normalized" gross billings represent actual billings adjusted for the
number of billable days in a given month, e.g., 29 billable days in February 2020 and 31 billable days in May 2020). As the Southern
California economy experienced modest recovery in June, we experienced continued client additions and some degree of gross billing
recovery. For the month of June 2020, our client count increased to 84 clients, with active billings representing 315 client locations
(an increase of 26% from February 2020 and equivalent to a 150% annualized client location growth rate), while gross client billings
exceeded "normalized" February 2020 billings. On July 13, 2020, the Governor of the State of California re-implemented
certain COVID-19 related lockdown restrictions in most of the counties in the state, including those located in Southern California
where most of our clients reside.  These lockdown restrictions will likely require that in-person dining be prohibited for
at least one month.  We believe that our business will be impacted based upon the negative effect on those clients that rely
more heavily upon in-person dining, but we have not had an opportunity to evaluate fully the probable impact of this lockdown
development on our overall customer base as of the date of this prospectus. For further discussion on the impact of COVID-19 on
our business, see " – Recent Developments – COVID-19 Related Considerations."
Our Services
Our core business is
to provide regular payroll processing services to clients under an employer administration services ("EAS") model in
addition to individual services, such as payroll tax compliance, workers' compensation insurance, and employee HR compliance
management. In addition, in November, 2019, we launched our employee onboarding and scheduling functions to our customers in the
mobile application. We expect to complete the full commercial launch of our mobile application software later this calendar year,
which will provide additional services including "white label" food delivery functionality.
Our core EAS
are provided via standard legal contracts with our business clients, customized for each client's specific needs, and are
typically one year in length and cancelable with 30 days' notice by either party. Through May 31, 2020, we have not had any
material revenues or billings generated by our HRIS from additional value-added services. We consider our future service offering
to be our future, which we believe will provide for additional revenue streams and support cost reductions for existing and future
business clients. Future services, including technology-based services provided through our HRIS system and mobile application,
will be offered through "a la carte" pricing via customizable on-line contracts.
The new market trend
towards flexible, temporary or freelance jobs, often involving connecting with clients or customers through an online platform
(the "Gig Economy") has created legal issues regarding the classification of workers as independent contractors or
employees. In addition, the rising trend of predictive scheduling creates logistical issues for our clients with respect to workers'
schedules. We provide our solution primarily by absorbing our clients' workers, whom we call WSEs but may also be called
"shift workers," "shifters," "gig workers," or "assigned employees." WSEs are carried
under a ShiftPixy corporate employee umbrella, pursuant to which we shoulder certain employment-related compliance responsibilities
for our business clients as part of our services provided. This arrangement benefits WSEs by opening additional work opportunities
through access to other shift work with our other clients. Each WSE further benefits from employee status benefits through our
benefit plan offerings, including minimum essential health insurance coverage plans and a 401(k) plan, while enjoying workers'
compensation coverage and other protections provided by applicable employment laws.
Competition
We have two
primary sources of competition. Competitors to our gig business model include businesses such as ShiftGig, Instawork, Snag, Jobletics
and other comparable businesses that seek to arrange short-term work assignments for both employees and independent contractors.
Competitors to our HRIS system include businesses such as Kelly Services, ManpowerGroup, and Barrett Business Services, which provide
human resource software solutions. We believe our service offering competes effectively based on our strategy of combining
an ecosystem of employment services with the individualized ability to link trained workers to specific shift-work opportunities.
Recent Developments
Reverse Stock Split
On November 13, 2019,
our board of directors authorized a one-for-forty (1:40) reverse split of our issued and outstanding common stock that became effective
on December 16, 2019 (the "Reverse Stock Split"). As a result of the Reverse Stock Split, each forty (40) shares of
our issued and outstanding common stock were automatically combined and converted into one issued and outstanding share of common
stock. The Reverse Stock Split affected all issued and outstanding shares of our common stock, as well as common stock underlying
stock options to purchase shares of common stock and warrants outstanding immediately prior to the effectiveness of the Reverse
Stock Split. The Reverse Stock Split did not alter the number of shares of preferred stock underlying the Preferred Options (as
defined below) and did not decrease the number of authorized shares of our common stock or preferred stock, alter the par value
of our common stock or preferred stock, both of which remain at $0.0001 per share, nor modify any voting rights or other terms
of our capital stock. Unless otherwise indicated, all information set forth in this prospectus gives effect to the Reverse Stock
Split.
2
Vensure Asset Sale
On January 3, 2020, effective January 1,
2020, we entered into an asset purchase agreement with Shiftable HR Acquisition, LLC, part of Vensure Employer Services, Inc. ("Vensure"),
that assigned client contracts representing approximately 70% of our billable clients, including 100% of our existing Professional
Employer Organization ("PEO") business, which comprised approximately 88% of our quarterly revenue as of November 30,
2019 and certain operating assets in exchange for up to approximately $19.2 million of consideration (the "Vensure Asset
Sale"). We received $9.7 million upon closing and expect to receive additional proceeds of approximately $2.4 million per
year, payable monthly, for the next four years if certain transaction conditions are met, including the performance of the assigned
client contracts. During the nine months ended May 31, 2020, we estimated $1.3 million of working capital adjustments, recorded
as a decrease in the note receivable, and to date we have recorded no adjustments for the client contract performance guarantee
during the nine months ended May 31, 2020. The Vensure Asset Sale required a 90 day settlement period for the contract assets and
liabilities associated with working capital. Due to disruptions from COVID-19, the parties to the Vensure Asset Sale have informally
agreed to extend the settlement period of the working capital adjustment. We will not begin to receive any additional proceeds
until the working capital adjustment has been completed.   This transaction required us to relinquish our service rights
to certain clients but allowed us to retain the clients' WSE information in our HRIS platform which now represents approximately
35,000 potential gig employees. We also retained all of our intellectual property rights, including our HRIS and our mobile application
technology, and 47 clients with approximately 2,400 billable WSEs.
Convertible Note
Settlements
Between December 5, 2019 and March 24, 2020,
we entered into a series of settlements, agreed upon note conversions, note exchanges, and principal repayments (the "Convertible
Note Settlements") for (i) our 8% Senior Secured Convertible Notes we issued on June 4, 2018 (the "June 2018 Notes"),
(ii) certain of our 8% Senior Secured Convertible Notes we issued pursuant to a Limited Settlement Agreement and Mutual Release,
dated December 20, 2018, with certain holders of the June 2018 Notes (the "December 2018 Notes"), (iii) certain of
our Convertible Notes issued on March 12, 2019 (the "March 2019 Notes") and, together with the June 2018 Notes and
the December 2018 Notes, the "Convertible Notes") and (iv) all of our warrants issued in connection with the March
2019 Notes (the "March 2019 Warrants") that previously included full-ratchet anti-dilution price protection. Pursuant
to the Convertible Note Settlements, we issued an adjustment of 302,271 shares of common stock for conversions and 123,358 shares
of common stock for inducements and cashless warrant exercises for the Convertible Notes and to extinguish the remaining March
2019 Notes and March 2019 Warrants with full-ratchet anti-dilution protection. On December 5, 2019, we exchanged $2,445,000 of
the March 2019 Notes and $222,000 of the June 2018 Notes for new Senior Convertible Notes in an aggregate principal amount of $2,934,000
(the "December 2019 Exchange Notes" and, together with the June 2018 Notes, the December 2018 Notes and the March 2019
Notes, the "Senior Convertible Notes"). On March 23, 2020 and March 24, 2020, we (i) further amended the December 2019
Exchange Notes to fix the conversion price at $9.20 per share of common stock, (ii) exchanged $772,000 of the March 2019 Notes
with full-ratchet anti-dilution price protection for $997,000 of amended March 2019 Notes with a fixed conversion price at $9.20
per share of common stock and (iii) amended, cancelled or exercised for shares of common stock via cashless exercise all March
2019 Warrants which previously included full-ratchet anti-dilution price protection and issued new warrants to purchase 423,669
shares of common stock at an exercise price of $10.17 per share. Pursuant to the Convertible Note Settlements, in January 2020
we also paid cash of approximately $2,600,000 to satisfy all default claims and litigation relating to our Senior Convertible Notes
and as repayment of all remaining principal on our June 2018 Notes and December 2018 Notes. Between March 23, 2020 and May 31,
2020 the holders of the remaining notes converted all of their note holdings into shares of common stock at $9.20 per share. For
further discussion of the Senior Convertible Notes, see "Description of Our Capital Stock – Debt and Equity Offerings."
May 2020 Public Offering
On May 20, 2020, we entered into an underwriting agreement with
A.G.P./Alliance Global Partners ("A.G.P."), in connection with a public offering (the "May 2020 Public Offering")
of an aggregate of (i) 1,898,850 shares of common stock, (ii) pre-funded warrants to purchase 323,310 shares of common stock
and (iii) warrants to purchase 1,277,580 shares of common stock, which included the partial exercise of A.G.P.'s over-allotment
option to purchase 166,500 additional warrants. The May 2020 Public Offering closed on May 26, 2020 and we received net proceeds
of approximately $10.9 million after deducting underwriting discounts and commissions and estimated expenses payable by us associated
with the May 2020 Public Offering. On June 11, 2020 and July 7, 2020, we closed partial over-allotment options exercised by A.G.P.
to purchase, in the aggregate, 334,180 additional shares of common stock resulting in net proceeds of an aggregate of approximately
$1.25 million after deducting underwriting discounts and commissions and estimated expenses payable by us.
Preferred Option
In September 2016, our founding shareholders, Scott W. Absher,
our Chief Executive Officer, and Stephen Holmes (the "Option Shareholders"), were granted options to acquire our preferred
stock (the "Preferred Options"). The number of Preferred Options granted were based upon the number of shares held
by the Option Shareholders at that time.  The Preferred Options are nontransferable and forfeited upon the sale of the related
founding shares of common stock.  Upon the occurrence of the Vensure Asset Sale in January 2020, the Option Shareholders could
exercise each Preferred Option to purchase one share of our preferred stock for $0.0001 per share.  On June 4, 2020, Mr. Absher
exercised 12,500,000 Preferred Options to purchase 12,500,000 shares of our preferred stock for $1,250.  Immediately following
the exercise of the Preferred Options described above, Mr. Absher elected to convert the 12,500,000 shares of preferred stock into
12,500,000 shares of common stock, which are subject to a 24-month lock-up period during which such shares may not be traded. As
of the date of this prospectus, there are outstanding Preferred Options exercisable to purchase up to 11,925,520 shares of preferred
stock which are convertible into an equal number of shares of common stock. As stated above, the amount of the Preferred Options,
and the number of shares of preferred stock issuable upon exercise of such options, is based upon the number of shares of common
stock held by the Option Shareholders at the time the Preferred Options were issued. Accordingly, in order to confirm the original
intent of the granting of up to 50,000,000 Preferred Options to Messrs. Absher and Holmes, at some point in the future we intend
to adopt a second grant of Preferred Options granting an additional 12,500,000 Preferred Options to each of Messrs. Absher
and Holmes whereby each option permits the holder to acquire one share of our preferred stock for $0.0001 per share. Each share
of preferred stock will be convertible into common stock on a one-for-one basis. See "Risk Factors— Purchasers in the
offering will suffer immediate and substantial dilution if our Option Shareholders exercise their Preferred Options" for
a further discussion of the Preferred Options.
3
COVID-19 Related
Considerations
Our business, results
of operations and financial condition have been, and may continue to be, materially adversely impacted by the recent outbreak of
respiratory illness caused by COVID-19. We do not, yet, know the impact that COVID-19 will have on our business in the medium to
long-term. As of the date of this prospectus, we have experienced the following COVID-19 impacts to our business:
·
We have observed significant staffing reductions for our Southern California clients since the
state lockdown in mid-March and a related reduction in payroll billings from those clients. Several of our clients have closed
operations either temporarily or permanently and most have furloughed staff or reduced hours.
·
We are working closely with our clients to assist them in obtaining additional capital, including
through the 2020 stimulus programs such as the Payroll Protection Plan. We observed a nearly 50% reduction in billed WSEs on April
30, 2020 as compared to March 1, 2020. As businesses in Southern California began to re-open and CARES Act funds began to be received
by our customers, billed WSEs decreased 20% on May 31, 2020 as compared to March 1, 2020. Since then, the State of California,
along with other regions where our clients are located, has re-implemented many lockdown measures in response to increases in COVID-19
cases. These new lockdown measures, to the extent they continue, are likely to have a material negative impact on our operating
results, based upon their negative impact on our clients' businesses and operations.
·
We have observed a significant increase in demand from potential customers, including franchise
restaurant customers, for the technology solutions we provide, which has resulted in a marked increase in our sales pipeline for
our delivery and scheduling application features. However, this increased demand has not yet translated to new customer billings
sufficient to offset the payroll billings reductions we have experienced that we believe to be attributable to the COVID-19 pandemic.
During the quarter ended May 31, 2020, we closed additional client business and began to bill additional client locations representing
a net increase of approximately 60 client locations billed, or approximately 23%, compared to the quarter ended February 29, 2020,
but our per-location monthly billings decreased by approximately 38% during the same period. We believe that these reductions are
due, in significant part, to the COVID-19 pandemic. We cannot predict to what extent, if any, this increase in potential customers
will result in additional signed contracts and increased revenues.
·
We expect additional workers' compensation claims to be made by furloughed employees,
                                                                                                              especially in light of the State of California's Executive Order N-62-20, which creates a rebuttable presumption for
                                                                                                              workers' compensation claims that an employee's COVID-19 related illness arose out of the course of their
                                                                                                              employment if (i) such infection occurred between March 19 and July 5, 2020, and (ii) the employee was diagnosed with
                                                                                                              COVID-19 or tested positive within 14 days after performing work for the employer at a location other than the
                                                                                                              employee's home. While we have not observed direct additional expenses as a result of any such claims, we have
                                                                                                              increased our workers' compensation reserve estimates for the quarter ended May 31, 2020 and
we continue to closely monitor all workers' compensation claims made during the COVID-19 pandemic. While we believe that
the steps we have taken to date are sufficient to protect against any increased level of workers' compensation claims related
to the COVID-19 pandemic, there can be no guarantee that this will be the case, or that our results of operations will not be materially,
negatively impacted should such an increase in claims materialize in the future.
4
·
Our application development cycle has been delayed.  Our internal development team, located
in Irvine, CA, was subject to lockdown measures for significantly all of the quarter ended May 31, 2020, and the work schedules
of our external project development teams in other locations were also negatively impacted by the COVID-19 pandemic.  All
of these personnel were forced to work remotely, and travel was restricted, disrupting the normal development project cycles and
management review of our external teams. Our development teams typically have a high degree of direct person to person interaction
as part of the creative and problem-solving processes inherent in the development and integration of new technologies.  Their
inability to engage in this type of interaction during the lockdown period has resulted in delays in the development, testing,
and deployment of our key development initiatives, and will continue to cause delays to the extent that lockdown directives continue
to be issued by governmental authorities.
·
On July 13, 2020, the Governor of the State of California re-implemented additional COVID-19 related
lockdown directives in most counties, including those located in Southern California where most of our clients reside.  These
orders will likely require that in-person dining be prohibited for at least one month.  While we believe that the negative
impact of these recent orders will be felt most severely by those clients that rely more heavily upon in-person dining, we are
unable to evaluate fully the probable impact of this lockdown development on our overall customer base as of the date of this
prospectus. We believe it is likely, however, that new lockdown orders will have a material negative impact on our business and
operations to the extent that they continue in force.
Risks Associated with Our Business and
this Offering
Our business and our
ability to implement our business strategy are subject to numerous risks, as more fully described in the section of this prospectus
entitled "Risk Factors". You should read these risks before you invest in our securities. We may be unable, for many
reasons, including those that are beyond our control, to implement our business strategy. In particular, risks associated with
our business include:
·
We have incurred net losses in recent periods and require additional financing. If financing is
not available, we may be required to further downsize or discontinue operations.
·
We assume the obligation to make wage, tax, and regulatory payments for WSEs, and, as a result,
are exposed to client credit risks.
·
Our business strategy depends upon our ability to receive future proceeds in connection with the
Vensure Asset Sale, which are contingent upon profits associated with our former clients that were transferred to Vensure.
·
If you purchase our securities in this offering, you will incur immediate and substantial dilution.
·
We will have broad discretion in the use of the net proceeds from this offering and may not use
them effectively.
·
There is substantial doubt about our ability to continue as a going concern.
·
We depend heavily on our Chief Executive Officer and director and the loss of his services could
harm our business.
·
If we are unable to meet Nasdaq's continued listing requirements, we could be subject to
suspension and delisting, which could negatively impact us.
·
The price of our common stock and warrants may be volatile.
Implications of Being an Emerging Growth
Company
We qualify as an "emerging
growth company" as defined in the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"). An emerging growth
company may take advantage of certain reduced disclosure and other requirements that are otherwise generally applicable to public
companies. As a result, the information that we provide to shareholders may be different than the information you may receive from
other public companies in which you hold equity. For example, as long as we are an emerging growth company:
5
·
we are not required to engage an auditor to report on our internal controls over financial reporting
pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act");
·
we are not required to comply with any requirement that may be adopted by the Public Company Accounting
Oversight Board (the "PCAOB"), regarding mandatory audit firm rotation or a supplement to the auditor's report
providing additional information about the audit and the financial statements (i.e., an auditor's discussion and analysis);
·
we are not required to submit certain executive compensation matters to shareholder advisory votes,
such as "say-on-pay," "say-on-frequency" and "say-on-golden parachutes"; and
·
we are not required to comply with certain disclosure requirements related to executive compensation,
such as the requirement to disclose the correlation between executive compensation and performance and the requirement to present
a comparison of our Chief Executive Officer's compensation to our median employee compensation.
We may take advantage
of these reduced disclosure and other requirements until the last day of our fiscal year following the fifth anniversary of the
completion of our initial public offering ("IPO"), or such earlier time that we are no longer an emerging growth company.
For example, if certain events occur before the end of such five-year period, including if we have more than $1.07 billion in annual
revenue, have more than $700 million in market value of our common stock held by non-affiliates or issue more than $1.0 billion
of non-convertible debt over a three-year period, we will cease to be an emerging growth company.
As mentioned above,
the JOBS Act permits us, as an emerging growth company, to take advantage of an extended transition period to comply with new or
revised accounting standards applicable to public companies. We have elected not to opt out of the extended transition period which
means that when an accounting standard is issued or revised, and it has different application dates for public or private companies,
as an emerging growth company, we can adopt the new or revised standard at the time private companies adopt the new or revised
standard. This may make it difficult or impossible because of the potential differences in accounting standards used to compare
our financial statements with the financial statements of a public company that is not an emerging growth company or the financial
statements of an emerging growth company that has opted out of using the extended transition period.
Our Corporate Information
We were incorporated
under the laws of the State of Wyoming on June 3, 2015. Our principal executive office is located at 1 Venture, Suite 150, Irvine,
CA 92618, and our telephone number is (888) 798-9100. Our website address is www.shiftpixy.com. Our website does not form a part
of this prospectus and listing of our website address is for informational purposes only.
6
THE OFFERING
Common stock offered
shares.
Pre-funded warrants offered
We are also offering to each purchaser whose purchase of shares of common stock in this offering would otherwise result in the purchaser, together with its affiliates and certain related parties, beneficially owning more than 4.99% of our outstanding common stock immediately following the consummation of this offering, the opportunity to purchase, if the purchaser so chooses, pre-funded warrants, in lieu of shares of common stock that would otherwise result in the purchaser's beneficial ownership exceeding 4.99% (or at the election of the purchaser, 9.99%) of our outstanding common stock. Each pre-funded warrant will be exercisable for one share of our common stock. The purchase price of each pre-funded warrant will be equal to the price per share at which the shares of common stock are being sold to the public in this offering, minus $0.001, and the exercise price of each pre-funded warrant will be $0.001 per share. The pre-funded warrants are exercisable immediately and may be exercised at any time until all of the pre-funded warrants are exercised in full. This offering also relates to the shares of common stock issuable upon exercise of any pre-funded warrants sold in this offering. For each pre-funded warrant we sell, the number of shares of common stock we are offering will be decreased on a one-for-one basis.
Purchase warrants offered
Each share of common stock and each pre-funded warrant is being sold together with a purchase warrant to purchase up to 0.5 shares of our common stock. Each purchase warrant will have an exercise price per share of not less than 110% of the public offering price, will be exercisable immediately and will expire on the fifth anniversary of the original issuance date. Each holder of purchase warrants will be prohibited from exercising its purchase warrant for shares of our common stock if, as a result of such exercise, the holder, together with its affiliates, would own more than 4.99% of the total number of shares of our common stock then issued and outstanding. However, any holder may increase such percentage to any other percentage not in excess of 9.99%. This offering also relates to the offering of the shares of common stock issuable upon the exercise of the purchase warrants.
Over-allotment option
The underwriter has a 45-day option to purchase up to an additional         shares of common stock and/or purchase warrants to purchase up to an aggregate of                   additional shares of common stock from us at the public offering price less underwriting discounts and commissions.
Common stock to be outstanding after this offering
shares of common stock, assuming no exercise of the pre-funded warrants or purchase warrants (or             shares of common stock if the underwriter exercises in full its option to purchase additional shares of common stock, assuming no exercise of the pre-funded warrants or purchase warrants).
Use of proceeds
We
        estimate that the net proceeds to us from this offering from the sale of the shares of our common stock and the accompanying
purchase
        warrant
s will be approximately $      million, or approximately
        $            million if the
underwriter exercises its
option
        to purchase additional shares in full, excluding any proceeds that may be received upon the exercise of the
pre-funded
warrants
        and the
purchase warrant
s, after deducting underwriting discounts and commissions
        and offering expenses.
We
        intend to
use the net proceeds of this offering for general corporate purposes, including working capital, operating expenses
        and capital expenditures. See "Use of Proceeds."
7
Risk factors
Investing in our
    securities involves a high degree of risk.  See "Risk Factors" beginning on page 9 of this prospectus
    for a discussion of factors to consider carefully before deciding to invest in shares of our common stock, purchase warrants
    or pre-funded warrants in this offering.
Nasdaq symbol
Our common stock is listed on Nasdaq under the symbol "PIXY." We do not intend to list the purchase warrants or pre-funded warrants on any securities exchange or nationally recognized trading system.
Unless otherwise indicated,
all information contained in this prospectus assumes no exercise by the underwriter of its over-allotment option, assumes no sale
of any pre-funded warrants in this offering, assumes no exercise of the purchase warrants, assumes no exercise of the warrants
to be issued to the underwriter
and accounts for
the
Reverse
Stock Split that became effective on December 16, 2019. The number of shares of our common stock that are and will be outstanding
immediately before and after this offering as shown above is based on
16,816,686 shares outstanding as of July 24, 2020.
The number of shares outstanding as of July 24, 2020, as used throughout this prospectus, unless otherwise indicated, excludes:
·
1,896,209 shares of common stock issuable upon the exercise of warrants to purchase shares of common stock that were exercisable and outstanding as of July 24, 2020, with a weighted-average exercise price of $8.42 per share;
·
198,816 shares of common stock reserved for future issuance under our 2017 Stock Option and Share Issuance Plan (the "2017 Plan");
·
43,126 shares of common stock issuable upon the exercise of options to purchase common stock issued pursuant to our 2017 Plan as of July 24, 2020, with a weighted-average exercise price of $101.31 per share;
·
1,175,784 shares of common stock issuable upon the exercise of options to purchase common stock granted pursuant to our 2017 Plan on July 1, 2020, with a price of $5.40 per share, subject to shareholder approval;
·
11,925,520 shares of common stock reserved for future issuance pursuant to Preferred Options that were granted to our shareholders of record on September 28, 2016 to purchase preferred stock for $0.0001 per share, with each share of preferred stock being convertible into common stock on a one-for-one basis; and
·
25,000,000 shares of common stock potentially issuable pursuant to options that are expected to be granted to Messrs. Absher and Holmes,
the issuance of which may be subject to various internal corporate, state, federal or regulatory approvals, following this offering to
purchase preferred stock for $0.0001 per share, with each share of preferred stock being convertible into common stock on a one-for-one
basis.
8
RISK FACTORS
An investment in
our common stock, pre-funded warrants or purchase warrants involves a high degree of risk. You should carefully consider the following
risks and all of the other information contained in this prospectus before deciding whether to invest in our common stock, pre-funded
warrants or purchase warrants including the risks and uncertainties described below and under the caption "Risk Factors"
in our most recently filed Annual Report on Form 10-K and Quarterly Report on Form 10-Q filed with the SEC, in each case as these
risk factors are amended or supplemented by subsequent Annual Reports on Form 10-K or Quarterly Reports on Form 10-Q. The risks
set forth below are those which we believe are the material risks that we face. The occurrence of any of such risks may materially
and adversely affect our business, financial condition, results of operations and future prospects. In such an event, the market
price of our common stock and the value of the pre-funded warrants and purchase warrants could decline, and you could lose part
or all of your investment.
Risks Related to this Offering and Ownership
of Our Common Stock and Warrants
Purchasers in the offering will suffer
immediate dilution.
If you purchase common
stock in this offering, the value of your shares based on our actual book value will immediately be less than the offering price
you paid. This reduction in the value of your equity is known as dilution. At the assumed public offering price of $        per share,
purchasers of common stock in this offering will experience immediate dilution of approximately $        per share, assuming no exercise
of the Preferred Options. Based upon the pro forma as adjusted net tangible book value of our common stock at $      per share, your
shares may be worth less per share than the price you paid in the offering. See "Dilution."
If the options, warrants and convertible securities we previously
granted are exercised, additional dilution will occur. As of July 24, 2020, options to purchase 43,126 shares of common stock at
a weighted-average exercise price of $101.31 per share were outstanding, options to purchase 1,175,784 shares of common stock
at a weighted-average exercise price of $5.40 per share subject to shareholder approval were outstanding, warrants to purchase
up to 1,896,209 shares of common stock at a weighted-average exercise price of $8.42 per share were outstanding, and Preferred
Options to purchase 11,925,520 shares of preferred stock at an exercise price of $0.0001 per share that are convertible into an
equal number of shares of common stock were outstanding. See "Risk Factors — Purchasers in the offering will suffer
immediate and substantial dilution if our Option Shareholders exercise their Preferred Options" for a discussion of the Preferred
Options.
Furthermore, if we
raise additional funding by issuing additional equity securities, the newly-issued shares will further dilute your percentage ownership
of our shares and may also reduce the value of your investment. The discussion above assumes no exercise of the purchase warrants
and no sale of pre-funded warrants, which, if sold, would reduce the number of shares of common stock that we are offering on a
one-for-one basis until such warrants are exercised.
Purchasers in the offering will suffer
immediate and substantial dilution if our Option Shareholders exercise their Preferred Options.
If the Preferred Options we previously granted to our Option
Shareholders are fully exercised and their preferred stock is converted into shares of common stock, purchasers in this offering
will suffer immediate and substantial dilution. As of the date of this prospectus, there were outstanding Preferred Options to
purchase up to 11,925,520 shares of preferred stock at an exercise price of $0.0001 per share that are convertible into an equal
number of shares of common stock. At the assumed public offering price of $     per share, purchasers of common
stock in this offering will experience immediate and substantial dilution of approximately $      per
share, assuming the Option Shareholders exercise all of their outstanding Preferred Options and convert all of their preferred
stock into shares of common stock. In this case, based upon the pro forma as adjusted net tangible book value of our common stock
at $       per share, your shares would be worth less per share than the price you paid in the offering.
Additionally, at some point in the future we intend to adopt a second grant of options granting an additional 12,500,000 options
to each of our founders, Scott W. Absher, our Chief Executive Officer, and Stephen Holmes, whereby each option permits the holder
to acquire one share of our preferred stock for $0.0001 per share. If those options are issued and the shares of preferred stock
underlying the options are converted into common stock, additional substantial dilution would occur.
A majority of our common stock is
closely held by our founders which may limit a minority shareholder from influencing corporate governance.
Approximately 78.0%
of our issued and outstanding common stock is held by our founders, Scott W. Absher, our Chief Executive Officer, and Stephen Holmes.
Following this offering, Messrs. Absher and Holmes will hold approximately        % of our issued
and outstanding common stock, assuming no exercise of the underwriter's option, no exercise of the purchase warrants or pre-funded
warrants and no exercise of the Preferred Option. Messrs. Absher and Holmes are the beneficial owners of approximately 44.2% and
42.2% of our outstanding voting securities, respectively, prior to the offering and        %
and        %, respectively, of our outstanding voting securities after the offering, assuming
Mr. Holmes exercises all of his outstanding 11,790,000 Preferred Options and the preferred stock underlying his Preferred Options
is converted into an equal number of shares of our common stock. As majority shareholders, Messrs. Absher and Holmes can continue
to possess significant influence and can elect and can continue to elect a majority of our board of directors and authorize or
prevent proposed significant corporate transactions. Their ownership and control may also have the effect of delaying or preventing
a future change in control, impeding a merger, consolidation, takeover or other business combination or discourage a potential
acquirer from making a tender offer. Individual shareholders with a minority stake may have limited influence over shareholder
matters. See "Risk Factors — Purchasers in the offering will suffer immediate and substantial dilution if our Option
Shareholders exercise their Preferred Options" for a further discussion of the Preferred Options.
9
In addition, as previously disclosed, in September 2016, our
founding shareholders, or Option Shareholders, were granted 24,634,550 options to acquire our preferred stock, or Preferred Options.
The number of Preferred Options granted was based upon the number of shares held by the Option Shareholders at that time. 
The Preferred Options are nontransferable and forfeited upon the sale of the related founding shares of common stock.  Upon
the occurrence of the Vensure Asset Sale in January 2020, the Option Shareholders could exercise each Preferred Option to purchase
one share of our preferred stock for $0.0001 per share.  Through July 24, 2020, a total of 12,709,030 Preferred Options were
exercised and converted into common stock. On June 4, 2020, Scott W. Absher, our Chief Executive Officer, exercised 12,500,000
Preferred Options to purchase 12,500,000 shares of our preferred stock for an aggregate purchase price of $1,250.  Immediately
following the exercise of the Preferred Options described above, Mr. Absher elected to convert the 12,500,000 shares of preferred
stock into 12,500,000 shares of common stock, which are subject to a 24-month lock-up period during which such shares may not be
traded. In July 2020, an additional 209,030 Preferred Options were exercised and converted into 209,030 shares of common stock,
which are unregistered and subject to a six-month lock up period during which such shares may not be traded on the open market.
As of the date of this prospectus, the outstanding Preferred Options are exercisable to purchase up to 11,925,520 shares of preferred
stock which are convertible into an equal number of shares of our common stock. As stated above, the amount of the Preferred Options,
and the number of shares of preferred stock issuable upon exercise of such options, is based upon the number of shares of common
stock held by the Option Shareholders at the time the Preferred Options were issued. Accordingly, in order to confirm the original
intent of the granting of up to 50,000,000 Preferred Options to Messrs. Absher and Holmes, at some point in the future we intend
to adopt a second grant of Preferred Options granting an additional 12,500,000 Preferred Options to each of Messrs. Absher and
Holmes whereby each option permits the holder to acquire one share of our preferred stock for $0.0001 per share. Each share of
preferred stock will be convertible into common stock on a one-for-one basis. See "Risk Factors— Purchasers in the
offering will suffer immediate and substantial dilution if our Option Shareholders exercise their Preferred Options" for
a further discussion of the Preferred Options.
We have a significant number of outstanding
warrants which may cause significant dilution to our shareholders, have a material adverse impact on the market price
of our common stock and make it more difficult for us to raise funds through future equity offerings.
As of July 24,
2020, we had 16,816,686 shares of common stock issued and outstanding. In addition, as of that date we had outstanding warrants
to acquire up to 1,896,209 shares of common stock. The issuance of shares of common stock upon the exercise of warrants would
dilute the percentage ownership interest of all shareholders, might dilute the book value per share of our common stock and would
increase the number of our publicly traded shares, which could depress the market price of our common stock.
In addition to the
dilutive effects described above, the perceived risk of dilution as a result of the significant number of outstanding warrants
may cause our common shareholders to be more inclined to sell their shares, which would contribute to a downward movement in the
price of our common stock. Moreover, the perceived risk of dilution and the resulting downward pressure on our common stock price
could encourage investors to engage in short sales of our common stock, which could further contribute to price declines in our
common stock. The fact that our shareholders and warrant holders can sell substantial amounts of our common stock in the public
market, whether or not sales have occurred or are occurring could make it more difficult for us to raise additional funds through
the sale of equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate, or at
all.
If we are unable to continue to meet
the listing requirements of Nasdaq, our common stock will be delisted.
Our common stock currently trades on Nasdaq, where it is subject
to various listing requirements. During Fiscal 2020, prior to effecting the 1 for 40 reverse stock split in December 2019 and which
is described in this prospectus, we were notified by Nasdaq that we were not in compliance with certain of these listing requirements,
and that failure to correct these deficiencies would result in delisting. We were able to address Nasdaq's concerns, and
have been assured by Nasdaq that we are currently in full compliance with all of its listing requirements. If we are not able to
meet Nasdaq's listing standards in the future, we could be subject to suspension and delisting proceedings. A delisting of
our common stock and our inability to list on another national securities market could negatively impact us by: (i) reducing the
liquidity and market price of our common stock; (ii) reducing the number of investors willing to hold or acquire our common stock,
which could negatively impact our ability to raise equity financing; (iii) limiting our ability to use a registration statement
to offer and sell freely tradable securities, thereby preventing us from accessing the public capital markets; and (iv) impairing
our ability to provide equity incentives to our employees.
10
There is no public market for the
purchase warrants or pre-funded warrants being offered in this offering.
There is no established
public trading market for the purchase warrants or pre-funded warrants being offered in this offering, and we do not expect a market
to develop. In addition, we do not intend to apply to list the purchase warrants or pre-funded warrants on any securities exchange
or nationally recognized trading system, including Nasdaq. Without an active market, the liquidity of the purchase warrants and
pre-funded warrants will be limited.
Our board of directors and our shareholders
recently approved an amendment to our Articles of Incorporation to add conversion rights to our preferred stock that would be dilutive
to the purchasers and current holders of our common stock.
Our board of directors
and our shareholders recently approved an amendment to the rights of our preferred stock to provide for its conversion into our
common stock on a one-for-one basis. The purchase price for such preferred stock was set at $0.0001 per share of preferred stock.
The conversion of the preferred stock to common stock had an immediate dilutive effect on our then current shareholders. On June
4, 2020, one of our Option Shareholders, Scott W. Absher, exercised 12,500,000 options into preferred stock, and subsequently converted
the preferred stock into an equal number of shares of our common stock. As of the date of this prospectus, one of our Option Shareholders,
Stephen Holmes, has Preferred Options which are exercisable to purchase up to 11,790,000 shares of our preferred stock, which are
convertible into an equal number of shares of common stock. See "Risk Factors— Purchasers in the offering will suffer
immediate and substantial dilution if our Option Shareholders exercise their Preferred Options" for a further discussion
of the Preferred Options.
Our share price may be volatile,
which could subject us to securities class action litigation and prevent you from being able to sell your shares at or above the
offering price.
Our stock could be
subject to wide fluctuation in response to many risk factors listed in this section and others beyond our control, including:
·
Market acceptance and commercialization of our products;
·
Our being able to timely demonstrate achievement of milestones, including those related to revenue
generation, cost control, cost effective source supply and regulatory approvals;
·
Regulatory developments or enforcement actions in the United States and other countries with respect
to our products or our competitors' products;
·
Failure to achieve pricing acceptable to the market;
·
Actual or anticipated fluctuations in our financial condition and operating results, or our continuing
to sustain operating losses;
·
Competition from existing products or new products that may emerge;
·
Announcements by us or our competitors of significant acquisitions, strategic partnerships, joint
ventures, collaborations or capital commitments;
·
Failure of securities analysts to maintain coverage of us, changes in financial estimates by securities
analysts who follow us, or our failure to meet these estimates or the expectations of investors;
·
Rumors and market speculation involving us or other companies in our industry;
·
The financial projections we may provide to the public, any changes in those projections, or our
failure to meet those projections;
·
Actual or anticipated developments in our business, our competitors' businesses or the competitive
landscape generally;
·
Litigation involving us, our industry, or both, or investigations by regulators into our operations
or those of our competitors;
·
Changes in accounting standards, policies, guidelines, interpretations or principles;
·
Announcement or expectation of additional financing efforts, particularly if our cash available
for operations significantly decreases;
11
·
Fluctuations in the valuation of companies perceived by investors to be comparable to us;
·
Share price and volume fluctuations attributable to inconsistent trading volume levels of our stock;
·
Additions or departures of key management personnel;
·
Disputes or other developments related to proprietary rights, including patents, litigation matters
and our ability to obtain patent protection for our technologies;
·
Sales of our common stock by us, our insiders, or our other shareholders;
·
Market conditions for stocks in general; and
·
General economic and market conditions unrelated to our performance.
Furthermore, the stock
markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity
securities of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance of
those companies. These broad market and industry fluctuations, as well as general economic, political, and market conditions such
as recessions, interest rate changes or international currency fluctuations, may negatively impact the market price of shares of
our common stock. In addition, such fluctuations could subject us to securities class action litigation, which could result in
substantial costs and divert our management's attention from other business concerns, potentially resulting in serious harm
to our business. Also, if the market price of shares of our common stock after this offering does not exceed the offering price,
you may not realize any return on your investment in us and may lose some or all of your investment.
If securities or industry analysts
do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could
decline.
The trading market
for our common stock is impacted by the research and reports that securities or industry analysts publish about us or our business.
We do not have any control over these analysts. We cannot assure that analysts will continue to cover us or provide favorable coverage.
If one or more of the analysts who cover us downgrade our stock or change their opinion of our stock, our share price would likely
decline. If one or more of these analysts cease coverage of us or fail to regularly publish reports on us, we could lose visibility
in the financial markets, which could cause our stock price or trading volume to decline.
We have broad discretion in the use
of the net proceeds from this offering and may not use them effectively.
We currently intend
to allocate the net proceeds that we will receive from this offering as described in this prospectus under the "Use of Proceeds"
section of this prospectus. However, our management will have broad discretion in the actual application of the net proceeds, and
we may elect to allocate proceeds differently from that described herein if we believe it would be in our best interest to do so.
Our shareholders may not agree with the manner in which our management chooses to allocate and spend the net proceeds. The failure
by our management to apply these funds effectively could have a material adverse effect on our business. Pending their use, we
may invest the net proceeds from this offering in a manner that does not produce income or that loses value.
Future sales, or the possibility
of future sales, of a substantial number of shares of our common stock could adversely affect the price of the shares and dilute
shareholders.
Future sales of a substantial
number of shares of our common stock, or the perception that such sales will occur, could cause a decline in the market price of
our common stock. This is particularly true if we sell our stock at a discount. In addition, in connection with this offering,
our directors and executive officers entered into lock-up agreements. If, after the end of such lock-up agreements, these shareholders
sell substantial amounts of shares of our common stock in the public market, or the market perceives that such sales may occur,
the market price of our common stock and our ability to raise capital through an issue of equity securities in the future could
be adversely affected.
In addition, in the
future, we may issue additional shares of common stock or other equity or debt securities convertible into common stock in connection
with a financing, acquisition, litigation settlement, employee arrangements or otherwise. Any such issuance could result in substantial
dilution to our existing shareholders and could cause our common share price to decline.
12
Holders of the purchase warrants
and pre-funded warrants purchased in this offering will have no rights as common shareholders until such holders exercise their
purchase warrants or pre-funded warrants and acquire our common stock.
Until holders of purchase
warrants or pre-funded warrants acquire shares of our common stock upon exercise of the purchase warrants or pre-funded warrants,
holders of purchase warrants and pre-funded warrants will have no rights with respect to the shares of our common stock underlying
such purchase warrants or pre-funded warrants. Upon exercise of the purchase warrants and pre-funded warrants, the holders will
be entitled to exercise the rights of a common shareholder only as to matters for which the record date occurs after the exercise
date.
We have not paid cash dividends in
the past and do not expect to pay dividends in the future. Any return on investment may be limited to the value of our common stock,
which may decrease in value.
We have never paid
cash dividends on our common stock and do not anticipate doing so in the foreseeable future. The payment of dividends on our common
stock will depend on earnings, financial condition and other business and economic factors affecting us at such time as our board
of directors may consider relevant. If we do not pay dividends, our common stock may be less valuable because a return on your
investment will only occur if our stock price appreciates.
If we do not maintain a current and
effective prospectus relating to the common stock issuable upon exercise of the purchase warrants or pre-funded warrants, public
holders will only be able to exercise such purchase warrants or pre-funded warrants on a "cashless basis."
If we do not maintain
a current and effective prospectus relating to the shares of common stock issuable upon exercise of the purchase warrants or pre-funded
warrants at the time that holders wish to exercise such warrants, they will only be able to exercise them on a "cashless
basis." As a result, the number of shares of common stock that holders will receive upon exercise of the purchase warrants
or pre-funded warrants will be fewer than it would have been had such holders exercised their purchase warrants or pre-funded for
cash. Under the terms of the purchase warrants and pre-funded warrants, we have agreed to use our best efforts to maintain a current
and effective prospectus relating to the shares of common stock issuable upon exercise of such warrants until the expiration of
such warrants. However, we cannot assure you that we will be able to do so. If we are unable to maintain a current and effective
prospectus, the potential "upside" of the holder's investment in our company may be reduced.
The purchase warrants may not have
any value.
Each purchase warrant
will have an exercise price of not less than 110% of the last reported sale price of our common stock as of the close of the
trading day immediately preceding the pricing of this offering and will expire on the fifth anniversary of the date they first
become exercisable. In the event our common stock price does not exceed the exercise price of the purchase warrants during the
period when the warrants are exercisable, the purchase warrants may not have any value.
Provisions of the purchase warrants
or pre-funded warrants offered by this prospectus could discourage an acquisition of us by a third party.
Certain provisions
of the purchase warrants or pre-funded warrants offered by this prospectus could make it more difficult or expensive for a third
party to acquire us. The purchase warrants and pre-funded warrants prohibit us from engaging in certain transactions constituting
"fundamental transactions" unless, among other things, the surviving entity assumes our obligations under the pre-funded
warrants. Further, the pre-funded warrants provide that, in the event of certain transactions constituting "fundamental transactions,"
with some exception, holders of such warrants will have the right, at their option, to require us to repurchase such purchase warrants
or pre-funded warrants at a price described in such warrants. These and other provisions of the purchase warrants or pre-funded
warrants offered by this prospectus could prevent or deter a third party from acquiring us even where the acquisition could be
beneficial to you.
The exercise price of the purchase
warrants or pre-funded warrants offered by this prospectus will not be adjusted for certain dilutive events.
The exercise price
of the purchase warrants or pre-funded warrants offered by this prospectus is subject to adjustment for certain events, including,
but not limited to, certain issuances of capital stock, options, convertible securities and other securities. However, the exercise
prices will not be adjusted for dilutive issuances of securities considered "excluded securities" and there may be
transactions or occurrences that may adversely affect the market price of our common stock or the market value of such purchase
warrants or pre-funded warrants without resulting in an adjustment of the exercise prices of such purchase warrants or pre-funded
warrants.
13
We are an "emerging growth
company" as that term is used in the JOBS Act, and we intend to continue to take advantage of reduced disclosure and governance
requirements applicable to emerging growth companies, which could result in our common stock being less attractive to investors
and adversely affect the market price of our common stock or make it more difficult to raise capital as and when we need it.
We are an "emerging
growth company" as that term is used in the JOBS Act, and we intend to continue to take advantage of certain exemptions from
various reporting requirements that are applicable to other public companies that are not emerging growth companies including,
but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley
Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, exemptions from
the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute
payments not previously approved, and exemptions from any rules that the Public Company Accounting Oversight Board may adopt requiring
mandatory audit firm rotation or a supplement to the auditor's report on the financial statements. We currently take advantage
of some, but not all, of the reduced regulatory and reporting requirements that are available to us under the JOBS Act, and intend
to continue to do so as long as we qualify as an "emerging growth company." For example, so long as we qualify as an
"emerging growth company," we may elect not to provide you with certain information, including certain financial information
and certain information regarding compensation of our executive officers, that we would have otherwise been required to provide
in filings we make with the SEC, which may make it more difficult for investors and securities analysts to evaluate us.
We cannot predict if
investors will find our common stock less attractive because we will rely on these exemptions. If some investors find our common
stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more
volatile. We may take advantage of these reporting exemptions until we are no longer an emerging growth company, which in certain
circumstances could be for up to five years. See "Prospectus Summary — Implications of Being an Emerging Growth Company."
Because of the exemptions
from various reporting requirements provided to us as an "emerging growth company," we may be less attractive to investors
and it may be difficult for us to raise additional capital as and when we need it. Investors may be unable to compare our business
with other companies in our industry if they believe that our financial accounting is not as transparent as other companies in
our industry. If we are unable to raise additional capital as and when we need it, our business, results of operations, financial
condition and cash flows, and future prospects may be materially and adversely affected.
Risks Relating to Our Business
We have limited operating history,
which makes it difficult for us to evaluate our future business prospects and make decisions based on those estimates of our future
performance.
We are an emerging business and are in
the process of developing our products and services. We have been in business since July 2015. Although we processed gross billings
of over $350 million for Fiscal 2019, (approximately 88% of which was attributable to clients that we sold the rights to in January
2020), it is still difficult, if not impossible, to forecast our future results based upon our limited historical operating data.
Because of the related uncertainties, we may be hindered in our ability to anticipate and timely adapt to increases or decreases
in sales, revenues or expenses. If we make poor budgetary decisions as a result of unreliable data, our gross billings in the future
may decline, which may result in a decline in our stock price.
There is uncertainty
regarding our ability to implement our business plan and to grow our business to a greater extent than we can with our existing
financial resources without additional financing. Except from the proceeds of our May 2020 public offering and subsequent overallotments
($10.3 million net of costs and $1.2 million net of costs, respectively), our initial public offering ($11.2 million net of costs)
and our recent private placements of senior secured convertible notes to institutional investors raising $13 million of gross proceeds
($11.9 million net of costs), we have no binding agreements, commitments or understandings to secure additional financing at this
time. We have no binding agreements, commitments or understandings to acquire any other businesses or assets. Our long-term future
growth and success are dependent upon our ability to generate cash from operating activities. There is no assurance that we will
be able to generate sufficient cash from operations, to borrow additional funds or to raise additional equity capital. Our inability
to obtain additional cash could have a material adverse effect on our ability to fully implement our business plan as described
herein and grow our business to a greater extent than we can with our existing financial resources.
The COVID 19 pandemic might create
additional liabilities, risks and exposures which could negatively impact our current business, growth prospects and cash flows,
and future profitability, while also requiring us to increase our workers' compensation reserve to protect against additional
liabilities all of which could negatively impact our ability to raise additional capital.
Our business has been
significantly impacted by the COVID-19 pandemic. Our employee billings per capita have decreased more than 20% from pre-pandemic
reporting periods. In particular, most of our clients are in the restaurant and hospitality business sector and concentrated in
Southern California. The vast majority of these clients have been negatively impacted by the lockdown measures imposed in the State
of California since March, which have required them to limit hours of operation, eliminate in-person dining, restrict food services
to takeout and delivery, and, in some cases, cease operations altogether. Although lockdown measures were relaxed somewhat throughout
Southern California beginning in May 2020, the Governor reinstated many of these restrictions on July 13, 2020, in response to
a surge in the number of COVID-19 cases reported throughout the state. As long as these directives remain in place, they are likely
to negatively impact our clients' business and operations, which, in turn, will likely have a negative impact on our business
prospects and operating results.
14
Further, our workers'
compensation policy limits our liability to $500,000. Accordingly, our profitability depends on collecting sufficient premium payments
to offset this potential liability to be profitable. In March 2020, the Governor of the State of California issued Executive Order
N-62-20, which creates a rebuttable presumption for workers' compensation claims that an employee's COVID-19 related
illness arose out of the course of their employment if (i) such infection occurred between March 19 and July 5, 2020, and (ii)
the employee was diagnosed with COVID-19 or tested positive within 14 days after performing work for the employer at a location
other than the employee's home. While we have not observed direct additional expenses as a result of any such claims at present,
our workers' compensation rates have increased significantly since the beginning of the pandemic. We have also increased
our workers' compensation reserve estimates for the quarter ended May 31, 2020 and we continue to closely monitor all workers'
compensation claims made during the COVID-19 pandemic. While we believe that the steps we have taken to date are sufficient to
protect against any increased level of workers' compensation claims related to the pandemic, there can be no guarantee that
this will be the case, or that our premium collections will be sufficient to offset our liabilities and achieve profitability should
such an increase in claims materialize in the future.
We maintain limited self-insurance
for the workers' compensation services that we provide to our clients. If we experience claims in excess of our collected
premiums, we might incur additional losses, higher costs, and reduced margins, resulting in a need for more liquidity.
We are responsible
for and pay workers' compensation costs for our shift workers. As noted above, we are currently self-insured for up to $500,000
per occurrence and we purchase reinsurance for claims in excess of $500,000. Our workers' compensation billings are designed
to cover expected claims based on insurance annuity calculations. These calculations are based on our limited operating history
and claims experiences due to our limited operating history. At times, these costs have risen substantially as a result of increased
claims and claim trends, general economic conditions, changes in business mix, increases in healthcare costs, and government regulations.
Although we carry insurance and believe that we currently have reserves sufficient to insulate us against projected losses, any
unexpected changes in claim trends, including the severity and frequency of claims, actuarial estimates, and medical cost inflation,
could result in costs that increase significantly above current projections. If future claims-related liabilities increase due
to unforeseen circumstances, or if new laws, rules, or regulations are implemented, costs could increase significantly. There can
be no assurance that we will be able to increase the fees charged to clients in a timely manner and in a sufficient amount to cover
increased costs as a result of any changes in claims-related liabilities.
Our business, results of operations
and financial condition have been and will likely continue to be materially adversely impacted in the event of a widespread public
health epidemic, including the recent COVID-19 outbreak.
Our business, results
of operations and financial condition have been, and will likely continue to be, materially adversely affected by any widespread
public health epidemics, such as the COVID-19 outbreak first identified in Wuhan, China in December 2019. On March 11, 2020, the
World Health Organization declared COVID-19 a pandemic disease. Potential impacts of the spread of COVID-19 include disruptions
or restrictions on our employees' and WSEs' ability to travel, and temporary closures of our clients' facilities.
For example, many of our WSEs perform services in the restaurant and hospitality industries, which have experienced significant
declines in traffic since early March 2020. Various states and municipalities throughout the United States have since declared
a state of emergency and imposed substantial restrictions on movement, required restaurants, bars and hotels to close, and advised
people not to patronize restaurants or bars or otherwise engage in non-essential travel. In some areas, residents have been instructed
to shelter in place to reduce the spread of COVID-19, resulting in many restaurants either closing or limiting their operations
to take-out and delivery service. Similarly, travel and tourism across the globe have significantly decreased, causing a significant
number of temporary hotel closures and furloughed employees.  Given that most of our clients are businesses in the hospitality
and restaurant industry, our results of operations are likely to continue to be negatively impacted as long as restrictions arising
from the COVID-19 pandemic continue.
Additionally, our headquarters
are located in Irvine, CA in Orange County, a region that has seen a recent rise of confirmed cases of COVID-19. We are continuing
to monitor and assess the effects of the COVID-19 outbreak on our commercial operations, including any potential impact on our
revenue in Fiscal 2020 and beyond. Nevertheless, we cannot at this time predict with any degree of certainty the precise impact
these adverse conditions will ultimately have on our operations due to a variety of unknown factors, including the ultimate geographic
spread of the virus, the severity of the disease, the duration of the outbreak, and the length of time that travel restrictions
and business closures imposed by the governments of impacted countries remain in place. Further, any future significant outbreak
of contagious diseases could result in a widespread health crisis that could adversely affect the economies and financial markets
of many countries, resulting in an economic downturn that could affect demand for our products and likely negatively impact our
operating results.
There is substantial doubt as to
our ability to continue as a going concern.
As of May 31, 2020, we had cash of $10.8 million and a working
capital surplus of $3.4 million. During Fiscal 2019, we used approximately $2.1 million of cash in operations, consisting of $9.5
million used in our continuing operations, less $7.4 million that was provided by our discontinued operations. We also used an
additional $1.2 million on capitalized software and fixed asset purchases. On January 3, 2020, we received $9.7 million in
sale proceeds in connection with the Vensure Asset Sale, and expect to receive an average of approximately $0.2 million per month
for four years thereafter. Through February 29, 2020 we had received additional proceeds from working capital of $1.0 million
from the Vensure Asset Sale subsequent to closing. During the nine months ended May 31, 2020, we used approximately $10.5 million
of cash in operations and repaid $1.2 million of convertible notes after receiving $10.7 million a total of cash through that date
from the Vensure Asset Sale. The COVID-19 pandemic has also slowed our growth through decreased customer billings and increased
our risk profile on our workers' compensation policies provided to our customers. These conditions raise substantial doubt
as to our ability to continue as going concern, and our independent registered public accounting firm has included an explanatory
going concern qualification in its audit report for Fiscal 2019. Management has prepared a liquidity plan to address the going
concern issue and, while we believe that these liquidity plan measures will be adequate to satisfy our requirements for at least
the next twelve months from the date of issuance of the May 31, 2020 financial statements, there is no assurance that our plan
will be successfully implemented. Failure to successfully implement the liquidity plan might have a material adverse effect on
our business, results of operations and financial condition, and might adversely affect our ability to continue as a going concern.
If we do not become consistently profitable, our accumulated deficit will grow larger, our cash balances will decline further,
and we will require additional financing to continue operations. Any such financing may not be accessible on acceptable terms,
if at all. If we cannot generate sufficient cash or obtain additional financing, we might be required to downsize our business
further or discontinue our operations altogether.
15
Our success depends on adoption of
our products and services by our various types of customers. If these potential customers do not accept and acquire our products
and services, then our revenue will be severely limited.
The major customer
groups to whom we believe our products and services will appeal, (i.e. both employers and employees who rely upon shift work),
may not embrace our products and services. Acceptance of our products and services will depend on several factors, including: cost,
ease of use, familiarity of use, convenience, timeliness, strategic partnerships, and reliability. If we fail to adequately meet
our customers' needs and expectations, our product offerings may not be competitive and our ability to commence or continue
generating revenues could be reduced. We also cannot be sure that our business model will gain wide acceptance among all targeted
customer groups. If the market fails to continue to develop, or develops more slowly than we expect, our ability to continue generating
revenues could be reduced.
We assume the obligation to make
wage, tax, and regulatory payments for WSEs, and, as a result, are exposed to client credit risks.
Under the Contract
Service Agreement, we become a co-employer of WSEs and assume the obligations to pay their salaries, wages and related benefits
costs and payroll taxes. We assume such obligations as an agent, not as a principal, of the client. Our obligations include responsibility
for:
·
payment of the salaries and wages for work performed by WSEs, regardless of whether the client
timely pays us the associated service fee; and
·
withholding and payment of federal and state payroll taxes with respect to wages and salaries reported
by us.
If a client does not
pay us, our ultimate liability for WSE payroll and benefits costs could have a material adverse effect on our financial condition
or results of operations.
If we are unable to effectively manage
growth and maintain low operating costs, our results of operations and financial condition may be adversely affected.
We have experienced
rapid growth since our inception, and our plans contemplate significant expansion of our business. If we are unable to manage our
growth effectively, including having geographically dispersed offices and employees or to anticipate and manage our future growth
accurately, our business may be adversely affected. If we are unable to manage our expansion and growth effectively, we may be
unable to keep our operating costs low or effectively meet the requirements of an ever-growing, geographically dispersed client
base. Our business relies on data systems, billing systems and financial reporting and control systems, procedures and controls.
Our success in managing our expansion and growth in a cost-effective manner will require us to upgrade and improve these systems,
procedures and controls. If we are unable to adapt our systems and put adequate controls in place in a timely manner, our business
may be adversely affected. In addition, our growth may place significant demands on our management, and our overall operational
and financial resources. A failure on our part to meet any of the foregoing challenges inherent in our growth strategy may have
an adverse effect on our results of operations and financial condition.
Our targeted customer base is diverse,
and we face a challenge in adequately meeting each group's needs.
Because we serve both
employers and employees, we must work constantly to understand the needs, standards and requirements of each group and must devote
significant resources to developing products and services for their interests. If we do not accurately predict our customers'
needs and expectations, we may expend valuable resources in developing products and services that do not achieve broad acceptance
across the markets, and we may fail to grow our business.
16
We face intense competition across
all markets for our services, which may lead to lower revenue or operating margins. Competing forms of Gig Economy oriented staffing
management products and services may be more desirable to consumers or may make our products and services obsolete.
Our competitors range
in size from diversified global companies with significant research and development resources to small, specialized firms whose
narrower service lines may let them be more effective in deploying technical, marketing, and financial resources. Barriers to entry
in many of our businesses are low and many of the areas in which we compete evolve rapidly with changing and disruptive technologies,
shifting user needs, and frequent introductions of new products and services. Our ability to remain competitive depends on our
success in making innovative products, devices, and services that appeal to customers.
Companies compete with
us based on a growing variety of business models. The competitive pressures described above may cause decreased sales volumes,
price reductions, and/or increased operating costs, such as for research and development, marketing, and sales incentives. This
may lead to lower revenue, gross margins, and operating income.
There are currently
several different competing Gig Economy oriented staffing management product and service technologies that are being marketed to
our potential customers. Further development of any of these technologies may lead to advancements in technology that will make
our products and services obsolete. Consumers may prefer alternative technologies and products and services. We cannot guarantee
that users of Gig Economy oriented staffing management products and services who will be using our products and services will continue
to grow within the industry as a whole. Any developments that contribute to the obsolescence of our products and services may substantially
impact our business, reducing our ability to generate or sustain revenues.
Providing specialized Gig Economy
oriented staffing management products and services is an emerging yet competitive business, and many of our competitors have greater
resources that may enable them to compete more effectively.
We will compete in
the same markets with many companies that offer not only staffing management products and services focused on the Gig Economy but
also more traditional staffing management products and services. There are limited barriers to entry. Price competition in the
industry, particularly from larger, more traditional industry model competitors, is intense, and pricing pressures from competitors
and clients are increasing. New competitors entering our markets may further increase pricing pressures.
We have observed that
clients sometimes competitively bid new contracts, which is a trend that we expect to continue for the foreseeable future. Some
of our competitors have greater resources than we do, which may enable them to compete more effectively in this market. Our competitors
may devote their resources to developing and marketing products and services that will directly compete with our product lines,
and new, more efficient competitors may enter the market. If we are unable to successfully compete with existing companies and
new entrants to the market, it will have a negative impact on our business and financial condition.
We operate in an immature and rapidly
evolving industry and have a relatively new business model, which makes it difficult to evaluate our business and prospects.
The industry in which
we operate is characterized by rapidly changing regulatory requirements, evolving industry standards and shifting user and client
demands. Our business model is also evolving and is different from models used by other companies in our industry. As a result
of these factors, the success and future revenue and income potential of our business is uncertain. Any evaluation of our business
and our prospects must be considered in light of these risks and uncertainties, some of which relate to our ability to:
·
Expand employer and employee client relationships;
·
Increase the number of our employer clients and grow a WSE base;
·
Develop relationships with third-party vendors such as insurance companies;
·
Expand operations and implement and improve our operational, financial and management controls;
·
Raise capital at attractive costs, or at all;
·
Attract and retain qualified management, employees and independent service providers;
·
Successfully introduce new processes, technologies products and services, and upgrade our existing
processes, technologies, products and services;
·
Protect our proprietary processes and technologies and our intellectual property rights; and
17
·
Respond to government regulations relating to the internet, personal data protection, email, software
technologies, cyber security and other regulated aspects of our business.
If we are unable to
successfully address the challenges posed by operating in an immature and rapidly evolving industry and having a relatively new
business model, our business could suffer.
We have claims and lawsuits against
us that may result in adverse outcomes
.
We are subject to a
variety of claims and lawsuits. These claims arise from a wide variety of business practices, significant business transactions,
operational claims, and employment practices. Adverse outcomes in some or all of these claims may result in significant monetary
damages or injunctive relief that could adversely affect our ability to conduct our business. Such litigation and other claims
are subject to inherent uncertainties and management's view of these matters may change in the future. A material adverse
impact on our consolidated financial statements could occur for the period in which the effect of an unfavorable outcome becomes
probable and reasonably estimable.
We have identified material weaknesses
in our internal control over financial reporting. If our internal control over financial reporting is not effective, we may not
be able to accurately report our financial results or file our periodic reports in a timely manner, which may cause adverse effects
on our business and may cause investors to lose confidence in our reported financial information and may lead to a decline in stock
price.
Effective internal
control over financial reporting is necessary in order to provide reliable financial reports in a timely manner. In connection
with the audit of our consolidated financial statements for Fiscal 2019, we concluded that there were material weaknesses in our
internal control over financial reporting relating to our IT environment, controls over cut-off procedures, a related party transaction,
accounting for certain litigation accruals, segregation of duties and corporate oversight functions. A material weakness is a deficiency,
or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that
a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.
If we are unable to
successfully remediate our material weaknesses or identify any future significant deficiencies or material weaknesses, the accuracy
and timing of our financial reporting may be adversely affected, a material misstatement in our consolidated financial statements
could occur, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports,
which may adversely affect our business and our stock price may decline as a result. In addition, even if we remediate our material
weaknesses, we will be required to expend significant time and resources to further improve our internal controls over financial
reporting, including by further expanding our finance and accounting staff to meet the demands that are placed upon us as a public
company, including the requirements of the Sarbanes-Oxley Act. If we fail to adequately staff our accounting and finance function
to remediate our material weaknesses, or fail to maintain adequate internal control over financial reporting, any new or recurring
material weaknesses could prevent us from concluding our internal control over financial reporting is effective and impair our
ability to prevent material misstatements in our consolidated financial statements, which could cause our business to suffer.
If we are unable to secure or pay
for the insurance coverage required for our business operations, or if we lose any existing coverage, we may not be able to offer
some of our services and our revenues could be reduced.
We are required to obtain and maintain various types of insurance
coverage for our business, in particular health and workers' compensation insurance related to our co-employment of WSEs.
Although we have contracts with all types of providers currently necessary for our business, if in the future we are unable to
secure the insurance coverage required for our business operations, or if we lose any existing coverage, we may not be able to
offer some of our services and our revenues could be reduced. In addition, any increases in the cost of insurance coverage we are
required to maintain could reduce our profitability (or increase our net losses).
We may be subject to penalties and
interest payable on taxes as a result of data entry into our software or manual error.
Our input of data
in our tax processing software must be entered properly to process the data and payments correctly with regard to clients, co-employees
and applicable tax agencies. If we input incorrect data or input accurate data incorrectly, we could inadvertently overbill or
underbill our clients or overpay or underpay applicable taxes, resulting in the loss of net income and/or clients and/or the incurrence
of tax penalties and interest. Despite our efforts to reconcile taxes on a monthly basis, we may incur additional taxes, penalties
and interest for which we may or may not bill our clients.
Our ability to adjust and collect
service fees for increases in unemployment tax rates may be limited.
We record our
State Unemployment Tax ("SUI") expense based on taxable wages and tax rates assigned by each state. SUI tax rates
vary by state and are determined, in part, based on prior years' compensation experience in each state. Prior to the
receipt of final tax rate notices, we estimate our expected SUI tax rate in those states for which tax rate notices have not
yet been received for purposes of pricing. In a period of adverse economic conditions state unemployment funds may experience
a significant increase in the number of unemployment claims. Accordingly, SUI tax rates would likely increase substantially.
Some states have the ability under law to increase SUI tax rates retroactively to cover deficiencies in the unemployment
fund.
18
In addition, taxes
under the Federal Unemployment Tax Act ("FUTA") may be retroactively increased in certain states in the event the state
fails to timely repay federal unemployment loans. Employers in such states are experiencing higher FUTA tax rates as a result of
not repaying their unemployment loans from the federal government in a timely manner. The credit reduction is an additional tax
on the FUTA wage base for employers in states that continue to have outstanding federal unemployment insurance loans beginning
with the fifth year in which there is a balance due on the loan. States have the option to apply for a waiver before July 1st of
the year in which the credit reduction is applicable.
Generally, our contractual
agreements allow us to incorporate such statutory tax increases into our service fees upon the effective date of the rate change.
However, our ability to fully adjust service fees in our billing systems and collect such increases over the remaining term of
the clients' contracts could be limited, resulting in a potential tax increase not being fully recovered. As a result, such
increases could have a material adverse effect on our financial condition or results of operations.
Risks Relating to Technology
We collect, use, transmit and store
personal and business information with the use of data service vendors, and a security or privacy breach may damage or disrupt
our businesses, result in the disclosure of confidential information, damage our reputation, increase our costs or cause losses.
In connection with
our business, we collect, use, transmit and store with data services vendors large amounts of personal and business information
about our clients and shift employees, including payroll information, healthcare information, personal and limited business financial
data, social security numbers, bank account numbers, tax information and other sensitive personal and business information. In
addition, as we continue to grow the scale of our business, we will process and store with data services vendors an increasing
volume of personally identifiable information of our users. Our data services vendors include PrismHR, Amazon Web Services, Microsoft
OneDrive, ShareFile, Dropbox, Egnyte, Smartsheet, MasterTax, Microsoft Outlook, Microsoft Office 365, and RightSignature. We believe
these vendors implement industry standard or more stringent data security measures to protect the data that we transmit through
and/or store with them. Despite our efforts to protect customer data, perceptions that the collection, use, and storage of personal
information are not satisfactorily protected could inhibit sales and limit adoption of our services. In addition, the continued
occurrence of high-profile data breaches provides evidence of an external environment increasingly hostile to information security.
We are focused on ensuring
that our operating environments safeguard and protect personal and business information, and we will devote significant resources
to maintaining and regularly updating our systems and processes. The cost to maintain these safeguards is significant and may increase
as we grow, which may limit our ability to employ our resources elsewhere and slow our ability to grow. Despite our efforts to
maintain security controls across our business, it is possible our security controls over personal data, our training of employees
and vendors on data security, and other practices we follow may not prevent the improper disclosure of customer data that we or
our vendors store and manage. In addition, attacks on information technology systems continue to grow in frequency, complexity
and sophistication, and we may be targeted by unauthorized parties using malicious tactics, code and viruses.
We engage third party
contractors who monitor our activities in a manner designed to prevent, detect and respond to data security incidents. However,
because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and
may be difficult to detect for long periods of time, we may be unable to anticipate these techniques or implement adequate preventive
measures. In addition, hardware, software, or applications we develop or procure from third-parties may contain defects in design
or manufacture or other problems that could unexpectedly compromise the confidentiality, integrity or availability of data or our
systems. Unauthorized parties may also attempt to gain access to our systems or facilities, or those of third-parties with whom
we do business, through fraud, trickery, or other methods of deceiving our employees, contractors, or temporary staff. As these
threats continue to evolve, we may be required to invest significant additional resources to modify and enhance our information
security and controls or to investigate and remediate any security vulnerabilities. In addition, while our operating environment
is designed to safeguard and protect personal and business information, we do not have the ability to monitor the implementation
of similar safeguards by our clients, vendors or their respective employees, and, in any event, third-parties may be able to circumvent
those security measures.
Any cyber-attack,
unauthorized intrusion, malicious software infiltration, network disruption, denial of service, corruption of data, theft of
non-public or other sensitive information, any similar act by a malevolent party, or inadvertent acts by our own employees,
could result in the disclosure or misuse of confidential or proprietary information, harm our reputation, and could have a
materially adverse effect on our business operations, or that of our clients, create financial liability, result in
regulatory sanction, or generate a loss of confidence in our ability to serve clients or cause current or potential clients
to choose another service provider, or subject us to liability under laws that protect personal data, resulting in increased
costs or loss of revenue. Although we believe that through our third-party contractors we maintain an adequate program of
information security and controls and any threats that we might have encountered to date have not materially impacted us, the
impact of a data security incident could have a materially adverse effect on our business, results of operations and
financial condition. In addition, any further security measures we may undertake to address further protections may cause
higher operating expenses.
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We are also subject
to various federal and state laws, rules and regulations relating to the collection, use, transmission and security of personal
and business information. In addition, the possession and use of personal information and data in conducting our business subjects
us to laws that may require notification to regulators, clients or employees in the event of a privacy breach and may impose liability
on us for privacy deficiencies, including but not limited to liability under laws that protect the privacy of personal information,
such as the Health Insurance Portability and Accountability Act of 1996 ("HIPAA"), and regulatory penalties. These
laws continue to develop, the number of jurisdictions adopting such laws continues to increase, and these laws may be inconsistent
from jurisdiction to jurisdiction. The future enactment of more restrictive laws, rules or regulations could have a materially
adverse impact on us through increased costs or restrictions on our businesses and noncompliance could result in regulatory penalties
and significant legal liability. In addition, enforcement actions and investigations by regulatory authorities related to data
security incidents and privacy violations continue to increase.
Some of the activities
in which our shift workers could become involved include health care information-related responsibilities that could invoke the
need for compliance with HIPAA as amended by the Health Information Technology for Economic and Clinical Health Act (the "HITECH
Act"). The United States Department of Health and Human Services issued regulations that establish uniform standards governing
the conduct of certain electronic health care transactions and protecting the privacy and security of protected health information
used or disclosed by health care providers and other covered entities. Three principal regulations with which we are required to
comply have been issued in final form under HIPAA: privacy regulations, security regulations, and standards for electronic transactions,
which establish standards for common health care transactions. The privacy regulations cover the use and disclosure of protected
health information by health care providers. They also set forth certain rights that an individual has with respect to his or her
protected health information maintained by a health care provider, including the right to access or amend certain records containing
protected health information or to request restrictions on the use or disclosure of protected health information. The security
regulations establish requirements for safeguarding the confidentiality, integrity, and availability of protected health information
that is electronically transmitted or electronically stored. The HITECH Act, among other things, establishes certain health information
security breach notification requirements. A covered entity must notify any individual whose protected health information is breached.
The HIPAA privacy and security regulations establish a uniform federal "floor" and do not supersede state laws that
are more stringent or provide individuals with greater rights with respect to the privacy or security of, and access to, their
records containing protected health information. These laws contain significant fines and other penalties for wrongful use or disclosure
of protected health information. Additionally, to the extent that we submit electronic health care claims and payment transactions
that do not comply with the electronic data transmission standards established under HIPAA and the HITECH Act, payments to us may
be delayed or denied.
We may be vulnerable to security
breaches that could disrupt our operations and adversely affect our business.
Despite security measures
and business continuity plans, our information technology networks and infrastructure may be vulnerable to damage, disruptions,
or shutdowns due to unauthorized access, computer viruses, cyber-attacks, distributed denial of service, and other security breaches.
An attack on or security breach of our network could result in interruption or cessation of access and services, our inability
to meet our access and service level commitments, and potentially compromise customer data transmitted over our network. We cannot
guarantee that our security measures will not be circumvented, resulting in network failures or interruptions that could impact
our network availability and have a material adverse effect on our business, financial condition, and results. We may be required
to expend significant resources to protect against such threats. If an actual or perceived breach of our security occurs, the market
perception of the effectiveness of our security measures could be harmed, and we could lose customers. Any such events could result
in legal claims or penalties, disruption in operations, misappropriation of sensitive data, damage to our reputation, and/or costly
response measures, which could adversely affect our business.
If we are unable to protect our proprietary
and technology rights our operations will be adversely affected.
Our success will depend
in part on our ability to protect our proprietary rights and technologies, including those related to our products and services.
Protecting our intellectual property rights and combating unlicensed copying and use of our software and other intellectual property
is difficult. Except as otherwise noted herein, we have not obtained any formal patent, trademark or similar protection. Our failure
to adequately protect our proprietary rights may adversely affect our operations. Despite our efforts to protect our proprietary
rights, unauthorized parties may attempt to copy aspects of our services or to obtain and use trade secrets or other information
that we regard as proprietary. Based on the nature of our business, we may or may not be able to adequately protect our rights
through patent, copyright and trademark laws. Our means of protecting our proprietary rights in the United States or abroad may
not be
adequate, and competitors may independently develop similar technologies. In addition, litigation
may be necessary in the future to:
·
Enforce
                                         intellectual property rights;
·
Protect
                                         our trade secrets;
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·
Determine the validity and scope of the rights of others; or
·
Defend against claims of infringement or invalidity.
Any such litigation
could result in substantial costs if we are held to have willfully infringed upon another party's intellectual property,
or to expend significant resources to develop non-infringing technology, and would divert the attention of management from the
implementation of our business strategy. Furthermore, the outcome of any litigation is inherently difficult to predict and we may
not prevail in any litigation in which we become involved.
Software products we use in our business
may contain defects which will make it more difficult for us to establish and maintain customers.
We are currently using
PrismHR software for our payroll processing. We also use MasterTax to process our tax reports and filings, and a host of other
software products in the course of conducting our business. The mobile app component of our mobile application, along with the
client portal and the ShiftPixy Command Hub, constitute our proprietary software and contain components that are licensed from
third parties and that constitute public domain software. Our payroll processing software and other software products that we use
in our business, including our mobile application, we use in our business could contain undetected design faults and software errors,
or "bugs" that are discovered only after they has been installed and used by a significant number of customers. Any
such defect or error in new or existing software or applications could cause delays in delivering our technology or require design
modifications. These developments could adversely affect our competitive position and cause us to lose potential customers or opportunities.
Since our technologies are intended to be utilized to supply human resources related services, the effect of any such bugs or delays
will likely have a detrimental impact on us. In addition, given that our specialized human resources software and services have
yet to gain widespread acceptance in the market, any delays or other problems caused by software bugs would likely have a more
detrimental impact on our business than if we were a more established company.
If a contract relating to our mission
critical software that we use in our business is terminated or not renewed, our business could be seriously disrupted and our revenues
significantly reduced.
If a contract relating
to our mission-critical software services, such as that applicable to payroll and payroll tax processing, is terminated or not
renewed, and we do not have an effective replacement software, our business and revenues will suffer. Although there are other
software vendors we can use, it may take time to negotiate an agreement and make any replacement software operational. Accordingly,
if the software agreements that we use in our business are terminated or not renewed, our business could be seriously disrupted
and our revenues significantly reduced until we locate replacement software and make it operational.
Our systems may be subject to disruptions
that could have a materially adverse effect on our business and reputation.
Our business is and
will continue to be highly dependent on our ability to process, on a daily basis, a large number of complicated transactions. We
rely heavily on our payroll, financial, accounting, and other data processing systems. We may not be successful in preventing the
loss of client data, service interruptions or disruptions to our operations from system failures. If any of these systems fail
to operate properly or become disabled even for a brief period of time, we could suffer financial loss, a disruption of our businesses,
liability to clients, regulatory intervention, or damage to our reputation, any of which could have a materially adverse effect
on our results of operation or financial condition.
Because we store data in the cloud
with providers such as Microsoft and Amazon, any disruptions in our ability to access this data or any breach of security concerning
this data in the cloud could have a materially adverse effect on our business and reputation.
Our business is and
will continue to be highly dependent on data storage in the cloud with providers such as Microsoft and Amazon. These cloud storage
systems may fail to operate properly or become disabled. There could also be security breaches of our data stored in the cloud.
If there is loss of client data, service interruptions or disruptions to our operations related to our cloud data storage, even
for a brief period of time, we could suffer financial loss, a disruption of our business, liability to clients, regulatory intervention,
or damage to our reputation, any of which could have a materially adverse effect on our results of operation or financial condition.
We make significant investments in
our software that may not meet our expectations.
Developing new technologies
is complex. It can require long development and testing periods. Significant delays in new releases or significant problems in
creating new products or services could adversely affect our revenue.
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Third parties may claim we infringe
their intellectual property rights.
From time to time,
others claim we infringe their intellectual property rights. The number of these claims may grow because of constant technological
change in the markets in which we compete, the extensive patent coverage of existing technologies and the rapid rate of issuance
of new patents. To resolve these claims, we may enter into royalty and licensing agreements on terms that are less favorable than
currently available, stop selling or redesign affected products or services, or pay damages to satisfy indemnification commitments
to our customers. These outcomes may cause operating margins to decline. Besides money damages, equitable relief is available in
some jurisdictions that, if granted, could limit or eliminate our ability to import, market, or sell our products or services that
contain infringing technologies.
We may not be able to protect our
source code from copying in the event of an unauthorized disclosure of source code.
Source code, the detailed
program commands for our operating systems and other software programs, is critical to our business. We take significant measures
to protect the secrecy of large portions of our source code. If a significant portion of our source code leaks, we might lose future
trade secret protection for that source code. It may become easier for third parties to compete with our products by copying functionality,
which could adversely affect our revenue and operating margins. Unauthorized disclosure of source code also could increase the
security risks described in the next paragraph.
We may have outages, data losses,
and disruptions of our online services if we fail to maintain an adequate operations infrastructure.
Our increasing user
traffic, growth in services, and the complexity of our services demand more computing power. We spend substantial amounts to build,
purchase, or lease data centers and equipment and to upgrade our technology and network infrastructure to handle more data. These
demands continue to increase as we grow our workforce. Maintaining, securing, and expanding this infrastructure is expensive and
complex. It requires that we maintain an internet connectivity infrastructure that is robust and reliable within competitive and
regulatory constraints that continue to evolve. Inefficiencies or operational failures, including temporary or permanent loss of
customer data or insufficient internet connectivity, could diminish the utility or functionality of our products, and adversely
impact the quality of our services and user experience, resulting in contractual liability, claims by users and other third parties,
regulatory actions, damage to our reputation, and loss of current and potential users, subscribers, and advertisers, each of which
could have a materially adverse impact on our operating results and financial condition.
Our software may experience quality
or supply problems
.
Our software may experience
quality or reliability problems. The highly-sophisticated software we have been developing may contain bugs and other defects that
interfere with their intended operation. Any defects we do not detect and fix in pre-release testing could cause reduced sales
and revenue, damage to our reputation, repair or remediation costs, delays in the release of new products or versions, or legal
liability. Although our license agreements typically contain provisions that limit our exposure to liability, there is no assurance
these provisions will withstand legal challenge.
We intend to use open source blockchain
technology in our technology platform. This technology has been scrutinized by regulatory agencies and therefore we may be impacted
by unfavorable regulatory action in one or more jurisdictions.
We intend to use open
source blockchain technology as a secure repository for "device reputation" information acquired by our technology
platform. Blockchain technologies have been the subject of scrutiny by various regulatory bodies around the world. We could be
impacted by one or more regulatory inquiries or actions, including but not limited to restrictions on the use of blockchain technology,
which could impede or limit the use of this technology within our product offerings.
We use and leverage open source technology
in our technology platform which may create risks of security weaknesses.
Some parts of our technology
that we currently use, and that we intend to develop in the future, incorporates (or may incorporate in the future) open-source
technology, including the blockchain technology that we intend to use in our technology platform. There is a risk that the development
team, or other third parties may, intentionally or unintentionally, introduce weaknesses or bugs into the core infrastructure elements
of our technology solutions interfering with the use of such technology which, in turn, could have a material negative impact on
our business and operations.
Risks Relating to Management and Personnel
We depend heavily on Scott W. Absher,
our Chief Executive Officer and a director. The loss of his services could harm our business.
Our future business
and results of operations depend in significant part upon the continued contributions of Scott W. Absher, our Chief Executive Officer
and a director. If we lose his services or if he fails to perform in his current position, or if we are not able to attract and
retain skilled employees in addition to Mr. Absher, this could adversely affect the development and implementation of our business
plan and harm our business.
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Mr. Absher has limited experience
managing a public company, which may inhibit our ability to implement successfully our business plan.
Mr. Absher has limited
experience managing a public company, which is required to establish and maintain disclosure controls and procedures and internal
control over financial reporting. We are endeavoring to comply with all of the various rules and regulations applicable to a public
reporting company, including those promulgated by the Securities and Exchange Commission. However, if we cannot operate successfully
as a public company, your investment may be materially adversely affected.
If we are not recognized as an employer
of WSEs under federal and state regulations, or we are deemed to be an insurance agent or third-party administrator, we and our
clients could be adversely impacted.
While in our client
engagements we typically arrange for our clients to act as sponsor of employee benefit plans, we also sponsor the benefit plans
applicable to their employees. For us to sponsor employee benefit plan offerings for WSEs, we must qualify as an employer for certain
purposes under the Internal Revenue Code of 1986 (the "Code") and the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"). In addition, our status as an employer is important for purposes of ERISA's preemption
of certain state laws. The definition of employer under various laws is not uniform, and under both the Code and ERISA, the term
is defined in part by complex multi-factor tests.
Generally, these tests
are designed to evaluate whether an individual is an independent contractor or employee and they provide substantial weight to
whether a purported employer has the right to direct and control the details of an individual's work. Some factors that the
IRS has considered important in the past have included the employer's degree of behavioral control (the extent of instructions,
training and the nature of the work), the financial control and the economic aspects of the relationship, and the intent of the
parties, as evidenced by (i) the specific benefit, contract, termination and other similar arrangements between the parties, and
(ii) the "on-going" versus "project-oriented" nature of the work to be performed. However, a definitive
judicial interpretation of "employer" in the context of co-employer relationships such as those in which we engage
has not been established. For ERISA purposes, for example, courts have held that test factors relating to ability to control and
supervise an individual are less important, while the U.S. Department of Labor has issued guidance that certain entities in the
HR outsourcing industry do not qualify as common law employers for ERISA purposes. Moreover, when our app is fully functional,
the scope of our employer status will increase, changing the legal analysis. Although we believe that we qualify as an employer
of WSEs under ERISA, and the U.S. Department of Labor has not provided guidance otherwise, we are not able to predict the outcome
of any future regulatory challenge.
If we are not recognized
as an employer under the Code or ERISA, we may be required to change the method by which we report and remit payroll taxes to the
tax authorities and the method by which we provide, or discontinue providing, certain employee benefits to WSEs, which could have
a material adverse effect on our business and results of operations.
We may also need to
qualify as an employer of WSEs under state regulations, which govern licensing, certification and registration requirements. Nearly
all states have enacted laws and regulations in this regard. While we believe that we qualify as an employer of WSEs under these
state regulations, these requirements vary from state to state and change frequently and if we are not able to satisfy existing
or future licensing requirements or other applicable regulations of any states, we may be prohibited from doing business in that
state.
Our business depends on our ability
to attract and retain talented employees.
Our business is based
on successfully attracting and retaining talented employees. The market for highly skilled workers and leaders in our industry
is extremely competitive. If we are less successful in our recruiting efforts, or if we cannot retain key employees, our ability
to develop and deliver services successfully may be adversely affected. If we cannot hire additional qualified personnel, we may
continue to have internal control weaknesses. Effective succession planning is also important to our long-term success. Failure
to ensure effective transfer of knowledge and smooth transitions involving key employees could hinder our strategic planning and
execution. How employment-related laws are interpreted and applied to our workforce practices may result in increased operating
costs and less flexibility in how we meet our workforce needs.
Lapses in our employee screening
process may harm our reputation or relationship with clients, or result in litigation, which may impact our financial condition.
Our business model
is dependent on hiring employees who will provide high quality service for our clients. Lapses in our screening process may result
in employees being hired who do not meet the standard expected by our clients. This may hurt our relationship with our clients
or result in them placing their business elsewhere, which would negatively impact our ability to remain in business. Criminal behavior
by our employees resulting from a lapse in our screening process may subject us to litigation from our clients or government regulators,
which may also be costly and/or damage our reputation.
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We are in the business of providing
employees to clients, and there is a risk that we will be sued and/or held liable for claims resulting from actions by or against
our employees.
We act as a co-employer
of WSEs, who perform their jobs in the workplaces of our clients. Our ability to control the workplace environment of our clients
is extremely limited. Further, many WSEs have access to our clients' information systems and confidential information. As
the co-employer of these WSEs, we incur a risk of liability arising from various workplace events, including claims of physical
injury, discrimination, harassment or failure to protect confidential personal information. Other inherent risks include possible
claims of errors and omissions; intentional misconduct; release, misuse or misappropriation of client intellectual property; employment
of illegal aliens; criminal activity; torts; or other claims. These claims can carry significant financial penalties and damages.
We have not experienced
significant claims for damages or losses to date arising from the actions of WSEs. However, there is a risk that we will be subject
to such claims in the future and may be held liable even if our contribution to the injury is minimal or absent. We may also be
required to indemnify our clients against claims brought against them by or against WSEs. Even if we are successful in defending
against these claims, the costs of mounting our defense might be significant and damaging to us. We may incur reputational costs
and/or be subject to investigations by public agencies, which could result in associated negative publicity. We may also lose clients
as a result claims against us.
To protect ourselves,
we carry a staffing liability program commercial insurance policy. We believe the level of insurance coverage we maintain is appropriate
for a company of our size and function. The policy provides coverage with respect to: (1) "wrongful employment acts"
committed against our "employees" pursuant to our agreement with that client; and (2) A "staffing services worker's
acts" committed while in the service of our client that result in a "wrongful business environment." No insurance
policy is without risk. A claim against us may not be covered by this plan, such as wage and hour disputes, which are on the rise
nationally. The insurer may seek to disclaim liability or deny coverage for various reasons, or the amount of judgment entered
against us may exceed the policy limits. If we are unable to maintain adequate insurance coverage, we may be exposed to substantial
liabilities. Any claims for damages against us as a result of actions of WSEs could damage our reputation, increase our expenses
and reduce our profitability (or increase net losses) and revenues.
Catastrophic events or geopolitical
conditions may disrupt our business.
Monetary and fiscal
policies and political and economic conditions may substantially change. When there is a slowdown in the economy, employment levels
may decrease with a corresponding impact on our businesses.
Clients may react to
worsening conditions by reducing their spending on payroll and other outsourcing services or renegotiating their contracts with
us.
Worsening economic
conditions, including inflation, recession, or other changes in economic conditions, may cause businesses to rely less on vendors
in our business, which could adversely affect our revenue. If demand for our services declines, or business spending for such services
declines, our revenue will be adversely affected.
Challenging economic
conditions also may impair the ability of our customers to pay for products and services they have purchased. As a result, allowances
for doubtful accounts and write-offs of accounts receivable may increase.
We are dependent upon
various large banks to execute Automated Clearing House and wire transfers as part of our client payroll and tax services. A systemic
shutdown of the banking industry would impede our ability to process funds on behalf of our payroll and tax services clients and
could have an adverse impact on our financial results and liquidity
A disruption or failure
of our systems or operations because of a major earthquake, weather event, cyber-attack, terrorist attack, fire, pandemic, or other
catastrophic event could cause delays in completing sales, providing services, or performing other critical functions. Our corporate
headquarters, a significant portion of our research and development activities, and certain other essential business operations
are located in the Irvine, California area, which is a seismically active region. A catastrophic event that results in the destruction
or disruption of any of our critical business or IT systems could harm our ability to conduct normal business operations. California
has also experienced destructive fires recently. As a result of these fires, power and utilities are occasionally shut off to parts
of the State. A fire or risk of fire may result in damage to our facilities, the temporary or permanent shut down of our or our
clients' facilities, disruption to our power supply or utilities, or other disruptions that may harm our ability to conduct
business
Abrupt political change
and terrorist activity may pose threats to our business and increase our operating costs. These conditions also may add uncertainty
to the timing and budget for technology investment decisions by our customers and may cause supply chain disruptions for hardware
manufacturers. Geopolitical change may result in changing regulatory requirements that could impact our operating strategies, hiring,
and profitability.
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Risks Relating to Regulations and Compliance
Failure to comply with, or changes
in, laws and regulations applicable to our business, particularly potential changes to the Patient Protection and Affordable Care
Act (the "ACA"), could have a materially adverse effect on our marketing plan as well as our reputation, results of
operations or financial condition, or have other adverse consequences.
Our business is subject
to a wide range of complex laws and regulations. For example, many states regulate entities offering the employment related services
such as those offered by us directly or through our subsidiary and require licenses as a prerequisite to operation of such enterprises
in their respective jurisdictions. There can be no assurance that either we or our subsidiary, ReThink, will be successful in either
securing or maintaining a license or licenses in compliance with a particular state's laws and regulations. Further, many
states require that workers' compensation policies offered by employment related firms such as ours be managed according
to strict rules and/or that unemployment insurance filings be administered according to strict rules.
Failure to comply with
such laws and regulations could result in the suspension or revocation of licenses or registrations, the limitation, suspension
or termination of services, and the imposition of consent orders or civil and criminal penalties, including fines, that could damage
our reputation and have a materially adverse effect on our results of operation or financial condition.
In addition, changes
in laws or regulations, or changes in the interpretation of laws or regulations by a regulatory authority, may decrease our revenues
and earnings and may require us to change the manner in which we conduct some aspects of our business. For example, a change in
regulations either decreasing the amount of taxes to be withheld or allowing less time to remit taxes to government authorities
would adversely impact interest income from investing client funds before such funds are remitted to the applicable taxing authorities.
Changes in taxation regulations could adversely affect our effective tax rate and our net income. Changes in laws that govern the
co-employment arrangement between a professional employer organization ("PEO") and its WSEs may require us to change
the manner in which we conduct some aspects of our business.
Changes to the ACA,
as amended, related state laws, and the regulations adopted or to be adopted thereunder, have the potential to impact substantially
the way that employers provide health insurance to employees and the health insurance market for the small and mid-sized businesses
that constitute our business's clients and prospects. The repeal or replacement of the ACA, the elimination of employer mandates
and similar employer requirements currently imposed by the ACA, and other regulatory changes could in the future reduce our revenues.
Amendments to money transmitter statutes have required us to obtain licenses in some jurisdictions. The adoption of new money transmitter
statutes in other jurisdictions, changes in regulators' interpretation of existing state and federal money transmitter or
money services business statutes or regulations, or disagreement by a regulatory authority with our interpretation of such existing
statutes or regulations, could require additional registration or licensing, limit certain business activities until they are appropriately
licensed, and expose us to financial penalties. These occurrences could also require changes to our compliance programs and to
the manner in which we conduct some aspects of our money movement business or client funds investment strategy, which could adversely
impact interest income from investing client funds before such funds are remitted.
Failure to secure any necessary registrations
or licensure could affect our ability to operate certain segments of our business in certain jurisdictions.
Some states require
licensure or registration of businesses offering PEO services. While some elements of our service offering overlap with PEO services,
our human capital platform is more in line with a traditional staffing model. However, if we need and are unable to secure registration
or licensure of such service offerings in a particular state, our ability to grow that segment of our business in such state would
be impaired and could affect our ability to increase our revenues and meet certain customer requirements in such states.
We may be subject to Private Attorney
General's Act ("PAGA") claims which we may require additional capital to defend.
Our work force resides
mostly in the State of California. Employment laws in the State of California can be complex and undefined where a co-employment
or human capital platform relationship exists, both of which are contemplated in our current business and our future plans. PAGA
allows plaintiffs to bring class action-like lawsuits against employers that can result in substantial costs to defend and may
result in large fines for seemingly insignificant or inadvertent clerical errors. As we move more into these areas, the risk will
increase that such PAGA claims will be filed and litigated which may result in increased costs to us.
Laws related to the classification
of Gig Economy workers are changing, and we may be subject to state and local regulations impacting how we classify our workers.
A significant
portion of our business is located in the State of California which recently passed AB-5 relating to the classification of
certain gig workers as employees instead of independent contractors. Other states such as New York and New Jersey, two of our
potential markets, are also considering similar legislation. We anticipate that classification status will continue to be an
unsettled area of law for the foreseeable future. Changes in classification can result in a change to various requirements
associated with the payment of wages, tax withholding, and the provision of unemployment, health, and other traditional
employer-employee related benefits. While we currently classify all WSEs as employees, our business plans potentially include
the use of large numbers of independent contractors.
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If we are unable to utilize independent contractors, or the cost to use
independent contractors becomes more expensive, our future growth opportunities may be limited or reduced. Costs or delays
associated with revising our services to account for changes in the status of employees and independent contractors may have
a significant impact on our future growth. Changes to the law may impact the desirability or applicability of our business
model, which could impact our ability to continue as a going concern.
Changes in tax laws or regulations that are applied adversely
to us or our customers may have a material adverse effect on our business, cash flow, financial condition, or results of operations.
In response to the COVID-19 pandemic, the
CARES Act was signed into law in March 2020. The CARES Act modifies certain of the changes made by the Tax Cuts and Jobs Act of
2017 (the "Tax Act"). Changes in corporate tax rates, the realization of net deferred tax assets relating to our U.S.
operations, and the deductibility of expenses under the Tax Act, as amended by the CARES Act, or future tax reform legislation
could have a material impact on the value of our deferred tax assets, could result in significant one-time charges in the current
or future taxable years, and could increase our future U.S. tax expense. The foregoing items, as well as any other future changes
in tax laws, could have a material adverse effect on our business, cash flow, financial condition, or results of operations. In
addition, it is uncertain if and to what extent various states will conform to the Tax Act, as amended by the CARES Act, or any
newly enacted federal tax legislation.
26
CAUTIONARY NOTE REGARDING
FORWARD-LOOKING STATEMENTS
This
prospectus contains forward-looking statements within the meaning of the federal securities laws, which statements involve substantial
risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance.
In some cases, you can 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 prospectus
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 successfully expand internationally;
·
our ability to effectively manage our growth and future expenses;
·
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 COVID-19 or other public health issues could have on our business and financial condition
and the economy in general;
·
our ability to successfully defend litigation brought against us; and
·
our use of the net proceeds from this offering.
We
caution you that the forward-looking statements highlighted above do not encompass all of the forward-looking statements made in
this prospectus.
We
have based the forward-looking statements contained in this prospectus 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 of this prospectus entitled "Risk Factors" and elsewhere in this prospectus. 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 prospectus.
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 prospectus 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 in this prospectus to reflect events or circumstances after the date
of this prospectus 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.
27
USE OF PROCEEDS
We estimate that the
net proceeds to us from this offering from the sale of the shares of our common stock and the accompanying purchase warrants will
be approximately $         , or approximately $        if the underwriters exercise their option to purchase additional shares and purchase warrants
in full, at the assumed offering price of $       , the closing price of our common stock as reported on Nasdaq on July       , 2020, and after
deducting underwriting discounts and commissions, and assuming no sale of any pre-funded warrants and excluding the proceeds, if
any, from the exercise of the purchase warrants issued in this offering.
A $1.00 increase
(decrease) in the assumed public offering price of  $       per share would increase
(decrease) the expected net proceeds to us from this offering by approximately $         , assuming that the number of shares of
common stock and accompanying purchase warrants offered by us, as set forth on the cover page of this prospectus, remains the
same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us,
and assuming no sale of any pre-funded warrants and excluding the proceeds, if any, from the exercise of the purchase
warrants issued pursuant to this offering.
Similarly, a one million
share increase (decrease) in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase
(decrease) the net proceeds to us by approximately $         , assuming the assumed public offering price of $        per share of common stock
and accompanying purchase warrant remains the same, and after deducting estimated underwriting discounts and commissions and estimated
offering expenses payable by us, and assuming no sale of any pre-funded warrants and excluding the proceeds, if any, from the exercise
of the purchase warrants issued pursuant to this offering.
We
are undertaking this offering in order to access the public capital markets and to increase our liquidity. We intend to use the
net proceeds we receive from this offering for general corporate purposes, including working capital, operating expenses and capital
expenditures. Our management will have broad discretion in the application of the net proceeds.
The amounts and timing
of our use of the net proceeds from this offering for general corporate purposes will depend on a number of factors, such as the
timing and progress of our research and development efforts and the timing and progress of any collaborative or strategic partnering
efforts. As of the date of this prospectus, we cannot specify with certainty all of the particular uses for the net proceeds to
us from this offering. Accordingly, our management will have broad discretion in the timing and application of these proceeds.
28
DIVIDEND POLICY
We
have never declared dividends on our equity securities, and currently do not plan to declare dividends on shares of our common
stock in the foreseeable future. We expect to retain our future earnings, if any, for use in the operation and expansion of our
business. The payment of cash dividends in the future, if any, will be at the discretion of our board of directors and will depend
upon such factors as earnings levels, capital requirements, our overall financial condition and any other factors deemed relevant
by our board of directors.
Accordingly, you may
need to sell your shares of our common stock to realize a return on your investment, and you may not be able to sell your shares
at or above the price you paid for them. See "Risk Factors — Risks Related to this Offering and Ownership of Our Common
Stock." We have not paid cash dividends in the past and do not expect to pay dividends in the future. Any return on investment
may be limited to the value of our common stock."
29
CAPITALIZATION
The following table
sets forth our cash and cash equivalents, as well as our capitalization, as of May 31, 2020 as follows:
·
on an actual basis;
·
on a pro forma basis, as adjusted for the partial over-allotment options exercised on June 11,
2020 and July 7, 2020; and
·
on an as adjusted basis, giving further effect to the receipt of estimated net proceeds from the
sale of shares of common stock and accompanying purchase warrants in this offering, after deducting the estimated underwriting
discounts and commissions and estimated offering expenses payable by us, and assuming no sale of pre-funded warrants and excluding
the proceeds, if any, from the exercise of the purchase warrants issued in this offering.
As of May 31, 2020
Unaudited Selected Condensed Balance Sheet Items
Actual
Pro Forma Adjustments for the Equity Offering
(1)
Total Pro Forma Amounts
Pro Forma
Adjustments for this
Offering
(2)(3)
Pro Forma
as Adjusted for this
Offering
(2)(3)
Cash
$
10,835,000
$
1,244,000
$
12,079,000
$
10,500,000
$
22,579,000
All other assets
16,673,000
-
16,673,000
-
16,673,000
Total assets
27,508,000
1,244,000
28,752,000
10,500,000
39,252,000
Total liabilities
21,017,000
-
21,017,000
-
21,017,000
Preferred stock, par value $0.0001 per share — 50,000,000 shares authorized and no shares outstanding, actual; shares issued and outstanding, as adjusted
-
-
-
-
-
Common stock, par value $0.0001 per share, 750,000,000 shares
authorized, 28,491,866
(4)
shares deemed issued and outstanding, actual; shares issued and outstanding, as adjusted
-
-
-
-
-
Additional paid-in capital
117,730,000
1,244,000
118,974,000
10,500,000
129,474,000
Accumulated deficit
(111,239,000
)
-
(111,239,000
)
(111,239,000
)
Total shareholders' equity
6,491,000
1,244,000
7,735,000
10,500,000
18,235,000
Total liabilities and shareholders' equity
$
27,508,000
$
1,244,000
$
28,752,000
$
10,500,000
$
39,252,000
Total capitalization
$
40,000,000
41,244,000
41,244,000
51,744,000
51,744,000
(1)
On June 11, 2020 and July 7, 2020, we closed partial over-allotment options exercised by A.G.P. to purchase 250,340 additional
shares of common stock resulting in net proceeds of approximately $1.25 million after deducting underwriting discounts and commissions
and estimated expenses payable by us.
(2)
The as adjusted information is illustrative only and following the completion of this offering will be adjusted based on the
actual price per share of common stock in this offering and other terms of this offering determined at pricing.
(3)
Each $1.00 increase or decrease in the assumed offering price of $           per share would increase or decrease each of the as adjusted
cash, additional paid-in capital, total shareholders' equity and total capitalization by approximately $            , assuming
that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, after deducting the
estimated underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease
the number of shares we are offering. An increase or decrease of 1.0 million in the number of shares we are offering would
increase or decrease each of the as adjusted cash, additional paid-in capital, total shareholders' equity and total
capitalization by approximately $         , assuming an offering price of $          per share after deducting the estimated underwriting discounts
and commissions and estimated offering expenses payable by us.
(4)
We have included the Preferred Options exercisable at $0.0001 per share and convertible into common stock on a one-for-one basis as shares deemed issued and outstanding as follows:
Shares of common stock outstanding as of May 31, 2020:
3,857,316
Preferred Options exercised since May 31, 2020:
12,709,030
Preferred Options unexercised as of July 27, 2020:
11,925,520
Total shares of common stock deemed issued and outstanding as of May 31, 2020:
28,491,866
You should read this
information in conjunction with the information contained in "Use of Proceeds" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and our financial statements and related notes in this prospectus.
30
DILUTION
If you invest in our
securities in this offering, your ownership interest will be diluted immediately to the extent of the difference between the public
offering price per share of our common stock and pre-funded warrant and the as adjusted net tangible book value per share of our
common stock after this offering.
Our historical net
tangible book value as of May 31, 2020 was $6,491,000, or $1.68 per share of common stock based on 3,857,316 shares of common stock
outstanding as of May 31, 2020. Historical net tangible book value per share is calculated by subtracting our total liabilities
from our total tangible assets, which is total assets less intangible assets, and dividing this amount by the number of shares
of common stock outstanding as of such date.
Our historical net
tangible book value, as adjusted, as of May 31, 2020 was $6,491,000, or $0.23 per share after adjusting for the 12,709,030 Preferred
Options that have been exercised and 11,925,520 Preferred Options that are unexercised.
Our pro forma net tangible
book value, as adjusted, as of May 31, 2020, after giving effect to the partial over-allotment options exercised on June 11, 2020
and July 7, 2020 was approximately $7,735,000, or $0.27 per share of common stock.
After giving effect
to the sale by us of                shares of common stock and an accompanying purchase warrant in this offering at an assumed public offering
price of $              per share, and assuming no sale of any pre-funded warrants in this offering, and after deducting the estimated underwriting
discounts and commissions and estimated offering expenses payable by us, and excluding the proceeds, if any, from the exercise
of the purchase warrants, our pro forma as-adjusted net tangible book value as of May 31, 2020 would have been approximately
$              , or $                per share of common stock. This represents an immediate increase in the net tangible book value of $               per
share to our existing shareholders and an immediate and substantial dilution in net tangible book value of $              per share to new
investors. The following table illustrates this hypothetical per share dilution:
Offering price per share
$
Historical net tangible book value per share as of May 31, 2020
$
1.68
Decrease in net tangible book value per share for Preferred Options
$
(1.45
)
Historical net tangible book value per share, as adjusted, as of May 31, 2020 for the Preferred Options
$
0.23
Increase in net tangible book value per share attributable to pro forma adjustments
$
0.04
Pro forma net tangible book value, as adjusted, per share as of May 31, 2020
$
0.27
Increase in pro forma net tangible book value, as adjusted, per share attributable to this offering
$
Pro forma as adjusted net tangible book value per share as of May 31, 2020, after giving effect to this offering and as adjusted for the partial over-allotment options exercised on June 11, 2020 and July 7, 2020 and the Preferred Options
$
Dilution per share to new investors purchasing shares in this offering
$
The
information above and below assumes that no pre-funded warrants are issued in this offering.  The information above assumes
that the underwriters do not exercise their over-allotment option. If the underwriters exercise their over-allotment option in
full, the pro forma as adjusted net tangible book value will increase to $              , representing an immediate increase to existing
stockholders of $
per share and an immediate dilution of $               per share to new investors.
A $0.25 increase (decrease)
in the assumed public offering price of $               per share would result in an incremental increase (decrease) in our pro forma as
adjusted net tangible book value of approximately $               million or approximately $               per share, and would result in an incremental
increase (decrease) in the dilution to new investors of approximately $ per share, assuming that the number of shares of our common
stock sold by us remains the same and after deducting the underwriting discounts and commissions and estimated offering expenses
payable by us. A $0.50 increase (decrease) in the assumed public offering price of $          
per share would result in an incremental increase (decrease) in our pro forma as adjusted net tangible book value of approximately
$               million or increase approximately $               per share, and would result in an incremental increase (decrease) in the dilution
to new investors of approximately $        per share, assuming that the number of shares of our common stock sold by us remains the same
and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.
We may also
increase or decrease the number of shares of common stock we are offering from the assumed number of shares of common stock
set forth above. An increase of 250,000 in the assumed number of shares of common stock sold by us in this offering would
result in an incremental increase in our pro forma as adjusted net tangible book value of approximately $               or
approximately $              per share, and would result in an incremental decrease in the dilution to new investors of approximately
$            per share assuming that the assumed public offering price
of the common stock remains the same and after deducting the estimated underwriting discount and estimated offering expenses
payable by us. A decrease of 250,000 in the assumed number of shares of common stock sold by us in this offering would result
in an incremental decrease in our pro forma as adjusted net tangible book value of approximately $              , or approximately
$              per share, and would result in an incremental increase in the dilution to new investors of approximately $               per
share, assuming that the assumed public offering price of the common stock remains the same and after deducting the estimated
underwriting discount and estimated offering expenses payable by us. An increase of 500,000 in the assumed number of shares
of common stock sold by us in this offering would result in an incremental increase in our pro forma as adjusted net tangible
book value of approximately $               or an increase of approximately $               per share and would result in an incremental decrease
in the dilution to new investors of approximately $              per share, assuming that the assumed public offering price of the
common stock remains the same and after deducting the estimated underwriting discount and estimated offering expenses payable
by us. A decrease of 500,000 in the assumed number of shares of common stock sold by us in this offering would result in an
incremental decrease in our pro forma as adjusted net tangible book value of approximately $              , or a decrease of
approximately $               per share, and would result in an incremental increase in the dilution to new investors of approximately
$               per share, assuming that the assumed public offering price of the common stock remains the same and after deducting the
estimated underwriting discount and estimated offering expenses payable by us. The information discussed above is
illustrative only and will adjust based on the actual public offering price, the actual number of securities in this offering
and other terms of this offering determined at pricing. The information discussed above is illustrative only and will adjust
based on the actual public offering price, the actual number of securities in this offering and other terms of this offering
determined at pricing.
31
The foregoing discussion
and table do not take into account further dilution to new investors that could occur upon the exercise of outstanding options
or warrants, including the pre-funded warrants having a per share exercise price less than the per share offering price to the
public in this offering, and the purchase warrants offered hereby. In addition, we may choose to raise additional capital due to
market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans.
To the extent that additional capital is raised through the sale of equity or convertible debt securities, the issuance of these
securities could result in further dilution to our stockholders.
The foregoing discussion and table are based on 16,816,686 shares
of common stock outstanding as of July 24, 2020 and 11,925,520 shares of common stock reserved for future issuance pursuant to
Preferred Options, and excludes the following securities:
·
1,896,209 shares of common stock issuable upon the exercise of warrants to purchase shares of common stock that were exercisable and outstanding as of July 24, 2020, with a weighted-average exercise price of $8.42 per share;
·
198,816 shares of common stock reserved for future issuance under our 2017 Plan;
·
43,126 shares of common stock issuable upon the exercise of options to purchase common stock issued pursuant to our 2017 Plan as of July 24, 2020, with a weighted-average exercise price of $101.31 per share;
·
1,175,784 shares of common stock issuable upon the exercise of options to purchase common stock granted pursuant to our 2017 Plan on July 1, 2020, with a price of $5.40 per share, subject to shareholder approval;
·
25,000,000 shares of common stock potentially issuable pursuant to options that are expected to be granted to Messrs. Absher and Holmes, the issuance of which may be subject to various internal corporate, state, federal or regulatory approvals, following this offering to purchase preferred stock for $0.0001 per share, with each share of preferred stock being convertible into common stock on a one-for-one basis.
32
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following management's
discussion and analysis should be read in conjunction with our historical financial statements and the related notes included in
this prospectus. Management's discussion and analysis contains forward-looking statements that involve risks and uncertainties,
including those we detail under "Risk Factors," "Cautionary Note Regarding Forward-Looking Statements"
and elsewhere in this prospectus, such as statements of our plans, objectives, expectations and intentions. Any statements that
are not statements of historical fact are forward-looking statements. When used, the words "anticipate," "believe,"
"could," "estimate," "expect," "intend," "may," "might,"
"plan," "potential," "predict," "project," "should," "will,"
"would" or the negative of those terms, or similar expressions, identify certain of these forward-looking statements.
These forward-looking statements are subject to risks and uncertainties that could cause actual results or events to differ materially
from those expressed or implied by the forward-looking statements in this prospectus. Our actual results and the timing of events
could differ materially from those anticipated in these forward-looking statements as a result of several factors. We do not undertake
any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this prospectus.
Overview
Our current
business, and the primary source of our revenues to date, has been under a traditional staffing services business model. 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, including the light industrial, services, and food and hospitality markets. We provide
human resources, employment compliance, insurance, payroll, and operational employment services solutions for our business clients
("clients" or "operators") and shift work or "gig" opportunities for WSEs ( or "shifters").
As consideration for providing these services, we receive administrative or processing fees 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 fiscal
year ended August 31, 2019, including our discontinued operations related to the Vensure Asset Sale described below, we processed
over $350 million of payroll billings. Our business has significantly grown for each year since inception and we expect to continue
our track record of significant customer growth. However, we have experienced losses to date as we have invested in both our technology
solutions as well as the back-office operations required to service a large employee base under a traditional staffing model.
We are currently focused
on clients in the restaurant and hospitality industries, traditionally market segments with high employee turnover and low pay
rates. We believe that our focus on these industries will be better served by our Human Resources Information System ("HRIS")
technology platform and related mobile application which provide payroll and human resources tracking for our clients and will
result in lower operating costs, improved customer experience and revenue growth acceleration. All of our clients enter into service
agreements with us or our wholly-owned subsidiary, ReThink.
Our revenues
for Fiscal 2019 and through the first nine months of Fiscal 2020 primarily 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 applicable taxation authority, and
workers' compensation premiums billed to the client for which we facilitate workers' compensation coverage. Our costs
of revenues consist of accrued and paid payroll taxes and our costs to provide the workers' compensation coverage including
premiums and loss reserves. A significant portion of our assets and liabilities is for our workers' compensation reserves.
Our cash balances related to these reserves are carried as assets and our estimates of projected workers' compensation claims
are carried as liabilities. Since Fiscal 2019, we have provided a self-funded workers' compensation policy for up to $500,000
and purchased reinsurance for claims in excess of $500,000. We actively monitor and manage our clients and WSE's workers'
compensation claims which we believe allows us to provide a lower cost workers' compensation option for our clients than
they would otherwise be able to purchase on their own.
As of August 31, 2019, we had 246 clients with over 13,000 WSEs,
and processed payroll of over $350 million during Fiscal 2019, an increase of nearly 60% over Fiscal 2018. Of these WSEs, approximately
60% represent workers in the restaurant industry. In addition, as of August 31, 2019, there were an additional 12,000 inactive
WSEs in our HRIS technology platform who are available for gig opportunities. In January 2020, in connection with the Vensure Asset
Sale described below, we assigned client contracts representing approximately 70% of our billable clients, which comprised approximately
88% of our quarterly revenue as of November 30, 2019, and certain operating assets for $19.2 million in cash, of which $9.7 million
was received at closing and $9.5 million is due over the next four years, which was scheduled to commence in April 2020, subject
to certain conditions, including the performance of the assigned contracts and minimum working capital delivered. The payments
have been delayed due to issues from the novel coronavirus disease ("COVID-19"). For further discussion on the delayed
payment to us pursuant to the Vensure Asset Sale, see " – Recent Developments – Vensure Asset Sale."
Following the
Vensure Asset Sale, our client count, client site count, and billed WSE count decreased by approximately 88% from pre-
Vensure Asset Sale metrics. On a comparative basis from May 31, 2019 to February 29, 2020 (our last reporting period before
the COVID-19 pandemic materially impacted our business operations), our continuing and remaining client count increased from
35 to 83 customers, representing approximately 250 client locations, and our billed WSEs increased from an average of 1,600
to 3,100 at the end of February 2020. The quarter ended February 29, 2020 represented an annualized growth rate of over 100%
for both clients and WSEs since November 30, 2019.
33
The COVID-19 pandemic has had a significant impact upon and
delayed our expected growth, which we have observed through a decrease in our billed customers and WSEs beginning in mid-March
2020, when the State of California first implemented "lockdown" measures. Significantly, all of our February 29, 2020
billed WSEs worked for clients located in Southern California, and many of these clients were required to furlough or layoff employees
or, in some cases, completely close their operations. However, during the quarter ended May 31, 2020, we continued to close new
customer opportunities. The combination of our sales efforts and the opportunities our services provide to businesses impacted
by the COVID-19 pandemic resulted in additional business opportunities for new client location additions, but our WSE billings
per client location decreased as many clients were shut down, or reduced staffing during the quarter ended May 31, 2020. For the
month of May 2020, our billed client count decreased to 81 clients, but client locations increased by 24% to over 300 client locations
compared to February 2020. Monthly "normalized" gross client billings decreased 23% from February 2020 to May 2020
as a result of the reduced staffing levels. ("Normalized" gross billings represent actual billings adjusted for the
number of billable days in a given month, e.g., 29 billable days in February 2020, and 31 billable days in May 2020). As the Southern
California economy experienced modest recovery in June, we experienced continued client additions and some degree of gross billing
recovery. For the month of June 2020, our client count increased to 84 clients, with active billings representing 315 client locations
(an increase of 26% from February 2020 and equivalent to a 150% annualized client location growth rate), while gross client billings
exceeded "normalized" February 2020 billings. On July 13, 2020, the Governor of the State of California re-implemented
certain COVID-19 related lockdown restrictions in most of the counties in the state, including those located in Southern California
where most of our clients reside.  These lockdown restrictions will likely require that in-person dining be prohibited for
at least one month.  We believe that our business will be impacted based upon the negative effect on those clients that rely
more heavily upon in-person dining, but we have not had an opportunity to evaluate fully the probable impact of this lockdown
development on our overall customer base as of the date of this prospectus. For further discussion on the impact of COVID-19 on
our business, see " – Recent Developments – COVID-19 Related Considerations."
Results of Operations
Year Ended August 31, 2019 Compared to Year Ended August
31, 2018
The following table
summarizes the condensed consolidated results of our operations for the years ended August 31, 2019 and 2018. These figures include
the discontinued operations.
For the Years Ended
August 31,
2019
August
31, 2018
Revenues (gross billings of $39.3 million and $12.1 million less worksite employee payroll cost of $33.9 million and $10.3 million, respectively)
$
5,423,000
$
1,819,000
Cost of revenue
4,594,000
1,488,000
Gross profit
829,000
331,000
Operating expenses:
Salaries, wages and payroll taxes
4,670,000
2,941,000
Stock-based compensation
632,000
363,000
Commissions
200,000
93,000
Professional fees
3,918,000
2,078,000
Software development
1,209,000
3,828,000
Marketing and advertising
1,208,000
547,000
General and administrative
3,823,000
3,005,000
Depreciation and amortization
839,000
274,000
Operating expenses
16,499,000
13,129,000
Operating Loss
(15,670,000
)
(12,798,000
)
Other income (expense)
Interest expense
(8,507,000
)
(1,751,000
)
Loss on debt extinguishment
(3,927,000
)
-
Change in fair value of derivative
2,569,000
-
Gain (Loss) associated with note defaults, net
811,000
(3,500,000
)
Total Other income (expense)
(9,054,000
)
(5,251,000
)
Loss from continuing operations
(24,724,000
)
(18,049,000
)
Total Income from discontinued operations, net of tax
5,997,000
1,226,000
Net Loss
$
(18,727,000
)
$
(16,823,000
)
34
We report our revenues as gross billings,
net of related direct labor costs for our Employee Administrative Services ("EAS") clients and revenues without reduction
of labor costs for staffing services clients. For the years ended August 31, 2019 and 2018, revenues associated with staffing services
were insignificant.
2019
2018
Net Revenues (in millions)
$
5.4
$
1.8
Increase, year over year (in millions)
3.6
1.2
% Increase, year over year
198.1
%
199.7
%
Cost of Revenues (in millions)
$
4.6
$
1.5
Increase, year over year (in millions)
3.2
1.0
Increase, year over year
208.7
%
199.4
%
Gross Profit (in millions)
$
0.8
$
0.3
Increase, year over year (in millions)
0.5
0.2
Increase, year over year
150.4
%
200.9
%
Gross Profit % of Revenues
15.3
%
18.2
%
Our net revenue excludes
the payroll cost component of gross billings. With respect to employer payroll taxes, employee benefit programs, workers'
compensation insurance, we believe that we are the primary obligor, have latitude in establishing price, selecting suppliers, and
determining the service specifications and, as such, the billings for those components are included as revenue. Revenues are recognized
ratably over the payroll period as WSEs perform their service at the client worksite.
Net Revenue
Our net revenue increase
of $3.6 million or 198.1% from $1.8 million in 2018 to $5.4 million in 2019 is primarily driven by the increase in business clients
and the workplace employees associated with those clients. Active worksite employees increased by 1,000 or 200% from 500 at the
end of 2018 to 1,500 at the end of 2019.
Cost of Revenue
Our cost of revenue
includes the costs of employer side taxes and workers' compensation insurance coverage. Cost of revenues increased $3.1 million
or 208.7% from $1.5 million in 2018 to $4.6 million in 2019. The change in cost of revenues was due to the 198.1% increase in worksite
employees.
Gross Profit
Gross profit increased
$0.5 million or 150.5% from $0.3 million in 2018 to $0.8 million in 2019. The increase is due to the combination of increased net
revenues and improvement in gross profit percentages. Gross profit percentage had a decrease of 2.9% from 18.2% of revenues for
the year ended August 31, 2018 to 15.3% for the year ended August 31, 2019 due to larger increase of cost of revenue compared to
net revenue as noted above.
Operating Expenses
The following table
presents certain information related to our operating expenses
Year ended August 31
,
2019
2018
% Change
(in thousands)
(in thousands)
Salaries, wages and payroll taxes
$
4,670
$
2,941
58.8
%
Share-based compensation
632
363
74.1
%
Commissions
200
93
115.1
%
Professional fees
3,918
2,078
88.5
%
General and Administrative
3,823
3,005
27.2
%
Marketing and Advertising
1,208
547
120.8
%
Software development
1,209
3,828
(68.4
)%
Depreciation and amortization
839
274
206.2
%
Total operating expenses
$
16,499
$
13,129
25.7
%
35
Operating expenses
increased $3.4 million or 25.7% from $13.1 million in 2018 to $16.5 million in 2019. The components of operating expenses changed
as follows:
Salaries, Wages and Payroll Taxes
Our salaries, wages
and payroll taxes consist of gross salaries, benefits, and payroll taxes associated with our executive management team and corporate
employees for the fiscal year ended August 31, 2019, increased by $1.7 million or 58.8% to $4.6 million from $2.9 million for the
fiscal year ended August 31, 2018. The increase is due to the increase in corporate employees including the addition of our technical
team hired to replace outside software developers at a higher average salary than previously hired corporate employees.
Share-Based Compensation
Share-based compensation
increased by $0.3 million or 74.1% to $0.6 million for the fiscal year ended August 31, 2019. This increase was primarily due to
additional stock option awards granted to our corporate employees in 2018 and 2019 and share grants issued to our non-employee
board of directors.
Commissions
Commissions consist
of commissions payments made to third party brokers and inside sales personnel. Commissions increased by $0.1 million or 115.1%
to $0.2 million from $0.1 million in the fiscal year ended August 31, 2018. Commissions are primarily associated with compensation
to our sales force for sales as well as to our property and casualty agents. Commission expenses approximates 0.5% and 0.8% of
our gross billings for the years ended August 31, 2019, and 2018, respectively.
Professional Fees
Professional fees consist
of legal fees, accounting and public company costs, board fees, and consulting fees. Professional fees for the year ended August
31, 2019, increased by $1.8 million or 88.5% to $3.9 million, from $2.1 million for the year ended August 31, 2018. The increase
is due to $1.1 million of increased legal fees and legal settlements, $0.3 million in increased sales and marketing related consulting,
$0.3 million increase for outsourced development related consulting costs, $0.3 million for increased administrative costs associated
with our Sunz workers' compensation policy, and a $0.3 million reduction in public company related costs, primarily due to
reduced accounting and audit related costs.
General and Administrative Expenses
Our general and administrative
expenses consist of office rent and related overhead, software licenses, insurance, penalties, business taxes, travel and entertainment,
and other general business expenses. General and administrative expenses for the fiscal year ended August 31, 2019, increased by
$0.8 million or 27.2% to $3.8 million, from $3.0 million for the fiscal year ended August 31, 2018. The increase is due to $0.3
million in higher software license fees related to our mobile application, $0.2 million in increased accrued tax penalties, and
$0.3 million higher rent and overhead relating to our increased revenues, personnel, and the support required for the business
growth.
Marketing and Advertising
Our marketing and advertising
expenses consist of advertising, website costs, marketing promotions, corporate marketing, and tradeshow related costs. Marketing
and advertising costs increased by $0.7 million or 120.8% to $1.2 million in Fiscal 2019 from $0.5 million in the prior year. The
increase is due to increased marketing, improvements to our website, increased tradeshows and advertising, and increased costs
associated with marketing our mobile application.
Software Development
Our software
development expenses consist of outsourced research and development to third parties. Software development costs decreased
$2.6 million or 68.4% to $1.2 million for the fiscal year ended August 31, 2019 from $3.8 million in the prior year. The
decrease is due to $2.8 million lower expenses in 2019 related to work contracted to Kadima, with whom we are currently in
litigation over non-delivery of the software and represented the entire expense in 2018. In 2019, Kadima represented $1.0
million of the expense and we incurred $0.2 million for contracted offshore developers in India and South America to support
our U.S. based mobile application development.
36
Depreciation and Amortization
Depreciation and amortization
increased by $0.6 million or 206.2% from our previous fiscal year. We capitalized $2.8 million of software development costs related
to the application development stage during the fiscal year ended August 31, 2018 and $0.9 million in 2019 for a total of $3.7
million in capitalized software development. The increase is due to increased amortization on that capitalized software.
Other expenses increased
from $5.3 million for the fiscal year ended August 31, 2018 to $6.8 million for the fiscal year ended August 31, 2019:
For the Year Ended August 31,
2019
2018
Interest expense
(8,507,000
)
(1,751,000
)
Loss on debt extinguishment
(3,927,000
)
-
Change in fair value of derivatives
2,569,000
-
Gain (Loss) associated with note defaults, net
811,000
(3,500,000
)
Total Other income (expense)
(9,054,000
)
(5,251,000
)
Interest Expense
Interest expense consists
of cash interest on interest bearing notes, financing charges for the excess of fair value over carrying amounts of notes issued
during any reporting period, amortization of recorded discount and associated deferred financing costs, and acceleration of discounts
and deferred financing costs due to early conversions on notes payable. Interest expense increased $6.7 million to $8.5 million
from $1.8 million in 2018. The increase is due to the increased interest expense and financing costs associated with the June 2018
Notes and the March 2019 Notes. The 2019 balances include: $2.6 million financing charge for the excess fair value over the carrying
amount of the June 2019 Notes, non-cash interest expense related to amortization of convertible notes discount of $5.6 million
and cash based interest of $0.9 million offset by the recovery of a $0.6 million interest accrual recorded into 2018 as part of
the registration rights penalties that was cured and reversed in December 2018. The 2018 balances include $0.6 million for the
accrual of the guaranteed twelve months of interest as part of the mandatory default clause of the debentures that was triggered
following the event of default, $0.9 million of non-cash interest related to the amortization of the debt discount and debt issuance
costs related to the June 2018 Notes, and $0.2 million is related to the cash basis coupon payments on the outstanding principal
amount of the convertible notes.
Loss on Debt Extinguishment
The balance in 2019
represents the additional loss required to be recorded for note conversions below the stated conversion rate and associated with
$8.4 million of principal conversions that were converted into common stock in Fiscal 2019. No such conversions occurred in 2018.
Change in Fair Value of Derivative
The balance in 2019
represents the reduction in fair value of the derivative liabilities recorded with the March 2019 Notes payable. No such derivative
existed in 2018. See also Note 8 to the Financial Statements.
Gain (Loss) Associated with
Note default, Net
For 2018, the loss
of $3.5 million relates to the accrual of penalties and liquidated damages associated with technical defaults under the registration
rights agreements relating to our 8% senior secured convertible notes. Those penalties were settled in Fiscal 2019 by the issuance
of $0.9 million of additional convertible notes in December 2018 resulting in a gain of $2.6 million recorded in Fiscal 2019. The
gain was offset by $1.8 million of accrued potential default damages related to our senior secured notes in default as of August
31, 2019.
Loss from Continuing Operations
As a result of the
explanations described above, the net loss from continuing operations for the fiscal year ended August 31, 2019 was $24.7 million
compared to a net loss of $18.0 million in the prior year representing an increase of $6.7 million or 37.0%.
37
Discontinued Operations
Results for the discontinued
operations by period were as follows:
For the Year Ended
August 31, 2019
August 31, 2018
Revenues (gross billings of $313.3 million and $210.3 million less worksite employee payroll cost of $265.3 million and $177.2 million for the years ended respectively
$
48,013,000
$
33,139,000
Cost of revenue
36,452,000
27,970,000
Gross profit
11,561,000
5,169,000
Operating expenses:
Salaries, wages and payroll taxes
3,032,000
2,442,000
Commissions
2,532,000
1,501,000
Total operating expenses
5,564,000
3,943,000
(Loss) income from discontinued operations, net of tax
5,997,000
1,226,000
(Loss) Income from Discontinued Operations
This represents the
operations for the clients transferred to Vensure pursuant to the Vensure Asset Sale, effective as of January 1, 2020, related
to the activity for the years ended August 31, 2019 and August 31, 2019.
Our net revenue from
discontinued operations increase of $14.9 million or 44.9% increase from $33.1 million in 2018 to $48.0 million in 2019 is primarily
driven by the increase in business clients and the workplace employees associated with those clients. Active WSEs increased by
3,500 or 43.8% from 8,000 at the end of 2018 to 11,500 at the end of 2019.
Cost of Revenue
Our cost of revenue
includes the costs of employer side taxes and workers' compensation insurance coverage. Cost of revenues increased $8.5 million
or 30.3% to $36.5 million in 2019 from $28.0 million in 2018.
The change in cost
of revenues was due to the net effect of the increase in WSEs net revenues, supported by the increase in WSEs offset by a reduction
in employer tax expenses of $0.8 million due to the combination of favorable rate exchanges and a non-recurring reversal of a tax
expense accrual made in Fiscal 2018 and reversed in Fiscal 2019 due to a tax reimbursement between the U.S. federal government
and the State of California.
Workers' compensation
decreased due to the combination of our operational focus on loss reduction, the full implementation of the Sunz Insurance Company
("Sunz") workers' compensation policy for 2019 and expense reduction due to a non-recurring return of premium
related to prior reporting periods. We implemented the Sunz policy in July, 2018, and therefore the cost reduction only impacted
our workers' compensation cost for two out of twelve months in 2018 compared to a full year for 2019.
Gross Profit
Gross profit from discontinued
operations increased $6.4 million or 123.7% to $11.6 million in 2019 from $5.2 million in 2018. The increase is due to the combination
of increased net revenues and improvement in gross profit percentages. Gross profit percentage improved 8.4% from 15.6% of revenues
for the fiscal year ended August 31, 2018 to 24.0% for the fiscal year ended August 31, 2019 due to the cost of revenue improvements
noted above and including the $0.8 million tax accrual and other cost savings and tax rate improvements.
Operating Expenses
Operating expenses
related to discontinued operations represent the salaries and commissions for our employees transferred to Vensure as a result
of the Vensure Asset Sale.
Salaries, Wages and Payroll Taxes
Salaries consist of
gross salaries, benefits, and payroll taxes associated with the sales and support employees transferred to Vensure. Discontinued
salaries for the fiscal year ended August 31, 2019, increased by $0.6 million to $3.0 million from $2.4 million for the fiscal
year ended August 31, 2018. The increase is due to the increase in staff required to support the increase in business levels.
38
Commissions
Commissions include
payments made to third party brokers and inside sales personnel for business activity that was transferred in the Vensure transaction.
Discontinued commissions increased by $1.0 million or 68.7% to $2.5 million, from $1.5 million for the fiscal year ended August
31, 2018. Commissions are primarily associated with compensation to our sales force for sales as well as to our property and casualty
agents and the increase is due to increased business levels. Commission expenses approximates 0.77% and 0.72% of our gross billings
for the fiscal years ended August 31, 2019, and 2018, respectively.
Income from Discontinued Operations
Income from Discontinued
Operations represents the income from the business transferred to Vensure. The income increased 389.2% to $6.0 million from $1.2
million due to increased business activity as described above.
Net Loss
As a result of the
explanations described above, the net loss for the fiscal year ended August 31, 2019, was $18.7 million, representing a $24.7 million
loss from continuing operations, offset by $6.0 million income from discontinued operations and compared to a net loss of $16.8
million in the prior year representing a loss from discontinued operations of $18.0 million offset by income from discontinued
operations of $1.2 million.
Three Months and Nine Months Ended
May 31, 2020 Compared to the Three and Nine Months Ended May 31, 2019
The following table
summarizes the condensed consolidated results of our operations for the three and nine months ended May 31, 2020, and May 31,
2019, prior to the reclassification of discontinued operations.
For the Three Months Ended
For the Nine Months
    Ended
May 31,
2020
May 31,
2019
May 31,
2020
May 31,
2019
Revenues (gross billings of $14.4 million and $11.9 million less worksite employee payroll cost of $12.4 million and $10.3 million, respectively for the three months ended; gross billings of $47.0 million and $25.9 million less worksite employee payroll cost of $40.3 million and $22.3 million, respectively for nine months ended)
$
2,014,000
$
1,638,000
$
6,775,000
$
3,658,000
Cost of revenue
1,873,000
1,467,000
6,051,000
3,126,000
Gross profit
141,000
171,000
724,000
532,000
Operating expenses:
Salaries, wages, and payroll taxes
1,793,000
1,152,000
5,246,000
3,182,000
Stock-based compensation – general and administrative
150,000
(5,000
)
895,000
154,000
Commissions
27,000
64,000
137,000
130,000
Professional fees
439,000
1,280,000
2,276,000
2,799,000
Software development
686,000
222,000
1,390,000
1,249,000
Depreciation and amortization
545,000
222,000
1,025,000
603,000
General and administrative
1,054,000
1,541,000
2,617,000
3,654,000
Total operating expenses
4,694,000
4,476,000
13,586,000
11,771,000
Operating Loss
(4,553,000
)
(4,304,000
)
(12,862,000
)
(11,239,000
)
Other (expense) income:
Interest expense
(559,000
)
(4,345,000
)
(2,524,000
)
(6,270,000
)
Expense related to preferred option exchange
(62,091,000
)
-
(62,091,000
)
-
Expense related to modification of warrants
-
-
(22,000
)
-
Loss from debt conversion
(2,842,000
)
-
(3,500,000
)
-
Inducement loss
(57,000
)
(2,273,000
)
(624,000
)
(3,829,000
)
Loss on debt extinguishment
(1,592,000
)
-
(1,592,000
)
-
Change in fair value derivative and warrant liability
6,000
4,748,000
1,777,000
4,748,000
Loss on convertible note settlement
-
-
-
2,611,000
Gain on convertible note penalties accrual
-
-
760,000
-
Total other (expense) income \
(67,135,000
)
(1,870,000
)
(67,816,000
)
(2,740,000
)
Loss from continuing operations
(71,688,000
)
(6,174,000
)
(80,678,000
)
(13,979,000
)
Income (Loss) from discontinued operations
Income (Loss) from discontinued operations
(1,490,000
)
1,178,000
(1,293,000
)
4,596,000
Gain from asset sale
-
-
15,682,000
-
Total Income (Loss) from discontinued operations, net of tax
(1,490,000
)
1,178,000
14,389,000
4,596,000
Net Loss
$
(73,178,000
)
$
(4,996,000
)
$
(66,289,000
)
$
(9,383,000
)
Net Income (Loss) gain per share, Basic and diluted
Continuing operations
$
(2.73
)
$
(7.92
)
$
(5.49
)
$
(18.54
)
Discontinued operations
Operating income (loss)
(0.06
)
1.51
(0.09
)
6.10
Gain on sale of assets
-
-
1.07
-
Total discontinued operations
(0.06
)
1.51
0.98
6.10
Net income (loss) per share of common stock – Basic and diluted
$
(2.79
)
$
(6.41
)
$
(4.51
)
$
(12.44
)
39
Revenue
Revenue for the three
months ended May 31, 2020, increased by $0.4 million, or 25.0%, to $2.0 million, compared to $1.6 million for the three months
ended May 31, 2019. Revenue for the nine months ended May 31, 2020 increased by $3.1 million, or 83.8%, to $6.8 million, compared
to $3.7 million for the nine months ended May 31, 2019.
Gross billings are
a non-GAAP measurement and are the metric in which we currently earn our revenue. Gross billings for the three months ended May
31, 2020, were earned from billings to clients to whom we provide staff or workforce management support. Gross billings for the
three months ended May 31, 2020, increased by $2.5 million, or 21.3%, to $14.4 million, compared to $11.9 million for the three
months ended May 31, 2019. Gross billings for the nine months ended May 31, 2020, increased by $21.1 million, or 81.5%, to $47.0
million from $25.9 million for the nine months ended May 31, 2019.
The gross payroll cost
of WSEs accounted for 86.0% and 86.2% of our gross billings for the three months ended May 31, 2020 and May 31, 2019, respectively.
As such, the mark-up components accounted for 14.0% and 13.8% of our gross billings for the three months ended May 31, 2020 and
May 31, 2019, respectively.
The gross payroll cost
of WSEs accounted for 85.6% and 85.9% of our gross billings for the nine months ended May 31, 2020 and May 31, 2019, respectively.
As such, the mark-up components accounted for 14.4% and 14.1% of our gross billings for the nine months ended May 31, 2020 and
May 31, 2019, respectively.
The increase in revenue
was primarily due to an increase in WSEs from a billed average of 1,650 employees in the three months ended May 31, 2019 to a billed
average of 2,700 employees in the three months ended May 31, 2020. Revenues are recognized ratably over the payroll period as WSEs
perform their service at the client worksite.
Cost of Revenues
Cost of revenues mainly
includes the costs of employer-side taxes and workers' compensation insurance coverage and employee benefits. Our cost of
revenues for the three months ended May 31, 2020, increased by $0.4 million, or 27.7%, to $1.9 million compared to $1.5 million
for the three months ended May 31, 2019. Our cost of revenues for the nine months ended May 31, 2020, increased by $2.9 million,
or 93.6%, to $6.1 million compared to $3.1 million in the nine months ended May 31, 2019.
The increase in cost
of revenue can be attributed to the additional WSEs we are servicing, which increased by 1,050 from a billed average of 1,650 employees
for the three months ended May 31, 2019, to a billed average of 2,700 employees for the three months ended May 31, 2020. Cost of
revenue for the three and nine months ended May 31, 2020 included $0.2 million in additional expense for workers' compensation
reserves as a result of the COVID-19 loss reserve increase requirements.
40
Gross Profit
Gross profit
decreased 17.5% to $141,000 for the three months ended May 31, 2020 from $171,000 for the three months ended May 31, 2019.
The gross profit, as a percentage of revenues, decreased from 10.5% for the three months ended May 31, 2019, to 7.0% for the
three months ended May 31, 2020. Gross Profit increased 36.1% to $724,000 for the nine months ended May 31, 2020 from
$532,000 for the nine months ended May 31, 2019. The gross profit, as a percentage of revenues, decreased from 14.5% for the
nine months ended May 31, 2019, to 10.7% for the nine months ended May 31, 2020.
The changes to our
gross profit as a percent of revenue is attributable to changes in paid losses and the development of open workers' compensation
claims during the period, primarily related to the increased reserve requirements as a result of the COVID-19 pandemic.
Operating Expenses
The following table
presents certain information related to our operating expenses (unaudited):
For the Three Months Ended
For the Nine Months Ended
May 31, 2020
May 31, 2019
May 31, 2020
May 31, 2019
Operating expenses:
Salaries, wages, and payroll taxes
$
1,793,000
$
1,152,000
$
5,246,000
$
3,182,000
Stock-based compensation – general and administrative
150,000
(5,000
)
895,000
154,000
Commissions
27,000
64,000
137,000
130,000
Professional fees
439,000
1,280,000
2,276,000
2,799,000
Software development
686,000
222,000
1,390,000
1,249,000
Depreciation and amortization
545,000
222,000
1,025,000
603,000
General and administrative
1,054,000
1,541,000
2,617,000
3,654,000
Total operating expenses
$
4,694,000
$
4,476,000
$
13,586,000
$
11,771,000
Operating expenses
for the three months ended May 31, 2020, increased by $0.2 million, or 4.9%, to $4.7 million compared to $4.5 million for the three
months ended May 31, 2019. The increase is due to increases in salaries of $0.6 million, stock-based compensation of $0.1 million
and product development costs of $0.5 million offset by decreases of $0.9 million in professional fees and $0.2 million of general
and administrative expenses.
Operating expenses
for the nine months ended May 31, 2020, increased by $1.8 million, or 15.4%, to $13.6 million compared to $11.8 million for the
nine months ended May 31, 2019. The increase is due to increases in salaries of $2.1 million, stock-based compensation of $0.7
million and product development of $0.1 million offset by $0.6 million decrease in professional fees and $0.6 million in general
and administrative expenses. The components of operating expenses changed as follows:
Salaries, Wages and Payroll Taxes
These consist of gross
salaries, benefits, and payroll taxes associated with our executive management team and corporate employees. For the three months
ended May 31, 2020, salaries, wages and payroll taxes increased by $0.6 million, or 55.7%, to $1.8 million compared to $1.2 million
for the three months ended May 31, 2019. For the nine months ended May 31, 2020, salaries, wages and payroll taxes increased by
$2.1 million, or 64.8%, to $5.2 million compared to $3.2 million for the nine months ended May 31, 2019. The increase for both
periods is due to the increase in corporate employees, primarily consisting of the hiring of our internal research and development
team in the third and fourth quarters of Fiscal 2019.
Stock Based Compensation
Stock based compensation
consists of expenses related to vested stock options granted to our employees. This compensation increased $0.2 million, or 3,257%,
for the three months ended May 31, 2020, from a $5,000 credit in the three months ended May 31, 2019, and increased $0.7 million,
or 483%, to $0.9 million for the nine months ended May 31, 2020, compared to $0.2 million for the nine months ended May 31, 2019.
The three month increase was due to a one-time credit in the May 2019 quarter and the nine month increase was due to one-time vesting
of all options granted to employees transferred under the Vensure Asset Sale.
Commissions
Commissions consist
of commission payments made to third party brokers and inside sales personnel. Commissions for the three and nine months ended
May 31, 2020 and May 31, 2019 decreased less than $0.1 million for the three month period and remained consistent at $0.1 million
for the nine month period. Our sales model changed from a high commission external sales force for the clients transferred pursuant
to the Vensure Asset Sale to an inside sales force with much lower commission rates.
Professional Fees
Professional fees
consist of legal fees, accounting and public company costs, board fees, and consulting fees. Professional fees for the three
months ended May 31, 2020, decreased by $0.9 million, or 69.6%, to $0.4 million, from $1.3 million for the three months ended
May 31, 2019. Professional fees for the nine months ended May 31, 2020, decreased by $0.6 million, or 20.5%, to $2.3 million,
from $2.8 million for the nine months ended May 31, 2019. The decrease is due to lower legal fees related to litigation
matters which were resolved in January 2020.
41
External Software Development
External software development
consists of payments to third party contractors for licenses, software development, and IT related spending for the development
of our HRIS platform and mobile application. For the three months ended May 31, 2020, external software development increased by
$0.5 million, or 209.8%, to $0.7 million from $0.2 million. For the nine months ended May 31, 2020, external software development
decreased by $0.1 million, or 11.3%, to $1.4 million from $1.2 million. The increase is due to increased expenditures related to
the development of our mobile application and related HRIS platform.
Depreciation and Amortization
Depreciation and amortization
expenses represent depreciation on our equipment and amortization on our capitalized internally developed or purchased software.
For the three months ended May 31, 2020, depreciation and amortization expenses increased by $0.3 million, or 145.5%, to $0.5 million.
For the nine months ended May 31, 2020, depreciation and amortization expenses increased by $0.4 million, or 70.8%, to $1.0 million.
The increase was due to higher software amortization, including a non-recurring write-off of $0.3 million in the May 31, 2020 quarter.
General and Administrative
General and administrative
expenses consist of office rent and related overhead, marketing, insurance, penalties, business taxes, travel and entertainment,
depreciation and amortization and other general business expenses. General and administrative expenses for the three months ended
May 31, 2020, decreased by $0.5 million, or 46.3%, to $1.1 million from $1.5 million in the three months ended May 31, 2019, and
decreased $1.1 million, or 28.4%, to $2.6 million for the nine months ended May 31, 2020 from $3.7 million in the nine months ended
May 31, 2019. The decrease was due to a reduction in marketing expenses driven by a reversal of a $0.3 million accrual recorded
in the fiscal year ended August 31, 2017 ("Fiscal 2017).
Other Income and Expenses
For the Three Months Ended
For the Nine Months Ended
May 31, 2020
May 31, 2019
May 31, 2020
May 31, 2019
Other (expense) income:
Interest expense
$
(559,000
)
$
(4,345,000
)
$
(2,524,000
)
$
(6,270,000
)
Expense related to preferred option exchange
(62,091,000
)
-
(62,091,000
)
-
Expense related to modification of warrants
-
-
(22,000
)
-
Loss from debt conversion
(2,842,000
)
-
(3,500,000
)
-
Inducement loss from debt conversion
(57,000
)
(2,273,000
)
(624,000
)
(3,829,000
)
Loss on debt extinguishment
(1,592,000
)
-
(1,592,000
)
-
Gain on change in fair value derivative and warrant liability
6,000
4,748,000
1,777,000
4,748,000
Gain on convertible note settlement
-
-
-
2,611,000
Gain on convertible note penalties accrual
-
-
760,000
-
Total other income (expense)
$
(67,135,000
)
$
(1,870,000
)
$
(67,816,000
)
$
(2,740,000
)
Interest Expense
Interest expense represents
cash interest paid and non-cash expense resulting from the amortization of our note discount and deferred financing fees on our
convertible notes payable. Interest expense decreased $3.8 million, or 87.1%, to $0.5 million and decreased $3.7 million, or 59.7%,
to $2.5 million for the three and nine months ended May 31, 2020, respectively, from the prior year periods. The changes are due
to differences in the amortization of the different series of convertible notes outstanding.
Expense Related to Preferred Options
Expenses related to
preferred options represents a non-recurring charge reflecting the fair value estimate of the preferred share options issued to
the Option Shareholders that were deemed to be exercisable in January 2020, and became exchangeable for our common stock on a one-for-one
basis pursuant to the amendment to our Articles of Incorporation filed with the Secretary of State of the State of Wyoming on March
25, 2020.
42
Expenses Related to Modification of
Warrants
Expenses related to
modification of warrants represents the difference in fair value for the June 2018 Note Warrants which had their exercise price
reduced from $70 per share to $40 per share in December 2019.
Loss from Debt Conversion
Loss from debt conversion
represents the acceleration of the pro-rated remaining note discount and deferred financing fees associated with March 2019 Notes,
as exchanged in either December 2019 or March 2020, that were either converted or repaid in cash during the three and nine months
ended May 31, 2020.
Inducement Loss
Inducement loss represents
the difference in fair value on the date of note conversion between the closing market price and the conversion price per share,
and decreased $2.2 million, or 97.5%, and $3.2 million, or 83.7%, for the three and nine months ended May 31, 2020, respectively
from the prior year periods. The change was caused by lower conversion amounts and conversions closer to market price for the 2020
periods.
Loss on Debt Extinguishment
Loss on debt extinguishment represents $0.5 million for the
fair value of the common stock issued in exchange for the March 2019 Warrants cancelled in the March 2020 note amendment and exchange,
and $1.0 million for the acceleration of the debt discount and deferred financing fees associated with the remaining March 2019
exchange or December 2019 exchange. These notes were amended in March 2020 and accounted for as debt extinguishment. No such transactions
existed for the three and nine months ended May 31, 2019.
Change in Fair Value Derivative and
Warrant Liability
Change in fair value
derivative and warrant liability represents the mark to market of our derivative liabilities created by the March 2019 Notes beneficial
conversion feature and related detachable warrants.
Gain on Convertible Note Settlement
This represents the
recovery of previously accrued convertible note penalties related to the June 2018 default. For the three and nine months ended
May 31, 2019, we recorded $3.5 million of penalty accrual as a result of claims by the noteholders as of August 31, 2018 and November
30, 2018. We satisfied this liability with the issuance of $889,000 of additional convertible notes in December 2018 and recorded
a penalty recovery of $2,611,000 for the nine months ended May 31, 2019.
Gain on Convertible Note Penalties Accrual
Gain on convertible
note penalties accrual represents the recovery of previously accrued convertible note penalties related to the June 2019 default.
For the nine months ended May 31, 2020, we recorded a $1.8 million penalty accrual for litigation damages and default interest
as of August 31, 2019 and November 30, 2019. We settled all note related litigation, as described above and in Note 5 to the financial
statements, in January 2020, which resulted in a gain due to the release of $760,000 for excess damages accrued liabilities in
excess of paid claims.
Loss from Continuing Operations
As a result of the
explanations described above, the loss from continuing operations was $71.7 million for the three months ended May 31, 2020, compared
to a net operating loss of $6.2 million for the three months ended May 31, 2019, and a loss of $80.7 million for the nine months
ended May 31, 2020 compared to a loss of $14.0 million for the nine months ended May 31, 2019. The increase is due to the non-recurring
charges related to our recapitalization including expenses related to the Preferred Options and convertible notes.
43
Discontinued Operations
Results for the discontinued operations
by period were as follows:
For the Three Months Ended
For the Nine Months Ended
May 31,
2020
May 31,
2019
May 31,
2020
May 31,
2019
Revenues (gross billings of $0 and $82.3 million less worksite employee payroll cost of $0 million and $69.7 million, respectively for the three months ended; gross billings of $120.0 million and $221.7 million less worksite employee payroll cost of $103.3 million and $187.3 million, respectively for Nine Months ended)
$
—
$
12,666,000
$
17,138,000
$
34,354,000
Cost of revenue
1,490,000
10,125,000
17,025,000
25,567,000
Gross profit (loss)
(1,490,000
)
2,541,000
113,000
8,787,000
Operating expenses:
Salaries, wages and payroll taxes
—
662,000
658,000
2,414,000
Commissions
—
701,000
748,000
1,777,000
Total operating expenses
—
1,363,000
1,406,000
4,191,000
(Loss) income from discontinued operations, net of tax
$
(1,490,000
)
$
1,178,000
$
(1,293,000
)
$
4,596,000
Gain from asset sale
—
—
15,682,000
—
Total Income from discontinued operations, net of tax
(1,490,000
)
1,178,000
14,389,000
4,596,000
(Loss) Income from Discontinued Operations
This represents the
operations for the clients transferred to Vensure pursuant to the Vensure Asset Sale, effective as of January 1, 2020. As such,
the operating activities represent zero months and four months of billings, revenues, cost of revenues and operating expenses for
the three and nine months ended May 31, 2020 and billings, revenues, cost of revenues and operating expenses for the three and
nine months ended May 31, 2019. For the three and nine months ended May 31, 2020 we recorded an additional expense of $1.5
million due to a change in the estimated loss reserves required for the retained workers compensation claims due to higher loss
reserve requirements set by our actuary contractors, in part due to the COVID-19 pandemic. Although claims in this workers compensation
pool typically would not qualify for a COVID-19 related liability, the rate increase for reserve requirements increased and changed
our loss estimates. We will continue to evaluate these claims and the related claims reserve rates in the next fiscal quarter.
Revenues
Revenues decreased
$12.7 million to $0, and decreased $17.2 million to $17.1 million, for the three and nine months ended May 31, 2020, compared to
the three and nine months ended May 31, 2019. The decrease is consistent with the change in billing months recorded.
Cost of Revenue
Cost of revenue decreased
$8.6 million to $1.5 million and decreased $8.5 million to $17.0 million for the three and nine months ended May 31, 2020, compared
to the three and nine months ended May 31, 2019. The changes reflect the net effect of the revenue decreases offset by the $1.5
million additional workers compensation reserve accrual recorded for the residual workers compensation claim liability estimates
associated with the existing WSEs being transferred under the Asset Sale.
Gross Profit (loss)
Gross profit (loss)
changes
are the result of the combined gross profit decrease from decreased revenues in addition to the $1.5 million additional workers
compensation expense accrual recorded in the three and nine months ended May 31, 2020.
Operating Expenses
Operating expenses
represent the salaries and commissions for our employees transferred to Vensure as a result of the Vensure Asset Sale.
44
Gain from Asset Sale
Gain from asset sale of
$0 and $15.7 million for the three and nine months ended May 31, 2020, respectively, represents the net present value of the proceeds
received or receivable from the Vensure Asset Sale, as reduced by the net financial assets transferred. The terms of the transaction
consisted of a total of $19.2 million of cash proceeds including $9.7 million upon closing and $9.5 million paid over 4 years beginning
in April 2020. The gain represents the $19.2 million, reduced by the $1.5 million of financial assets to be provided, and further
reduced by a $1.8 million discount recorded to long term portion of the four-year note receivable. We believe, based upon our
evaluation, that we will be able to utilize existing tax NOL's to offset any material tax liabilities generated by
the Vensure Asset Sale.
Income (loss) on Discontinued Operations
Income (loss) on discontinued
operations represents the gain or loss on discontinued operations for each period, adjusted for the $15.7 million gain from asset
sale for the nine months ended May 31, 2020, as described above.
Net Income (loss)
Net income (loss) increased
to net loss of $73.2 million from a net loss of $5.0 million for the three months ended May 31, 2020 and May 31, 2019, respectively.
Net income (loss) increased to a net loss of $66.3 million from a net loss of $9.4 million for the nine months ended May 31, 2020
and May 31, 2019, respectively. For the periods reported, net income was impacted primarily by the changes in discontinued operations
and the changes in other expenses related to the convertible note related expenses of approximately $5.0 million for the three
months end, and by the one-time charge for the expense related to the preferred options of $62.1 million.
Liquidity and Capital Resources
Going Concern
As of May 31, 2020,
we had cash of $10.8 million and a working capital surplus of $3.4 million. During the nine months ended May 31, 2020, we used
approximately $10.6 million of cash from our continuing operations and repaid $1.2 million of convertible notes, after receiving
$9.5 million of cash from the Vensure Asset Sale, and closed an underwritten public offering, receiving $10.3 million, net of offering
costs. We have incurred recurring losses resulting in an accumulated deficit of $111.2 million as of May 31, 2020. The recurring
losses and cash used in operations raise substantial doubt as to our ability to continue as going concern within one year from
issuance date of the financial statements.
Historically, our principal source of financing
has come through the sale of our common stock and issuance of convertible notes. We successfully completed an IPO on Nasdaq on
June 29, 2017, raising a total of $12 million ($10.9 million net of costs). In June 2018, we completed a private placement of 8%
senior secured convertible notes to institutional investors raising $9 million of gross proceeds ($8.4 million net of costs). In
March 2019, we completed a private placement of senior secured notes to institutional investors raising $3.75 million ($3.3 million
net of costs). Between September 1, 2019 and May 22, 2020 all convertible notes outstanding as of August 31, 2019 were repaid or
converted into equity. On May 26, 2020, we successfully completed an underwritten public offering raising a total of $12 million
($10.3 million net of costs) and closed an additional $1.35 million ($1.25 million net of costs) between June 1, 2020 and July
7, 2020 pursuant to the underwriter's overallotment.
Our plans and expectations for the next
12 months include raising additional capital to help fund expansion of our operations, including the continued development and
support of our IT and HR platform. We engaged an investment banking firm to assist us in (i) preparing information materials, (ii)
advising us concerning the structure, price and conditions and (iii) organizing the marketing efforts with potential investors
in connection with a financing transaction.
In January 2020, pursuant
to the Vensure Asset Sale, we assigned approximately 88% of our customer contracts in exchange for $9.7 million in cash at closing
and received an additional $1.0 million of cash, net of $0.9 million of cash transferred, and expect to receive an additional $7.5
million over the four years following the transaction close, subject to certain closing conditions. We transferred $1.6 million
of working capital, including $0.9 million of cash, and the business transfer represented approximately $6.0 million of our annualized
gross profit.
We continue to experience
significant growth in the number of WSEs, which we believe will generate additional administrative fees that will offset the current
level of operational cash burn. We retained the high growth business which increased over 100% of billings and revenue growth.
We also retained the rights to monetize the existing pool of WSEs and have begun to roll out our delivery and scheduling applications
to our customers.
Our management believes, but cannot be certain, that our current
cash position, along with our revenue growth and the financing from potential institutional investors, will be sufficient to fund
our operations for at least a year from the date of the issuance of the financial statements contained elsewhere in this prospectus.
We expect to benefit from certain tax holiday and loan programs created by the CARES Act in response to the COVID-19 economic crisis.
If these sources do not provide the capital necessary to fund our operations during the next twelve months from the date of issuance
of the financial statements contained elsewhere in this prospectus, we may need to curtail certain aspects of our operations or
expansion activities, consider the sale of additional assets, or consider other means of financing. We can give no assurance that
we will be successful in implementing our business plan and obtaining financing on terms advantageous to us, or that any such additional
financing will be available to us. These condensed consolidated financial statements do not include any adjustments for this uncertainty
45
Cash Flows
The following table
sets forth a summary of changes in cash flows for the nine months ended May 31, 2020 and 2019:
For the Nine Months Ended
May 31,
2020
2019
Net cash used in operating activities
$
(10,518,000
)
$
(1,623,000
)
Net cash provided by (used in) investing activities
10,667,000
(581,000
)
Net cash provided by financing activities
9,125,000
3,489,000
Change in cash
$
9,274,000
$
1,285,000
As of May 31, 2020,
we had cash of $10.8 million and a working capital surplus of $3.4 million.
During the nine months
ended May 31, 2020, we used approximately $10.5 million of cash in our operations of which $10.6 million was used in continuing
operations and $0.1 million was provided by discontinued operations. Cash used in continuing operations consisted of a net loss
of $80.7 million, reduced by working capital changes of $0.7 million and non-cash charges of $69.4 million including $62.1 million
in expenses related to Preferred Options, $8.0 million of non-cash expenses related to our convertible notes, $1.0 million of depreciation
and offset by a $1.8 million gain on derivative liability valuation. The working capital changes were primarily workers'
compensation related.
During the nine months
ended May 31, 2019, we used $1.6 million of cash in our operations of which $8.8 million was used in continuing operations and
$7.2 million was provided by discontinued operations. Cash used in continuing operations consisted of a net loss of $14.0 million
reduced by $1.0 million of working capital changes, $4.1 million of net non-cash charges consisting primarily of $7.9 million of
expenses related to our convertible notes including inducement loss, interest amortization, and deferred financing charges, $0.6
million of depreciation, and offset by a $4.7 million gain on derivative liability valuation. The working capital changes primarily
reflect increases in accrued liabilities net of changes in workers' compensation liabilities and accounts receivable.
The cash provided by
investing activities for the nine months ended May 31, 2020 primarily reflects proceeds from the Vensure Asset Sale. Cash used
by investing activities for the nine months ended May 31, 2019, primarily reflects purchases of assets related to our mobile application
launch.
For the nine months
ended May 31, 2020, cash from financing activities of $9.1 million resulted primarily from the receipt of $12.2 million in gross
proceeds ($10.3 million net of original issue discount and closing costs) from the May 2020 underwritten public offering offset
by $1.2 million repayment of convertible notes.
For the nine months
ended May 31, 2019, cash from financing activities of $3.5 million resulted primarily from $3.75 million in gross proceeds ($3.3
million net of original issue discount and closing costs) from the issuance of the March 2019 Notes, exercise of warrants for common
stock of $0.7 million, and $0.4 million repayment of the Senior Convertible Notes in cash.
The following table
sets forth a summary of changes in cash flows for the twelve months ended August 31, 2019 and 2018:
For the Year Ended
August 31,
2019
2018
Net cash used in operating activities
$
(2,086,000
)
$
(9,538,000
)
Net cash used in investing activities
(1,492,000
)
(3,019,000
)
Net cash provided by financing activities
3,489,000
8,310,000
Change in cash
$
(89,000
)
$
(4,247,000
)
As of August 31,
2019, we had cash and cash equivalents of $1.6 million and a working capital deficiency of $15.9 million. During Fiscal 2019,
we used approximately $2.1 million of cash in our operations, of which $12.1 million was used in continuing operations and
$10.0 million was provided by discontinued operations. Cash used in continuing operations consisted of a net loss of $24.7
million, reduced by net non-cash charges of $10.6 million and working capital changes of $2.0 million. Cash provided by
discontinued operations consisted of income of $6.0 million and $4.0 million in working capital changes. The working capital
changes were primarily in accounts payable and accrued payroll. During the year our workers' compensation cash reserves
increased by $4.4 million and our accrued workers' compensation liabilities increased by $4.7 million. A significant
portion of our continued operations cash spending for 2019 was attributable to approximately $4.0 million of expensed
development and marketing costs associated with the development of our mobile application.
46
During Fiscal 2018,
we used approximately $9.5 million of cash consisting of $11.4 million used in continuing operations and $1.9 million provided
by discontinued operations. Cash used in continuing operations consisted of a continuing operations loss of $18.0 million, reduced
by net non-cash charges of $5.1 million and working capital changes of $7.1 million, primarily in accrued payroll. Cash used in
discontinued operations consisted of $1.2 million income from discontinued operations and working capital changes of $0.7 million.
During the year our workers' compensation cash reserves increased by $1.5 million and our accrued workers' compensation
liabilities increased by $1.2 million. A significant portion of our operating cash spending for 2018 was attributable to approximately
$4.7 million of expensed development and marketing costs associated with the development of our mobile application.
The cash used in investing
activities was primarily due to the capitalization of the mobile application development costs performed by outside software consultants
for both 2019 and 2018.
For Fiscal 2019, cash
from financing activities of $3.5 million was primarily due to $3.75 million in gross proceeds ($3.3 million net of original issue
discount and closing costs) from the issuance of the March 2019 Notes, exercise of warrants for common stock of $0.7 million, and
$0.4 million repayment of the Senior Convertible Notes in cash.
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. It is not meant to be considered
in isolation, superior to, or as a substitute for the directly comparable financial measures presented in accordance with GAAP.
We report our revenues
as gross billings, net of related direct labor costs, for our EAS clients and revenues without reduction of labor costs for staffing
services clients. For the years ended August 31, 2019 and 2018, we had no revenues associated with staffing services or generated
through our technology services. 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 are a non-GAAP measurement and represent a key operating metric for management
along with number of WSEs and number of clients. Gross billings and the number of active WSEs represent the primary drivers of
our business operations. Active WSEs are defined as employees in our HRIS ecosystem that have provided services for at least one
of our client customers for any reported period. Our primary profitability metrics are gross profit, gross profit per WSE, and
gross profit percentage of gross billings.
May 31,
2020
May 31,
2019
Active worksite employees (unaudited)
2,700
1,600
Reconciliation of GAAP to Non-GAAP Measure
Three Months Ended,
Nine Months Ended,
May 31, 2020
May 31, 2019
May 31, 2020
May 31, 2019
Gross Billings
$
14,425,000
$
11,894,000
$
47,028,000
$
25,940,000
Less: Adjustment to gross billings
12,411,000
10,256,000
40,253,000
22,282,000
Revenues
$
2,014,000
$
1,638,000
$
6,775,000
$
3,658,000
Non-GAAP Adjusted Net Income
We incurred
significant non-recurring expenses during the quarter ended May 31, 2020 of approximately $67.1 million related to the
combined expenses of the preferred option expense and the recapitalization charges related to our convertible notes that were
fully converted as of May 31, 2020. The expenses recorded are highly dependent on the input variables used for the fair value
estimates for the valuation of the Preferred Options and the derivative instruments consisting of the value of the detachable
warrants and the value of the beneficial conversion features embedded in the convertible notes. During the quarter ended May
31, 2020, we eliminated all of our convertible notes and related derivative liabilities. Significantly all of the expense
related to these "below the line" non-recurring items recorded in other expenses were related to our
recapitalization efforts and as such resulted in a corresponding significant increase to additional paid in capital, for a
negligible impact to our net equity position. We believe that providing an adjusted net income figure excluding the May 31,
2020 quarter non-recurring items is meaningful to our investors.
47
For the three months
ended May 31, 2020, excluding those non-recurring items recorded in other expenses totaling $67.1 million, our adjusted net loss
for the three months ended May 31, 2020 was $6.1 million, consisting of an adjusted continuing operating loss (excluding non-recurring
items) of $4.6 million, and a loss from discontinued operations of $1.5 million.
For the nine months
ended May 31, 2020, excluding the $67.1 million of non-recurring other expense described above, our adjusted net income was $0.8
million consisting of an adjusted continuing operating loss (excluding non-recurring items) of $13.6 million and a gain on discontinued
operations of $14.4 million.
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.
Off-Balance Sheet Arrangements
We did not have during
the periods presented, and we do not currently have, any off-balance sheet arrangements.
Share Repurchase Plan
On July 9, 2019, our
board of directors authorized the repurchase of up to 10 million shares of our outstanding common stock as market conditions warrant
over a period of 18 months. We have not implemented the share repurchase plan to date and have not repurchased any shares of stock
under the plan.
Critical Accounting Policies and
Significant Judgment and Estimates
Our management's
discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which
have been prepared in accordance with GAAP. The preparation of our consolidated financial statements requires us to make estimates
and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosure of contingent
assets and liabilities. On an ongoing basis, we evaluate our estimates based on historical experience and make various assumptions,
which management believes to be reasonable under the circumstances, which form the basis for judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under
different assumptions or conditions.
The notes to our audited
consolidated financial statements contain a summary of our significant accounting policies. We consider the following accounting
policies critical to the understanding of the results of our operations:
Use of Estimates
The preparation of
financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates
include:
·
Valuation expense related to preferred stock options;
·
Liability for legal contingencies;
·
Useful lives of property and equipment;
·
Assumptions made in valuing equity instruments;
·
Assumptions made in valuing embedded derivatives and freestanding equity-linked instrument classified
as liabilities;
·
Deferred income taxes and related valuation allowance; and
48
·
Projected development of workers' compensation claims.
Revenue and Direct Cost Recognition
We provide an array
of human resources and business solutions designed to help improve business performance.
Our revenues are primarily
attributable to fees for providing staffing solutions and EAS/human capital management services. We recognize revenues when all
of the following criteria are met: (i) persuasive evidence of an arrangement exists; (ii) the services have been rendered to the
customer; (iii) the sales price is fixed or determinable; and (iv) collectability is reasonably assured. We enter into contracts
with our clients for EAS based on a stated rate and price in the contract. Contracts generally have a term of 12 months but are
cancellable at any time by either party with 30 days' notice. Contract performance obligations are satisfied as services
are rendered, and the time period between invoicing and when the performance obligations are satisfied is not significant. We do
not have significant financing components or significant payment terms for its customers and consequently has no material credit
losses. Payments for our services are typically made in advance of, or at the time that the services are provided.
We account for our
revenues in accordance with Accounting Standards Codification ("ASC") 605-45,
Revenue Recognition, Principal Agent
Considerations
. Our EAS solutions revenue is primarily derived from our gross billings, which are based on (i) the payroll
cost of WSEs and (ii) a mark-up computed as a percentage of payroll costs for payroll taxes and workers' compensation premiums.
Gross billings are
invoiced to each client concurrently with each periodic payroll of WSEs which coincides with the services provided and which is
typically a fixed percentage of the payroll processed. Revenues, which exclude the payroll cost component of gross billings and
therefore consist solely of markup are recognized ratably over the payroll period as WSEs perform their service at the client worksite.
Revenues that have been recognized but not invoiced are included in unbilled accounts receivable on our consolidated balance sheets
and were $1,137,000 and $310,000 for the years ended August 31, 2019 and August 31, 2018, respectively, and $270,000 as of May
31, 2020.
Consistent with our
revenue recognition policy, our direct costs do not include the payroll cost of WSEs. Our cost of revenue associated with our revenue
generating activities are primarily comprised of all other costs related to WSEs, such as the employer portion of payroll-related
taxes, employee benefit plan premiums and workers' compensation insurance costs.
We have evaluated our
revenue recognition policies in conjunction with our future expected business which may be migrating to a staffing business model.
For Fiscal 2018 and 2019, and for Fiscal 2020 to date, we determined that we did not have any revenues which should have been evaluated
under a staffing business model. Such a staffing business model would have included the payroll costs in revenues with a corresponding
increase to cost of revenues for payroll costs associated with staffing services.
We reviewed the costs
associated with acquiring our customers under ASC 340-40
Other Assets and Deferred Costs
and determined that no such costs
should be capitalized. Costs relating to our customers are typically commissions paid as a percentage of some of our revenue components
and are expensed as they are incurred because the terms of our contracts generally are cancellable by either party with a 30-day
notice. These costs are recorded in commissions in our Consolidated Statement of Operations.
Fixed Assets
Fixed assets are recorded
at cost, less accumulated depreciation and amortization. Expenditures for major additions and improvements are capitalized and
minor replacements, maintenance, and repairs are charged to expense as incurred. When fixed assets are retired or otherwise disposed
of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results
of operations for the respective period. Leasehold improvements are being amortized over the shorter of the useful life or the
initial lease term.
Fixed assets are recorded
at cost and are depreciated over the estimated useful lives of the related assets using the straight-line method. The estimated
useful lives for purposes of computing depreciation for equipment is five years and for furniture and fixtures is five to seven
years. The amortization of leasehold improvements and the depreciation of equipment and furniture is included in depreciation expense
on the consolidated statements of operations.
Computer Software Development
Software development
costs relate primarily to software coding, systems interfaces and testing of our proprietary employer information systems and are
accounted for in accordance with ASC 350-40, Internal Use Software.
49
Internal software development
costs are capitalized from the time the internal use software is considered probable of completion until the software is ready
for use. Business analysis, system evaluation and software maintenance costs are expensed as incurred. The capitalized computer
software development costs are reported under the section fixed assets, net in the consolidated balance sheets.
We determined that
there were no material internal software development costs for Fiscal 2018 or Fiscal 2019. All capitalized software recorded was
purchased from third party vendors. Capitalized software development costs are amortized using the straight-line method over the
estimated useful life of the software, generally five years.
The amortization of
these assets is included in depreciation expense on the consolidated statements of operations.
Impairment and Disposal of Long-Lived
Assets
We periodically evaluate
our long-lived assets for impairment in accordance with ASC 360-10,
Property, Plant, and Equipment
. ASC 360-10 requires
that an impairment loss be recognized for assets to be disposed of or held-for-use when the carrying amount of an asset is deemed
to not be recoverable. If events or circumstances were to indicate that any of our long-lived assets might be impaired, we would
assess recoverability based on the estimated undiscounted future cash flows to be generated from the applicable asset. In addition,
we may record an impairment loss to the extent that the carrying value of the asset exceeded the fair value of the asset. Fair
value is generally determined using an estimate of discounted future net cash flows from operating activities or upon disposal
of the asset. During Fiscal 2019 we conducted an impairment analysis of our capitalized software and determined that there was
no impairment loss required.
Workers' Compensation
Everest Program
Up to July 2018, a
portion of our workers' compensation risk was covered by a retrospective rated policy, which calculates the final policy
premium based on our loss experience during the term of the policy and the stipulated formula set forth in the policy. We fund
the policy premium based on standard premium rates on a monthly basis and based on the gross payroll applicable to workers covered
by the policy. During the policy term and thereafter, periodic adjustments may involve either a return of previously paid premiums
or a payment of additional premiums by us or a combination of both. If our losses under that policy exceed the expected losses
under that policy, then we could receive a demand for additional premium payments.
We utilize a third-party
to estimate our loss development rate, which is based primarily upon the nature of WSEs' job responsibilities, the location
of WSEs, the historical frequency and severity of workers' compensation claims, and an estimate of future cost trends. Each
reporting period, changes in the assumptions resulting from changes in actual claims experience and other trends are incorporated
into our workers' compensation claims cost estimates. As of August 31, 2019, we classified $0.1 million in short term accrued
workers' compensation and $0.1 million in long-term accrued workers' compensation in our consolidated balance sheets.
Sunz Program
Since July 2018, our
workers' compensation program for WSEs has been provided through an arrangement with United Wisconsin Insurance Company and
administered by Sunz. Under this program, we have financial responsibility for the first $0.5 million of claims per occurrence.
We provide and maintain a loss fund that will be used to pay claims and claim related expenses. The workers' compensation
insurance carrier established monthly funding requirements comprised of premium costs and funds to be set aside for payment of
future claims ("claim loss funds"). The level of claim loss funds is primarily based upon anticipated WSE payroll levels
and expected workers' compensation loss rates, as determined by the insurance carrier. Monies funded into the program for
incurred claims expected to be paid within one year are recorded as Deposit - workers' compensation, a short-term asset,
while the remainder of claim funds are included in deposits- workers' compensation, a long-term asset in our consolidated
balance sheets.
As of August 31, 2019,
we had $0.2 million in "deposit – workers' compensation", classified as a short-term asset and $0.8 million,
classified as a long-term asset.
Our estimate of incurred
claim costs expected to be paid within one year is included in short-term liabilities, while our estimate of incurred claim costs
expected to be paid beyond one year is included in long-term liabilities on our consolidated balance sheets. As of August 31, 2019,
we had short term accrued workers' compensation costs of $0.2 million and long-term accrued workers' compensation costs
of $0.5 million.
Because we bear
the financial responsibility for claims up to the level noted above, such claims, which are the primary component of our
workers' compensation costs, are recorded in the period incurred. Workers' compensation insurance includes
ongoing health care and indemnity coverage whereby claims are paid over numerous years following the date of injury.
Accordingly, the accrual of related incurred costs in each reporting period includes estimates, which takes into account the
ongoing development of claims and therefore requires a significant level of judgment. In estimating ultimate loss rates, we
utilize historical loss experience, exposure data, and actuarial judgment, together with a range of inputs which are
primarily based upon the WSE's job responsibilities, their location, the historical frequency and severity of
workers' compensation claims, and an estimate of future cost trends. For each reporting period, changes in the
actuarial assumptions resulting from changes in actual claims experience and other trends are incorporated into our
workers' compensation claims cost estimates. The estimated incurred claims are based upon: (i) the level of claims
processed during each quarter; (ii) estimated completion rates based upon recent claim development patterns under the plan;
and (iii) the number of participants in the plan.
50
Debt Issuance Costs and Debt Discount
Debt issuance costs
and debt discounts are being amortized over the lives of the related financings on a basis that approximates the effective interest
method. Costs and discounts are presented as a reduction of the related debt in the accompanying balance sheets. Portions attributable
to notes converted into equity are accelerated to interest expense upon conversion.
Beneficial Conversion Features
The intrinsic value
of a beneficial conversion feature ("BCF") inherent to a convertible note payable, which is not bifurcated and accounted
for separately from the convertible note payable and may not be settled in cash upon conversion, is treated as a discount to the
convertible note payable. This discount is amortized over the period from the date of issuance to the stated maturity using the
straight-line method which approximates the effective interest method. If the note payable is retired prior to the end of the contractual
term, the unamortized discount is expensed in the period of retirement to interest expense. In general, the BCF is measured by
comparing the effective conversion price, after considering the relative fair value of detachable instruments included in the financing
transaction, if any, to the fair value of the common stock at the commitment date to be received upon conversion.
Derivative Financial Instruments
When a company issues
debt that contains a conversion feature, it first evaluates whether the conversion feature meets the requirement to be treated
as a derivative: a) the settlement amount is determined by one or more underlying factors, typically the price of our stock, b)
the settlement amount is determined by one or more notional amounts or payments provisions or both, generally the number of shares
upon conversion; c) no initial net investment, which typically excludes the amount borrowed; and d) net settlement provision, which
in the case of convertible debt generally means the stock received upon conversion can be readily sold for cash. There are certain
scope exceptions from derivative treatment, but these typically exclude conversion features that provide for a variable number
of shares. When we issue warrants to purchase our common stock, we evaluate whether they meet the requirements to be treated as
derivative. Generally, warrants would be treated as a derivative if the provisions of the warrants agreements create uncertainty
as to a) the number of shares to be issued upon exercise, or b) whether shares may be issued upon exercise. If the conversion feature
within convertible debt or warrants meet the requirements to be treated as a derivative, we estimate the fair value of the derivative
liability using the lattice-based option valuation model upon the date of issuance. If the fair value of the derivative liability
is higher than the face value of the convertible debt, the excess is immediately recognized as interest expense. Otherwise, the
fair value of the derivative is recorded as a liability with an offsetting amount recorded as a debt discount, which offsets the
carrying amount of the debt. The derivative liability is revalued at the end of each reporting period and any change in fair value
is recorded as a change in fair value in the consolidated statement of operations. The debt discount is amortized through interest
expense over the life of the debt. Derivative instrument liabilities and the host debt agreements are classified on the consolidated
balance sheets as current or non-current based on whether settlement of the derivative instrument could be required within twelve
months of the consolidated balance sheet date.
The accounting treatment
of derivative financial instruments requires that we record the embedded conversion option and warrants at their fair values as
of the inception date of the agreement and at fair value as of each subsequent balance sheet date. Any change in fair value is
recorded as non-operating, non-cash income or expense for each reporting period at each balance sheet date. We reassess the classification
of our derivative instruments at each balance sheet date. If the classification changes as a result of events during the period,
the contract is reclassified as of the date of the event that caused the reclassification.
Share-Based Compensation
At May 31, 2020 and
May 31, 2019, we had one stock-based compensation plan under which we may issue both share and stock option awards. We account
for this plan under the recognition and measurement principles of ASC 718, Compensation- Stock Compensation, which requires all
share-based payments to employees, including grants of employee stock options, to be recognized in the consolidated statements
of operations on their fair values. Share grants are valued at the closing market price on the date of issuance which approximates
fair value.
For option grants,
the grant date fair value is determined using the Black-Scholes-Merton ("Black-Scholes") pricing model. Our option
grants are typically issued with vesting depending on a term of service. For all employee stock options granted, we recognize expense
over the requisite service period over the employee's requisite service period (generally the vesting period of the equity
grant).
51
Our option pricing
model requires the input of highly subjective assumptions, including the expected stock price volatility and expected term. The
expected volatility is based on our historical volatility since our IPO. Any changes in these highly subjective assumptions significantly
impact stock-based compensation expense.
Following the adoption
of Accounting Standards Update ASU 2016-09, we elected to account for forfeitures as they occur. Any compensation cost previously
recognized for an unvested award that is forfeited because of a failure to satisfy a service condition is reversed in the period
of the forfeiture.
Off-Balance Sheet Arrangements
We did not have during
the periods presented, and we do not currently have, any off-balance sheet arrangements.
Contingencies
Certain conditions
may exist as of the date the financial statements are issued, which may result in a loss to us, but which will only be resolved
when one or more future events occur or fail to occur. Our management, in consultation with our legal counsel, as appropriate,
assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies
related to legal proceedings that are pending against us or unasserted claims that may result in such proceedings, we, in consultation
with legal counsel, evaluate the perceived merits of any legal proceedings or unasserted claims, as well as the perceived merits
of the amount of relief sought or expected to be sought therein. If the assessment of a contingency indicates it is probable that
a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued
in our financial statements. If the assessment indicates a potentially material loss contingency is not probable, but is reasonably
possible, or is probable, but cannot be estimated, then the nature of the contingent liability, together with an estimate of the
range of possible loss, if determinable and material, would be disclosed. Loss contingencies considered remote are generally not
disclosed unless they involve guarantees, in which case the guarantees would be disclosed.
Emerging Growth Reporting
Requirements
We are a public reporting
company under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). We are required to publicly report
on an ongoing basis as an "emerging growth company" (as defined in the JOBS Act) under the reporting rules set forth
under the Exchange Act. For so long as we remain an "emerging growth company", we may take advantage of certain exemptions
from various reporting requirements that are applicable to other Exchange Act reporting companies that are not "emerging
growth companies", including but not limited to:
·
not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley
Act;
·
taking advantage of extensions of time to comply with certain new or revised financial accounting
standards;
·
being permitted to comply with reduced disclosure obligations regarding executive compensation
in our periodic reports and proxy statements; and
·
being exempt from the requirement to hold a non-binding advisory vote on executive compensation
and shareholder approval of any golden parachute payments not previously approved.
We expect to take advantage
of these reporting exemptions until we are no longer an emerging growth company. We would remain an "emerging growth company"
for up to five years, although if the market value of our common stock that is held by non-affiliates exceeds $700 million as of
any June 30 before that time, we would cease to be an "emerging growth company" as of the following December 31.
52
BUSINESS
Business Overview
Our current
business, and the primary source of our revenues to date, has been under a traditional staffing services business model. 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, including the light industrial, services, and food and hospitality markets. We provide
human resources, employment compliance, insurance, payroll, and operational employment services solutions for our business clients
("clients" or "operators") and shift work or "gig" opportunities for WSEs or shifters. As consideration
for providing these services, we receive administrative or processing fees 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 Fiscal 2019, including our discontinued
operations related to the Vensure Asset Sale described below, we processed over $350 million of payroll billings. Our business
has significantly grown for each year since inception and we expect to continue our track record of significant customer growth.
However, we have experienced losses to date as we have invested in both our technology solutions as well as the back-office operations
required to service a large employee base under a traditional staffing model.
We are currently focused
on clients in the restaurant and hospitality industries, traditionally market segments with high employee turnover and low pay
rates. We believe that our focus on these industries will be better served by our HRIS technology platform and related mobile application
which provide payroll and human resources tracking for our clients and will result in lower operating costs, improved customer
experience and revenue growth acceleration. All of our clients enter into service agreements with us or our wholly-owned subsidiary,
ReThink.
Our revenues
for Fiscal 2019 and through the first nine months of Fiscal 2020 primarily 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 applicable taxation authority, and
workers' compensation premiums billed to the client for which we facilitate workers' compensation coverage. Our costs
of revenues consist of accrued and paid payroll taxes and our costs to provide the workers' compensation coverage including
premiums and loss reserves. A significant portion of our assets and liabilities is for our workers' compensation reserves.
Our cash balances related to these reserves are carried as assets and our estimates of projected workers' compensation claims
are carried as liabilities. Since Fiscal 2019, we have provided a self-funded workers' compensation policy for up to $500,000
and purchased reinsurance for claims in excess of $500,000. We actively monitor and manage our clients and WSE's workers'
compensation claims which we believe allows us to provide a lower cost workers' compensation option for our clients than
they would otherwise be able to purchase on their own.
As of August 31, 2019, we had 246 clients with over 13,000 WSEs,
and processed payroll of over $350 million during Fiscal 2019, an increase of nearly 60% over Fiscal 2018. Of these WSEs, approximately
60% represent workers in the restaurant industry. In addition, as of August 31, 2019, there were an additional 12,000 inactive
WSEs in our HRIS technology platform who are available for gig opportunities. In January 2020, in connection with the Vensure Asset
Sale described below, we assigned client contracts representing approximately 70% of our billable clients, which comprised approximately
88% of our quarterly revenue as of November 30, 2019, and certain operating assets for $19.2 million in cash, of which $9.7 million
was received at closing and $9.5 million is due over the next four years, which was scheduled to commence in April 2020, subject
to certain conditions, including the performance of the assigned contracts and minimum working capital delivered. The payments
have been delayed due to issues from the novel coronavirus disease ("COVID-19"). For further discussion on the delayed
payment to us pursuant to the Vensure Asset Sale, see " – Recent Developments – Vensure Asset Sale."
Following the Vensure
Asset Sale, our client count, client site count, and billed WSE count decreased by approximately 88% from pre- Vensure Asset Sale
metrics. On a comparative basis from May 31, 2019 to February 29, 2020 (our last reporting period before the COVID-19 pandemic
materially impacted our business operations), our continuing and remaining client count increased from 35 to 83 customers, representing
approximately 250 client locations, and our billed WSEs increased from an average of 1,600 to 3,100 at the end of February 2020.
The quarter ended February 29, 2020 represented an annualized growth rate of over 100% for both clients and WSEs since November
30, 2019.
The COVID-19 pandemic has had a significant impact upon and
delayed our expected growth, which we have observed through a decrease in our billed customers and WSEs beginning in mid-March
2020, when the State of California first implemented "lockdown" measures. Significantly, all of our February 29, 2020
billed WSEs worked for clients located in Southern California, and many of these clients were required to furlough or layoff employees
or, in some cases, completely close their operations. However, during the quarter ended May 31, 2020, we continued to close new
customer opportunities. The combination of our sales efforts and the opportunities our services provide to businesses impacted
by the COVID-19 pandemic resulted in additional business opportunities for new client location additions, but our WSE billings
per client location decreased as many clients were shut down, or reduced staffing during the quarter ended May 31, 2020. For the
month of May 2020, our billed client count decreased to 81 clients, but client locations increased by 24% to over 300 client locations
compared to February 2020. Monthly "normalized" gross client billings decreased 23% from February 2020 to May 2020
as a result of the reduced staffing levels. ("Normalized" gross billings represent actual billings adjusted for the
number of billable days in a given month, e.g., 29 billable days in February 2020, and 31 billable days in May 2020. As the Southern
California economy experienced modest recovery in June, we experienced continued client additions and some degree of gross billing
recovery. For the month of June 2020, our client count increased to 84 clients, with active billings representing 315 client locations
(an increase of 26% from February 2020 and equivalent to a 150% annualized client location growth rate), while gross client billings
exceeded "normalized" February 2020 billings. On July 13, 2020, the Governor of the State of California re-implemented
certain COVID-19 related lockdown restrictions in most of the counties in the state, including those located in Southern California
where most of our clients reside.  These lockdown restrictions will likely require that in-person dining be prohibited for
at least one month.  We believe that our business will be impacted based upon the negative effect on those clients that rely
more heavily upon in-person dining, but we have not had an opportunity to evaluate fully the probable impact of this lockdown
development on our overall customer base as of the date of this prospectus. For further discussion on the impact of COVID-19 on
our business, see " – Recent Developments – COVID-19 Related Considerations."
53
We believe that our
customer value proposition is to provide the combination of overall net cost savings to the client as follows:
·
Payroll tax compliance and management services
·
Governmental HR compliance such as for ACA compliance requirements
·
Reduced client workers' compensation premiums or enhanced coverage
·
Access to an employee pool of potential applicants to reduce turnover costs
·
Offset by increased administrative fee cost to the client payable to us
Our founders and management
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 businesses face. Our next goal, currently underway, is to match the needs of small businesses with paying "gigs"
with a fully compliant and lower cost staffing solution. For this, we need to acquire a significant number of WSEs to provide our
clients with a variety of solutions for their unique staffing needs and to facilitate the employment relationship.
Managing, recruiting,
and scheduling a large number of low wage employees can be both difficult and expensive. The acquisition and recruiting of such
an employee population is highly labor intensive and costly in part due to high onboarding and maintenance costs such as tax information
capture or I-9 verification. Early in our history, we evaluated these costs and determined that proper process flows, automated
with blockchain and cloud technology and coupled with access to lower cost workers' compensation policies resulting from
economies of scale could result in a profitable and low-cost scalable business model. Over the past four years, we have invested
heavily in a robust, cloud-based HRIS platform in order to:
·
reduce WSE management costs,
·
automate new WSE and client onboarding, and
·
provide additional value-add services for our business clients resulting in additional revenue
streams to us.
Beginning in 2017,
we began to develop our HRIS database and front-end desktop and mobile phone application to facilitate easier WSE and client onboarding
processes as well as for additional client functionality and the opportunity for WSEs to find shift work. Beginning in March 2019,
we brought the development of our mobile application in house and launched in 2019. As of August 31, 2019, the initial launch was
completed and we began to provide some of the HRIS and application services to select legacy customers on a test basis. We are
continuing to implement additional HRIS functionality in delivery, gig intermediation services, and scheduling through our mobile
phone application. We see these technology based services as multiple potential revenue drivers with limited additional costs.
Our cloud-based HRIS
platform captures, holds, and processes HR and payroll information for the clients and WSEs through an easy to use customized front
end interface coupled with a secure, remotely hosted database. The HRIS system can be accessed by either a desktop computer or
an easy to use electronic mobile application designed with HR workflows in mind. Once fully implemented, we expect to reduce the
time, expense, and error rate for onboarding our client employees into our HRIS ecosystem. Once onboarded, the client employees
are included as our WSEs and who are available for shift work within our business ecosystem. This allows our HRIS platform to serve
as a gig marketplace for WSEs and allows for client businesses to better manage their staffing needs.
54
Our Services
Our core business is to provide regular payroll processing services to clients under an EAS model in addition to individual services, such as payroll tax compliance, workers' compensation insurance, and employee HR compliance management.  In addition, in November, 2019, we launched our employee onboarding function and employee scheduling functions to our customers in the mobile application.  Beginning later in calendar 2020, with the full commercial launch of our mobile application software, we expect to provide additional services including "white label" food delivery functionality.
Figure 1
Our core EAS are typically provided to our clients for one-year
renewable terms. As of the date of this prospectus, we have not had any material revenues or billings generated within our HRIS
from additional services. We expect that our future service offerings, including technology-based services provided through our
HRIS system and mobile application, will provide for additional revenue streams and support cost reductions for existing and future
clients. We expect that our future services will be offered through "a la carte" pricing via customizable on-line contracts.
The new Gig Economy
has created legal issues regarding the classification of workers as independent contractors or employees. In addition, the rising
trend of predictive scheduling creates logistical issues for our clients regarding worker's schedules. We provide solutions
to businesses struggling with these compliance issues primarily by absorbing our clients' workers, whom we refer to as WSEs
but are also referred to as "shift workers," "shifters," "gig workers," or "assigned
employees." WSEs are included under our corporate employee umbrella and we handle certain employment-related compliance responsibilities
for our clients as part of our services. This arrangement benefits WSEs by providing additional work opportunities through access
to our clients. WSEs further benefit from employee status benefits through our benefit plan offerings, including minimum essential
health insurance coverage plans and 401(k) plans, as well as enjoying the protections of workers' compensation coverage.
Technological Solution
At the heart of our employment service solutions is a secure, cloud-based HRIS database accessible by a desktop or mobile device through which our WSEs will be able to find available shift work at our client locations.  This solution solves a problem of finding available shift work for both the WSEs seeking additional work and clients looking to fill open shifts.  For new WSEs, the mobile application includes an easy to use WSE onboarding functionality which we believe will increase our pool of WSEs that will provide a deep bench of worker talent for our business clients.  The onboarding feature of our software enables us to capture all application process related data regarding our assigned employees and to introduce employees to and integrate them into the ShiftPixy Ecosystem.  The mobile application features a chatbot that leverages artificial intelligence to aid in gathering the data from workers via a series of questions designed to capture all required information, including customer specific and governmental information.  Final onboarding steps requiring signatures can also be prepared from the HRIS onboarding module.
Figure 2
55
In 2019, we implemented
additional functionality to provide a scheduling component of our software, which enables each client worksite to schedule workers
and to identify shift gaps that need to be filled. We utilize artificial intelligence to maintain schedules and fulfillment, using
an active methodology to engage and move people to action. We began using this functionality at the end of Fiscal 2019 on a test
basis.
The final phase of
our initial platform, deployed in late Fiscal 2019 on a test basis, consists of our "shift intermediation" functionality,
which is designed to enable our WSEs to receive information regarding and to accept available shift work opportunities. The intermediation
functionality becomes useful only to the extent that we have meaningful numbers of WSEs and client shift opportunities in the same
geographic region. We reached geographical concentration in Southern California during Fiscal 2019 and we activated these key features
in August 2019 to a limited group of customers on a test basis.
Our goal is to have
a mature and robust hosted cloud-based HRIS platform coupled with a seamless and technically sophisticated mobile application that
will act as both a revenue generation system as well as a "viral" customer acquisition engine through the combination
of the scheduling, delivery, and intermediation features and interactions. We believe that once a critical mass of clients and
WSEs is achieved, additional shift opportunities will be created in the food service and hospitality industries. Our approach to
achieving this critical mass is to market our services to restaurant owners and franchisees, focusing on specific brands and geographical
locations. We expect critical mass to be a function of both geography, such as in Southern California for viral adoption by WSEs
and clients, or by adoption within franchise brands.
Markets and Marketing
Our market focus was
chosen based on our understanding of the issues and challenges facing "Quick Service Restaurants" ("QSRs"),
including fast food franchises and local restaurants. We have chosen to invest in two key features of our mobile application to
this end consisting of: i) scheduling functionality, which is designed to enhance the client's experience through scheduling
of employees and reducing the impact of turnover and ii) delivery functionality, which is designed to increase revenues through
delivery fulfillment and bring "in house" delivery fulfillment, thereby reducing delivery costs.
One of the most recent developments in the food and hospitality industry is the rapid rise of third-party restaurant delivery providers such as Uber Eats, GrubHub, and DoorDash.  These providers have successfully increased QSR revenue in many local markets by providing food delivery to a wide-scale audience using contract delivery drivers.  We have observed two significant issues with our clients and third-party delivery providers which is increasingly being reported in the news media.  The first issue is the large revenue share typically being paid to third-party delivery providers as delivery fees.  These additional costs erode the profit for the QSRs from additional sales made through the delivery channel.  The second issue is that our QSR customers have encountered logistical problems with food deliveries - late deliveries, cold food, missing accessories, and unfriendly delivery people.  This has caused significant "brand erosion" and has caused these clients to reconsider third-party delivery.
Figure 3
We provide a solution
to the third-party delivery issues. We designed our HRIS platform to manage food deliveries by the QSRs using internal personnel
and a customized "white label" mobile application. Our recently released delivery feature links this "white label"
delivery ordering system to our delivery solution, thereby freeing the QSR to have their own brand showcasing an ordering mobile
application but retaining similar back-office delivery technology including scheduling, ordering, and delivery status pushed to
a customer's smart phone. Our technology and approach to human capital management provides a unique window into the daily
demands of QSR operators and the ability to extend our technology and engagement to enable this self-delivery proposition. Our
new driver management layer for operators in the ShiftPixy Ecosystem will now allow clients to use their own team members to deliver
a positive customer experience. Our mobile application now provides the HR compliance, management and insurance solutions necessary
to support a delivery option and created a turnkey self-delivery opportunity for the individual QSR operator. Our solution saves
delivery costs to the QSR client and allows them to retain the customer information and quality control over the food delivery.
The first phase of
this component of our platform is the driver onboarding, which was completed in 2019. The enhanced features will also "micro
meter" the essential commercial insurance coverages required by our operator clients on a delivery-by-delivery basis (workers'
compensation and auto coverages) which has been a significant barrier for some QSRs to provide their own delivery services. We
began using the "delivery features" of our mobile application for selected customers on a trial basis in the fourth
quarter of Fiscal 2019 and expect to fully deploy the solution in calendar 2020.
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A significant problem for small businesses, particularly in
the food service industry, such as QSRs, involves compliance with employment related regulations imposed by federal, state and
local governments. Requirements associated with workers' compensation insurance, and other traditional employment compliance
issues, including the employer mandate provisions of the ACA, create compliance challenges and increased costs. The compliance
challenges are often complicated by "workaround" solutions that many employers resort to in order to avoid characterizing
employees as "full-time" and requires increased compliance to avoid fines and penalties. As of the date of this prospectus,
the United States Congress has considered but not passed an amendment to replace the ACA, with the exception that the individual
mandate provision of the ACA was removed in 2017. Despite the removal of the individual mandate, employers still face regulatory
issues and overhead costs for which we believe our services are a cost-effective solution.
Other regulation is
prevalent at the state and local levels. Recently in California, where most of our WSEs reside, legislation was passed that more
clearly defines gig workers for companies such as Lyft or Uber as employees rather than their previous classification as independent
contractors. We believe that legislation such as this is a direct response to a considerable loss of tax revenue from the gig companies'
contract employees, and that there is an increasing likelihood that workers in other states will have to be treated as employees
within the next few years. The effective date for the California legislation is January, 2020. Both Lyft and Uber are filing appeals
to avoid these reclassifications. Our business model provides a solution to this regulatory change by absorbing workers for these
types of gig economy companies as our employees, eliminating any risk of litigation, fines and other worker misclassification problems
for these types of gig economy companies to the extent they become our clients.
Figure 4
The worldwide trend
toward a gig economy is a result of the market adoption of smart phones and mobile telephones and remote office workers moving
away from the traditional office or factory workplace. For our target WSE audience, as of February 2019, over 92% of 18-30-year-old
workers have, or use, a smart phone. This development has created opportunities for companies catering to the use of these devices.
We have designed our mobile application to utilize the smart phone adoption to create an easy to use on-boarding tool for potential
employees. The migration towards a gig economy trend is also significant, and according to a 2016 study conducted by Ardent partners,
nearly 42% of the world's total workforce is now considered 'non-employee,' which includes contingent/contract
workers, temporary staff, gig workers, freelancers, professional services, and independent contractors. Our initial focus in the
marketing of our product to the larger gig economy is to small and medium sized businesses with high worker turnover such as the
restaurant and hospitality industries who have high turnover and often contract with independent contractor workers to perform
less than full-time gig engagements, primarily in the form of shift work.
57
Figure 5
Our headquarters is
currently situated in Irvine, California, from which it can reach the California market.
We believe we will
experience business and revenue growth in the gig economy from the following factors:
·
Large Potential Market
. Current statistics show that there are over 14.7 million
employees working in our current target market--the restaurant and hospitality industries representing over $300 billion of annual
revenues. Compared to the total workforce in all industries, workers in the restaurant industry have a notably higher percentage
of part-time workers. At our current monetization rate per employee, this represents an annual revenue opportunity of over $9 billion
per year for the United States. Our intention is to expand both our geographic footprint and our service offerings into other industries,
particularly where part-time work is a significant component of the applicable labor force, including the retail and health care
sectors.
·
Rapid Rise of Independent Workers
. The number of independent workers, totaling approximately
41 million in 2018, is expected to increase to 40% of the private, non-farm U.S. workforce by 2021. As of early 2019, approximately
48% of the U.S. workforce has worked as an independent employee as either part time or on a contract basis.
·
Technology Affecting and Attitudes towards Employment Related Engagements
. Gig-economy
platforms have changed the way part-time workers can identify and connect to work opportunities, and Millennials and others have
embraced such technologies as a means to secure short-term employment related engagements. The significant increase in the adoption
of smart phone devices has provided the "last mile" platform to enable technology solutions such as ours to provide
a gig economy platform. Most importantly, as of February 2019, and estimated 92% off our target audience of 18-35 year old workers
regularly used a smart phone.
·
New ShiftPixy Mobile App is Designed to Provide Additional Benefits to Employers and Shift
Workers.
Millennials represent approximately 40% of the independent workforce who are over the age of 21 and who work 15
hours or more each week. Mindful that most of our shifters will be Millennials who connect with the outside world primarily through
a mobile device, we are poised to significantly expand our business through our mobile app. Our mobile app is a proprietary application
downloaded to mobile devices, allowing our shifters to access shift work opportunities at all of our clients, not just their current
restaurant or hospitality provider, and with an added feature, anticipated to be available later in calendar 2020, also allowing
shift employees not working at our clients to access shift work opportunities at all of our clients.
58
Figure 6
The ShiftPixy Ecosystem Solution
We have developed an
HRIS Ecosystem comprised of a closed proprietary operating and processing information system that provides a tool for businesses
needing staffing flexibility to schedule existing employees and to post open schedule slots to be filled by an available pool of
shift workers (the "ShiftPixy Ecosystem"). The ShiftPixy Ecosystem provides the following benefits to our clients:
1.
Compliance
:
We assume a substantial portion of responsibility for a business's employment regulatory compliance issues by having all client shifter employees become employees of us. As the co-employer of the WSEs, we can assist our clients with the staffing of their shift employee requirements by providing a qualified pool of potential applicants as shift workers. The individual WSE is a legal employee of ours and we thereby provide employment regulatory compliance reporting, taking this burden away from our clients. The client's management time spent on compliance issues is substantially reduced and allows client management to focus on their business.
2.
Operational improvements
: Our service can reduce the impact of high turnover, which is a consistent problem across the restaurant industry and a significant issue to our clients. Our service provides pre-screened applicants for permanent positions as well as access to the ShiftPixy Ecosystem population of potential shift workers. The flexibility inherent in the Ecosystem approach can better tailor the staffing needs of a client to the talent pool available.
3.
Cost Savings
: The payroll and related costs associated with WSEs such as workers' compensation and benefits are consolidated and charged, in effect, in conjunction with the shifters' applicable rates of pay, allowing the clients to fund the employment related costs as the services are used--thereby avoiding various lump sum employment-related cost impositions. Cost savings for our clients can vary but they experience cost reductions in reduced overhead costs related to HR compliance, payroll processing, and elimination of non-compliance fines and related penalties. Clients also experience reduced turnover and the related costs. We exploit economies of scale in purchasing employer related solutions such as workers' compensation and other benefits and can provide a WSE to a business at a lower cost than the business can otherwise typically staff a particular position.
4.
Improved human resources management
:
By having access to our entire part-time workforce, a client business is enabled to scale up or down more rapidly, making it easier to contain and manage operational costs. The two largest costs for a restaurant are food and labor. We charge a fixed percentage on wages that allows the client business to budget and plan more effectively without the full weight associated with the threats of penalties or missteps in dealing with employment law compliance related issues.
As of November 30, 2019, we served an aggregate of 252 clients,
with an aggregate of approximately 13,000 employees. None of these clients represented more than 10% of our revenues for Fiscal
2019. Effective January 1, 2020, we assigned client contracts representing approximately 70% of our billable clients which comprised
approximately 88% of our quarterly revenue as of November 30, 2019 and certain operating assets as part of the Vensure Asset Sale.
As of June 30, 2020, our retained customer base was an aggregate of 84 clients with an aggregate of approximately 3,200 billed
WSEs and approximately 35,000 additional unbilled WSEs retained in our HRIS system. None of these clients represents more than
10% of our revenues for any reporting period in Fiscal 2020.
59
Competition
We have two primary
sources of competition. Competitors to our gig business model include businesses such as ShiftGig, Instawork, Snag, Jobletics and
other comparable businesses that seek to arrange short-term work assignments for both employees and independent contractors. Competitors
to our HRIS system include businesses such as Kelly Services, ManpowerGroup, and Barrett Business Services which provide human
resource software solutions.
We believe our service
offering competes effectively based on our strategy of combining an ecosystem of employment services with the individualized ability
to link trained workers to specific shift-work opportunities.
Governmental Regulation
Our business operates
in an environment that is affected by numerous federal, state and local laws and regulations relating to labor and employment matters,
benefit plans and income and employment taxes. Moreover, because our client engagements involve some form of co-employer relationship
with regard to the employees who provide services in employment to our clients, the application of such laws to these non-traditional
employer relationships can become complex. Nearly all states have adopted laws or regulations regarding the licensure, registration
or certifications of organizations that engage in co-employer relationships. While our model is currently not included in such
regulations, we may become subject to such laws and regulations when we enter into co- employer relationships with regard to employees
providing services in the jurisdictions where such laws and regulations apply.
Additionally, government
agencies have since declared a state of emergency in the U.S., and some have restricted movement, required restaurant, bar and
hotel closures, and advised people not to visit restaurants or bars and otherwise restrict non-essential travel. In some jurisdictions,
people have been instructed to shelter in place to reduce the spread of COVID-19, in response to which restaurants have temporarily
closed and have shifted operations at others to provide only take-out and delivery service. See "Prospectus Summary —
Recent Developments — COVID-19 Related Considerations."
The following summarizes what we believe
are the most important legal and regulatory aspects of our business:
Federal Regulations
Employer Status
We sponsor certain
employee benefit plan offerings as the "employer" of our shift workers under the Code and ERISA. The multiple definitions
of "employer" under both the Code and ERISA are not clear and most are defined in part by complex multi-factor tests
under common law. We believe that we qualify as an "employer" of our shift workers under both the Code and ERISA, as
well as various state regulations, but this status could be subject to challenge by various regulators. For additional information
on employer status and its impact on our business and results of operations, refer to the section entitled "Risk Factors,"
under the heading "If we are not recognized as an employer of WSEs under federal and state regulations, or we are deemed
to be an insurance agent or third-party administrator, we and our clients could be adversely impacted."
Affordable Care Act and Health Care
Reform
The ACA was signed
into law in March 2010. The ACA implemented substantial health care reforms with staggered effective dates continuing through 2020,
and many provisions in the Act require the issuance of additional guidance from applicable federal government agencies and the
states. There could be significant changes to the ACA and health care in general, including the potential modification, amendment
or repeal of the ACA. For additional information on the ACA and its impact on our business and results of operations, refer to
the section entitled "Risk Factors," under the heading, "Failure to comply with, or changes in, laws and regulations
applicable to our business, particularly potential changes to the ACA, could have a materially adverse effect on our marketing
plan as well as our reputation, results of operations or financial condition, or have other adverse consequences." As of
the date of this prospectus, the ACA has not been formally amended or repealed; however, the Tax Cuts and Jobs Act of 2017 effectively
eliminates the individual mandate provisions of the ACA, beginning in 2019.
60
Health Insurance Portability and Accountability
Act
Maintaining the
security of information regarding our employees is important to us as we sponsor employee benefit plans and may have access
to personal health information of our employees. The manner in which we manage protected health information (PHI) is subject
to HIPAA, and the HITECH Act. HIPAA contains substantial restrictions and health data privacy, security and breach
notification requirements with respect to the use and disclosure of PHI. Further, under the HITECH Act there are steep
penalties and fines for HIPAA violations. Our health plans are covered entities under HIPAA, and we are therefore required to
comply with HIPAA's portability, privacy, and security requirements. For additional information regarding the
information we collect, how we maintain the confidentiality of our clients' and employees' confidential
information and the potential impact to our business if we fail to protect the confidentiality of such data, refer to the
section entitled "Risk Factors," under the heading, "We collect, use, transmit and store personal and
business information with the use of data service vendors, and a security or privacy breach may damage or disrupt our
businesses, result in the disclosure of confidential information, damage our reputation, increase our costs or cause
losses."
State Regulations
Nearly all states have
adopted provisions for licensing, registration, certification or other formal recognition of co-employers. Such laws vary from
state to state but generally provide for monitoring or ensuring the fiscal responsibility of a co-employer, and in some cases codify
and clarify the co-employment relationship for unemployment, workers' compensation and other purposes under state laws. The
scope of the laws and regulations of states is such that it encompasses our activities. In addition, many state laws require guarantees
by us of the activities of our subsidiary, ReThink, and in some states we may seek licensure, registration or certification, as
applicable, together with our subsidiary, ReThink, because the financials for both organizations are consolidated. We believe we
are in compliance in all material respects with the requirements in the states wherein we are conducting business.
We must also comply
with state unemployment tax requirements where our clients are located. State unemployment taxes are based on taxable wages and
tax rates assigned by each state. The tax rates vary by state and are determined, in part, based on our prior years' compensation
and unemployment claims experience in each state. Certain rates are also determined, in part, by each client's own compensation
and unemployment claims experience. In addition, states have the ability under law to increase unemployment tax rates, including
retroactively, to cover deficiencies in the unemployment tax funds.
In addition, we are
subject to Federal and state laws and regulations regarding privacy and information security. California recently enacted legislation,
the California Consumer Privacy Act of 2018, (the "CCPA") that went into effect on January 1, 2020. The CCPA affords
consumers expanded privacy protections, including rights to access, to require deletion of their personal information, to opt out
of certain personal information sharing, and to receive detailed information about how their personal information is used. The
CCPA also provides for civil penalties for violations, as well as a private right of action for data breaches that may increase
data breach litigation. There are also a number of other pending U.S. state privacy laws that contain similar, but potentially
stricter and conflicting, obligations to the CCPA. These laws, if enacted, may require material alteration of our internal procedures
and could potentially limit the ability of data providers or our customers to provide certain personal information to us that is
necessary for our business operations.
Intellectual Property
We have registered
five trademarks, consisting of two names (ShiftPixy and ZiPixy) and three logos (the Pixy image, the Pixy wings image and wings/name
logo). In addition, we have patents pending for certain features of our mobile application in the United States, Australia, Brazil,
European Union, India, Japan, Korea and Hong Kong. We have other intellectual property and related rights as well, particularly
in connection with our software. We believe that our intellectual property is of considerable importance to our business.
Employees
As of May 31, 2020, we employed 46 people on a full-time basis
in our corporate offices, and we served approximately 2,700 active, paid WSEs with an additional 35,000 inactive WSEs carried within
our HRIS platform. Effective as of January 1, 2020, we assigned client contracts representing approximately 70% of our billable
clients which comprised approximately 88% of our quarterly revenue as of November 30, 2019 as part of the Vensure Asset Sale and
transferred 21 of our 64 corporate employees. We retained all WSEs in our HRIS system. Our billed WSE count decreased from the
February 2020 quarter due to the COVID-19 pandemic. The billed WSE count increased to approximately 3,200 in June 2020 as the Southern
California economy opened.
Legal Proceedings
Kadima Litigation
The Company is in a dispute with its former software developer,
Kadima Ventures ("Kadima"), over incomplete but paid for software development work. In May 2016, the Company entered
into a contract with Kadima for the development and deployment of user features that were proposed by Kadima for an original build
cost of $2.2 million to complete. This proposal was later revised upward to approximately $7.2 million to add certain features
to the original proposal. As of the date of this prospectus, the Company has paid approximately $11 million to Kadima, but has
never been provided access to the majority of the promised software. Kadima refused to continue development work, denied access
to developed software, and refuses to surrender to the Company any software that it has developed unless the Company pays an additional
$12.0 million above the $11.0 million already paid. In addition to the non-delivery of the paid for user features, Kadima asserts
that it is owed additional funds to turn over the work completed. In April 2019, Kadima filed a complaint against the Company in
the Superior Court of the State of Arizona, Maricopa County, alleging claims for breach of contract, promissory estoppel and unjust
enrichment, and seeking damages in excess of $11.0 million. The Company vigorously disputes and denies each of Kadima's claims,
including that it owes any sums to Kadima, and further believes that it is entitled, at a minimum, to a refund of a substantial
portion of the sums that it has already paid, along with the release of the software modules currently being withheld. In June,
2020 the Company engaged in mediation discussions with Kadima in an attempt to resolve the matter, which were unsuccessful. On
July 14, 2020 the Company filed an answer to Kadima's complaint, which denied Kadima's claims and asserted counter-claims
for breach of contract and fraud.
61
Splond Litigation
On April 8, 2019, claimant,
Corey Splond, filed a class action lawsuit, on behalf of himself and other similarly situated individuals, in the Eighth Judicial
District Court for the State of Nevada, Clark County, naming the Company and its client as defendants, and alleging violations
of certain wage and hour laws. This lawsuit is in the initial stages, and the Company denies any liability. Even if the plaintiff
ultimately prevails, the potential damages recoverable will depend substantially upon whether the Court determines in the future
that this lawsuit may appropriately be maintained as a class action.  Further, in the event that the Court ultimately enters
a judgment in favor of plaintiff, the Company believes that it would be contractually entitled to be indemnified by its client
against at least a portion of any damage award.
In addition, from time
to time, we may become involved in various claims and legal proceedings. We are not currently a party to any legal proceedings
that, in the opinion of our management, are likely to have a material adverse effect on our business. Regardless of outcome, litigation
can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.
Our Corporate Information
We were incorporated
under the laws of the State of Wyoming on June 3, 2015. Our principal executive office is located at 1 Venture, Suite 150, Irvine,
CA 92618, and our telephone number is (888) 798-9100. Our website address is www.shiftpixy.com. Our website does not form a part
of this prospectus and listing of our website address is for informational purposes only.
62
MANAGEMENT
Executive Officers and Directors
Our board of directors
elects our executive officers annually, at a meeting following the annual meeting of shareholders. Our board of directors can also
elect persons to fill any executive officer vacancies. Each officer holds such office until his successor is elected and qualified,
or until his or her death, earlier resignation or removal. The following table sets forth information regarding our executive officers
and directors as of July 24, 2020:
Name
Position
Age
Scott W. Absher
President, Chief Executive Officer and Director
60
Kenneth W. Weaver
(1) (2) (3)
Independent Director
66
Domonic J. Carney
Chief Financial Officer
54
Whitney White
(1) (2) (3)
Independent Director
45
Christopher Sebes
Independent Director
66
Amanda Murphy
Director
36
(1)
Member of the Audit Committee.
(2)
Member of the Compensation Committee.
(3)
Member of the Nominations Committee.
Executive Officers
Scott W. Absher
has
served as our President, Chief Executive Officer and director since our formation in June 2015. Since February 2010 he has also
been President of Struxurety, a business insurance advisory company. As a member of our board of directors, Mr. Absher contributes
significant industry-specific experience and expertise to our insurance products and services and has a deep understanding of all
aspects of our business, products and markets, as well substantial experience developing corporate strategy, assessing emerging
industry trends, and managing business operations.
Domonic Carney
has served as our Chief Financial Officer since August 4, 2019. Mr. Carney began his career at Deloitte & Touche where he audited
high tech startups in Palo Alto, CA. Mr. Carney brings substantial experience in small, high-growth companies as well as over fifteen
years of C-Level experience in micro-cap public companies. Between 1994 and 2001, Mr. Carney worked for various high tech startups
in Silicon Valley, CA including software development, internet, and Internet Service Providers in increasing levels of responsibility.
From 2001 until 2004, Mr. Carney was the Finance Director in San Diego, CA providing Finance support for the Western half of the
US Operations of Danka Office Imaging. From 2005 to 2012, Mr. Carney served as the Chief Financial Officer for Composite Technology
Corporation (CPTC-OTC), an energy equipment and technology company that grew from pre-revenue to over $75 million a year between
2005 and 2008. Between 2012 and 2014, Mr. Carney provided C-Level finance and accounting consulting services to manufacturing,
health care, energy, and technology companies in San Diego and Irvine, CA. From 2014 until 2019 Mr. Carney served as the Chief
Financial Officer for Ener-Core, Inc. (ENCR-OTC), an energy technology company located in Irvine, CA. Mr. Carney holds a Masters
in Accounting degree from Northeastern University, a Bachelors of Arts in Economics from Dartmouth College, and is licensed as
a Certified Public Accountant (inactive status) in the State of California.
Independent Directors
Kenneth W. Weaver
has served as an independent director since December 5, 2016. Mr. Weaver currently serves as the chairman of the Audit
Committee and is also a member of the Compensation Committee and the Nominations Committee. Since April, 2012, Mr. Weaver has been
the sole proprietor of Ken Weaver Consulting, providing operations consulting for TVV Capital, a Nashville Private Equity firm.
Before his service with TVV, Mr. Weaver spent over 30 years with Bridgestone Corporation, having served in various responsible
leadership roles, including as President, Bridgestone North American Tire Commercial Sales, Chief Financial Officer, Bridgestone
Americas and Chairman, CEO and President, Firestone Diversified Products. Mr. Weaver earned both his bachelor's degree in
business and his Master of Business Administration degree from Pennsylvania State University. Mr. Weaver's substantial financial
background qualifies him as an audit committee financial expert under applicable rules.
Whitney
White
has served as an independent director since September 28, 2017. Mr. White serves as the chairman of the
Compensation Committee and the Nominations Committee, and is also a member of the Audit Committee. Since April, 2017, Mr.
White has been Chief Operating Officer and Chief Technology Officer of Prime Trust, LLC, a Nevada chartered trust company.
Before his service with Prime Trust, Mr. White spent 17 years with W.R. Hambrecht + Co., LLC, an investment banking, advisory
and brokerage firm that was the underwriter of our recently completed Regulation A offering. At W.R. Hambrecht + Co., LLC,
Mr. White served in various executive roles, including Chief Technology Officer and as Managing Director, Equity Capital
Markets. Mr. White earned a bachelor's degree in computer science & psychology from Hamilton College, a Master of
Business Administration degree in finance and accounting from Columbia University's Graduate School of Business, and a
Master of Business Administration degree in technology and entrepreneurship from the University of California
Berkeley's Hass School of Business. Mr. White holds a Series 79 license as an Investment Banking Representative, a
Series 24 license as a General Securities Principal, and a Series 7 license as a General Securities Representative. As a
member of our board of directors, Mr. White contributes the benefits of decades of leadership and management experience
building and advising early stage, technology-driven companies. Based on his investment banking experience, Mr. White has
significant corporate finance and governance expertise. As an experienced senior technologist, Mr. White provides years of
experience applying technology to enhance traditional business processes.
63
Christopher Sebes
has served as an independent director since February 7, 2020. From August 2004 to July 2014, he served as the CEO of XPIENT Solutions,
a full-service, global provider of solutions for food ordering, digital menus, drive-thru management, kitchen management, inventory,
labor and scheduling analytics. From November 2014 to July 2019, Mr. Sebes served as the President of Xenial, Inc., a cloud-based
restaurant and retail management platform. Since August, 2019, Mr. Sebes has been a partner and member of the board of directors
of Results Thru Strategy, Inc., a strategic advisory firm specializing in restaurants, hotels, and technology companies serving
those industries. Since September 2019, he has also served as a member of the board of advisors of Valyant AI which has developed
a proprietary conversational AI platform that integrates with existing mobile, web, call ahead, kiosk and drive through platforms.
Mr. Sebes received his degree in Hotel and Restaurant Management from the University of Portsmouth (Hampshire, United Kingdom)
in 1975. Mr. Sebes brings to our board of directors his innovative thought leadership and extensive knowledge of restaurant industry
technology both in the United States and abroad.
Non-Independent Directors
Amanda Murphy
has served as a director since February 10, 2020. Prior to her election to our board of directors, Ms. Murphy served and continues
to serve as our Director of Operations and has been vital to our success and growth in that position. Ms. Murphy has been active
in the operations side of the staffing industry at a senior level since 2007. Ms. Murphy received her certificate in HR Management
from California State University – Long Beach in 2007. Ms. Murphy also studied law at Taylor University in Selango, Malaysia.
Family Relationships
There are no family
relationships between any of our current officers or directors.
Board of Directors
Composition of Our Board of Directors
Our directors are elected
at our annual meeting of the shareholders. In addition, directors may be elected to fill vacancies and newly created directorships
by our board of directors. Each director holds the office until the next annual meeting of shareholders and until his or her successor
shall have been elected and qualified; provided, however, that directors can be elected for a term not to exceed five (5) years.
As of July 24, 2020,
our board of directors consisted of six members. Each director serves until the next annual meeting of the shareholders and until
his or successor is elected and duly qualified, or until his or her earlier death, resignation or removal.
We have no formal policy
regarding board diversity. In selecting board candidates, we seek individuals who will further the interests of our shareholders
through an established record of professional accomplishment, the ability to contribute positively to our collaborative culture,
knowledge of our business and understanding of our prospective markets.
Committees of Our Board of Directors
Audit Committee
Our Audit Committee
consists of Messrs. Weaver and White. Mr. Weaver serves as the chairman of the Audit Committee and qualifies as an audit committee
financial expert within the meaning of SEC regulations and the Nasdaq Listing Rules. In making a determination on which member
will qualify as a financial expert, our board of directors considers the formal education and nature and scope of such members'
previous experience.
64
Our Audit Committee
assists our board of directors in its oversight of our accounting and financial reporting process and the audits of our consolidated
financial statements. Our Audit Committee's responsibilities include:
·
appointing, approving the compensation of, and assessing the independence of our registered public
accounting firm;
·
overseeing the work of our registered public accounting firm, including through the receipt and
consideration of reports from such firm;
·
reviewing and discussing with management and the registered public accounting firm our annual and
quarterly consolidated financial statements and related disclosures;
·
monitoring our internal control over financial reporting, disclosure controls and procedures and
code of business conduct and ethics;
·
overseeing our internal accounting function;
·
discussing our risk management policies;
·
establishing policies regarding hiring employees from our registered public accounting firm and
procedures for the receipt and retention of accounting-related complaints and concerns;
·
meeting independently with our internal accounting staff, registered public accounting firm and
management;
·
reviewing and approving or ratifying related party transactions; and
·
preparing audit committee reports required by SEC rules.
Compensation Committee
Our Compensation Committee
consists of Messrs. Weaver and White, with Mr. White serving as chairman. Our Compensation Committee assists our board of directors
in the discharge of its responsibilities relating to the compensation of our executive officers. The Compensation Committee's
responsibilities include:
·
reviewing and approving corporate goals and objectives with respect to Chief Executive Officer
compensation;
·
making recommendations to our board of directors with respect to the compensation of our Chief
Executive Officer and our other executive officers;
·
overseeing evaluations of our senior executives;
·
reviewing and assessing the independence of compensation advisers;
·
overseeing and administering our equity incentive plans;
·
reviewing and making recommendations to our board of directors with respect to director compensation;
·
reviewing and discussing with management our "Compensation Discussion and Analysis"
disclosure; and
·
preparing the compensation committee reports required by SEC rules.
Compensation Committee Interlocks and
Insider Participation
None of the members
of our Compensation Committee, at any time, have been one of our officers or employees. None of our executive officers currently
serve, or in the past year have served, as a member of our board of directors or the compensation committee of any entity that
has one or more executive officers on our board of directors or Compensation Committee.
65
Nominations Committee
Our Nominations Committee
consists of Messrs. Weaver and White, with Mr. White serving as chairman. The Nominations Committee's responsibilities include:
·
identifying individuals qualified to become board members;
·
recommending to our board of directors the persons to be nominated for election as directors and
to be appointed to each committee of our board of directors;
·
reviewing and making recommendations to our board of directors with respect to management succession
planning; and
·
overseeing periodic evaluations of board members.
Board Leadership Structure and Risk
Oversight
Our board of directors
oversees our business and considers the risks associated with our business strategy and decisions. Our board of directors currently
implements its risk oversight function as a whole. Each of the board committees also provides risk oversight in respect of its
areas of concentration and reports material risks to our board of directors for further consideration.
Code of Business Conduct and Ethics
We have adopted a written
code of business conduct and ethics that applies to our directors, officers and employees, including our principal executive officer,
principal financial officer and principal accounting officer or controller, or persons performing similar functions. The code of
conduct is posted on our website, and we will post all disclosures that are required by law or Nasdaq rules in regard to any amendments
to, or waivers from, any provision of the code.
Director Independence
Rule 5605 of the Nasdaq
Listing Rules requires a majority of a listed company's board of directors to be comprised of independent directors within
one year of listing. In addition, the Nasdaq Listing Rules require that, subject to specified exceptions, each member of a listed
company's audit, compensation and nominating and corporate governance committees be independent and that audit committee
members also satisfy the independence criteria set forth in Rule 10A-3 under the Exchange Act.
In selecting our independent
directors, our board of directors considered the relationships that each such person has with our company and all the other facts
and circumstances our board of directors deemed relevant in determining independence, including the beneficial ownership of our
capital stock by each such person. Using this definition of independence, we have determined that that three directors, Kenneth
Weaver, Whitney White, and Christopher Sebes are independent directors.
Legal Proceedings
Administrative Order and Settlement
with State Securities Commissions
On June 25, 2013, the
Alabama Securities Commission issued a Cease and Desist Order (the "Order") against Scott W. Absher and other named
persons and entities, requiring that they cease and desist from further offers or sales of any security in the State of Alabama.
The Order asserts that Mr. Absher was the president of a company that issued unregistered securities to certain Alabama residents,
that he was the owner of a company that was seeking investments, and that in March 2011 he spoke to an Alabama resident who was
an investor in one of the named entities. The Order concludes that Mr. Absher and others caused the offer or sale of unregistered
securities through unregistered agents. While Mr. Absher disputes many of the factual statements and specifically that he was an
owner or officer of any of the entities involved in the sale of the unregistered securities to Alabama residents or that he authorized
any person to solicit investments for his company, in the interest of allowing the matter to become resolved, he did not provide
a response.
Legal Matters Related to J. Stephen
Holmes
J. Stephen Holmes is
a co-founder and currently an independent contractor and major shareholder. As a condition of certifying our common stock for a
Nasdaq listing, Mr. Holmes agreed to the disclosure of his prior conviction for acts related to making false statements in relation
to two quarterly IRS Form 941 Employer Federal Quarterly tax returns, one in 1996 and the second in 1997, for a company for which
he was at the time an officer. The former company is not affiliated or related to us in any way. As an independent contractor with
us, Mr. Holmes is focusing upon building a sales network and providing consulting in relation to workers' compensation programs
as well as ACA health insurance programs, and as such is not involved in any part of the accounting or tax paying and IRS return
filing areas of our operations.
66
EXECUTIVE COMPENSATION
Set forth below is
certain information regarding the historical compensation of our named executive officers during the years ended August 31, 2019
and 2018. For additional information about our current officers and directors, see the section titled "Management."
Executive Compensation
Summary Compensation Table
The following table
provides information regarding the compensation paid during the last two fiscal years to the named executive officers.
Name and Principal Position
Year
Salary
($)
Stocks
Awards
($)
Option
Awards
($)
(1)
Non-Equity
Incentive Plan
Compensation
($)
All Other
Compensation
($)
Total
($)
Scott W. Absher
2019
750,000
—
—
—
—
750,000
President, Chief Executive Officer and Director
2018
750,000
—
—
—
—
750,000
Domonic J. Carney
(2)
2019
12,115
—
—
—
—
12,115
Chief Financial Officer
2018
—
—
—
—
—
—
Patrice H. Launay
(3)
2019
285,558
—
50,875
(4)
336,433
Former Chief Financial Officer
2018
180,000
—
50,875
(5)
—
—
230,875
Mark Absher
(6)
2019
300,000
—
—
—
300,000
Former In-House Counsel, Director and Secretary
2018
275,000
—
50,875
(7)
—
—
325,875
(1)
The amount shown for option awards represents the grant date fair value of such awards granted to the named executive officers
as computed in accordance with Financial Accounting Standards Board ("FASB") ASC Topic 718, Compensation-Stock Compensation.
For each award, the grant date fair value is calculated using the closing price of our common stock on the grant date. This amount
does not correspond to the actual value that may be realized by the named executive officers upon vesting or exercise of such award.
For information on the assumptions used to calculate the value of the awards, refer to Note 6 to the Consolidated Financial Statements.
(2)
Mr. Carney joined our company on August 4, 2019 and receives an annual salary of $350,000.
(3)
Mr. Launay joined our company as Chief Financial Officer on January 24, 2018, and resigned on July 30, 2019. Mr. Launay initially
received an annual salary of $240,000, which was later increased to $350,000 on February 1, 2019.
(4)
Represents 1,250 options issued pursuant to the 2017 Plan at an exercise price of $51.20 per share on April 1, 2019, estimated
to have been the fair market value price per share at the time of the award.
(5)
Represents the following grants pursuant to the 2017 Plan: 1,250 options issued at an exercise price of $118.00 per share on
February 1, 2018 and 156 options issued at an exercise price of $100.00 per share on May 10, 2018, estimated to have been the fair
market value price per share at the time of the awards.
(6)
Mr. Mark Absher resigned from his position as Registered In-House Counsel, Director and Secretary on February 6, 2019.
(7)
Represents 1,250 options issued pursuant to the 2017 Plan at an exercise price of $51.20 per share on May 10, 2018, estimated
to have been the fair market value price per share at the time of the award.
67
Outstanding Equity Awards at Fiscal
Year End
The following table
summarizes the outstanding equity awards held by each named executive officer as of August 31, 2019. This table includes unexercised
and unvested options and equity awards
Number of
Securities
Underlying
Unexercised
Options
(#) Exercisable
Number of
Securities
Underlying
Unexercised
Unearned Options (#)
Unexercisable
Option
Exercise
Price
($)
Option
Expiration
Date
Scott W. Absher
President, Chief Executive
        Officer and Director
1,250
—
160.00
3/15/2027
Domonic J. Carney
Chief
        Financial Officer
—
—
—
—
Patrice H. Launay
Former
        Chief Financial Officer
—
—
—
—
Mark Absher
Former Secretary
        and Director
—
—
—
—
Director Compensation
Our directors classified
as employees receive no additional compensation for services as directors of the Company. The following table summarizes the compensation
paid to our non-employee directors during Fiscal 2019:
Name
Fees
Earned or
Paid in
Cash
($)
(1)
Stock
Awards
($)
(2)
Option
Awards
($)
All Other
Compensation
($)
Total
($)
Scott W. Absher
(3)
—
—
—
—
—
Kenneth W. Weaver
91,000
75,000
(4)
—
—
166,000
Whitney J. White
90,500
37,500
(5)
—
—
128,000
Sean C. Higgins
(6)
85,000
37,500
(7)
—
—
122,500
Christopher Sebes
(8)
—
—
—
—
—
Amanda Murphy
(9)
—
—
—
—
—
(1)
Represents monthly board of director fees paid or payable in cash during Fiscal 2019.
(2)
Represents annual value of stock awards issued during Fiscal 2019 under our 2017 Plan.
(3)
Mr. Absher did not receive any compensation for his services as a director during Fiscal 2019.
(4)
Pursuant to the terms of Mr. Weaver's director agreement, we issued 1,202 shares of common stock on May 15, 2019 valued
at $37,500, or $31.20 per share and 1,995 shares of common stock on August 19, 2019, or $18.80 per share.
(5)
Pursuant to the terms of Mr. White's director agreement, we issued 411 shares of common stock on April 16, 2019, valued
at $37,500 or $91.20 per share.
(6)
Mr. Higgins resigned from our board of directors on February 10, 2020, effective April 1, 2020.
(7)
Pursuant to the terms of Mr. Higgins's director agreement, we issued 411 shares of common stock on April 16, 2019, valued
at $37,500 or $91.20 per share.
(8)
Mr. Sebes joined our board of directors on February 7, 2020.
(9)
Ms. Murphy joined our board of directors on February 10, 2020.
68
Equity Incentive Plans
In March 2017, we adopted the 2017 Plan.
The 2017 Plan provides incentives to eligible employees, officers, directors and consultants in the form of incentive stock options,
non-qualified stock options and stock. We have reserved, subject to shareholder approval, a total of 3,000,000 shares of common
stock for issuance under the 2017 Plan. Of these shares, approximately 43,415 shares have been designated by our board of directors
for issuance through July 24, 2020. Approximately 38,000 of the options have been forfeited and returned to the option pool under
the 2017 Plan as a consequence of employment terminations. Unless the Plan Administrator under the 2017 Plan determines otherwise,
each option is immediately exercisable and the shares subject to such option will vest pursuant to each grant notice.
On July 1, 2020, our board of directors
unanimously approved an increase in the number of shares of common stock issuable under our 2017 Plan from 250,000 to 3,000,000,
subject to approval by a majority of our shareholders no later than the next regularly scheduled annual shareholders meeting. Also
on July 1, 2020, our board of directors approved the award, primarily to current employees, and subject to shareholder approval
no later than the next regularly scheduled annual meeting, of grants of options to purchase 1,235,159 shares of our common stock
at an exercise price of $5.40 per share, which was the closing price of our common stock as reported by Nasdaq at the close of
trading on the day of our board of directors' action. Of the options awarded, 995,000 are designated as "incentive
stock options", and 280,159 are designated as "non-qualifying" or "non-statutory" options under the
Code. These options have a 10-year life, and will vest over a period of time as follows: 25% vest after a 12-month service period
following the award, and the balance vest in equal quarterly installments over the next 12 quarters of service.
Employment Agreements with our Named Executive Officers
On March 23, 2016,
we entered into an offer letter agreement with Scott W. Absher, our President and Chief Executive Officer (the "Absher Offer
Letter"), which included certain provisions related to the executive's compensation. The Absher Offer Letter provides
for a full-time exempt position, an annual base salary and standard employee benefit plan participation.
On July 16, 2019, we
entered into an offer letter agreement with Domonic J. Carney, our Chief Financial Officer (the "Carney Offer Letter").
The Carney Offer Letter provides for at-will employment, a monthly salary of $29,166.67, participation in the 2017 Plan and standard
employee benefit plan participation.
69
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information known to
us regarding beneficial ownership of our capital stock as of July 24, 2020, for (i) all executive officers and directors as a group
and (ii) each person, or group of affiliated, known by us to be the beneficial owner of more than five percent (5%) of our capital
stock. The percentage of beneficial ownership in the table below is based on 16,816,686 shares of common stock deemed to be outstanding
as of July 24, 2020. In addition, shares of common stock that may be acquired by the shareholder within 60 days of July 24, 2020,
pursuant to the exercise of stock options are deemed to be outstanding for the purpose of computing the percentage ownership of
such shareholder but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person
shown in the table. Unless otherwise indicated, the business address for each stockholder listed is c/o ShiftPixy, Inc., 1 Venture,
Suite 150, Irvine, CA 92618.
Percentage of Common Stock Beneficially Owned
5% Stockholders
Number of
Shares
Beneficially
Owned
Before Offering
After Offering
Stephen Holmes
12,086,000
(1)
42.2
%
%
Percentage of Common Stock
Beneficially Owned
Directors and Named Executive Officers
Number of
Shares
Beneficially
Owned
Before Offering
After Offering
Scott W. Absher
12,813,750
(2)
76.2
%
%
Domonic J. Carney
--
*
%
Kenneth W. Weaver
5,062
(3)
*
%
Whitney J. White
1,498
(3)
*
%
Christopher Sebes
--
*
%
Amanda Murphy
--
*
%
Mark Absher
(4)
--
*
%
Patrice H. Launay
(5)
--
*
%
All Executive Officers and Directors as a Group (7 persons)
12,820,310
76.2
%
%
*
Less than 1%
(1)
Represents 294,750 shares of common stock, 1,250 shares underlying options exercisable within 60 days of July 24, 2020 and
11,790,000 shares of common stock underlying Preferred Options to purchase shares of Preferred Stock exercisable within 60 days
of July 24, 2020. The business address for Mr. Holmes is 22 Trailing Ivy, Irvine, CA 92620.
(2)
Represents 12,812,500 shares of common stock and 1,250 shares underlying options exercisable within 60 days of July 24,
                                                           2020.
(3)
Represents shares of common stock issued in conjunction with services rendered as a director.
(4)
Mr. Absher resigned as our Registered In-House Counsel, Director and Secretary on February 6, 2019.
(5)
Mr. Launay resigned as our Chief Financial Officer on July 30, 2019.
70
CERTAIN RELATIONSHIPS AND RELATED PARTY
TRANSACTIONS AND DIRECTOR INDEPENDENCE
Related Party Transactions
Except as set forth
below, none of our directors or executive officers, nor any proposed nominee for election as a director, nor any person who beneficially
owns, directly or indirectly, shares of stock carrying more than 5% of the voting rights attached to all of our outstanding shares,
nor any members of the immediate family (including spouse, parents, children, siblings, and in-laws) of any of the foregoing persons
has any material interest, direct or indirect, in any transaction since our incorporation, or in any presently proposed transaction
which, in either case, has or will materially affect us:
On September 28, 2017,
Whitney White, our independent director and Sean Higgins, our independent director who resigned effective April 1, 2020, were each
awarded 26,316 shares of our common stock for services rendered pursuant to the 2017 Plan. The fair value at the time of issuance
was $75,000, or $2.85 per share.
On August 9, 2018,
Kenneth Weaver, our Chairman of the Audit Committee and independent director, was granted 24,592 shares of our common stock pursuant
to the 2017 Plan. The fair value at the time of issuance was approximately $75,000, or $3.05 per share. 12,296 of the shares issued
to Mr. Weaver were deemed to have been purchased and immediately vested on August 9, 2018, as a consequence of Mr. Weaver's
continued service as a director through that date. The other 12,296 shares of our common stock issued to Mr. Weaver on August 9,
2018 were deemed to have been purchased and immediately vested on November 30, 2018, contingent upon Mr. Weaver's continued
service as a director through that date.
On April 16, 2019,
Messrs. White and Higgins were each issued 16,448 shares of our common stock for services rendered valued at $37,500 at a fair
value of $2.28 per share.
On June 6, 2019,
we advanced $325,000 in cash to Mr. Stephen Holmes as payment for consulting services. Mr. Holmes is one of our founders and
owns 1.8% of our outstanding shares of common stock as of July 24, 2020. On July 18, 2019, Mr. Holmes repaid the advance by
returning 558,132 shares of common stock valued at $0.58 per share.
On August 19, 2019,
we issued Mr. Weaver 79,788 shares of our common stock for services rendered valued at $37,500 at a fair value of $0.47 per share.
On January 3, 2020,
effective January 1, 2020, we entered into the Vensure Asset Sale. Upon the occurrence of the Vensure Asset Sale, the holders
of our Preferred Options obtained the right to exercise each Preferred Option to purchase one share of our preferred stock for
$0.0001 per share.  Each share of preferred stock is convertible into common stock on a one-for-one basis. As of the date
of this prospectus, the Preferred Options are exercisable to purchase up to 11,925,520 shares of preferred stock which are convertible
into an equal number of shares of common stock. Scott W. Absher, our Chief Executive Officer and director, exercised all of his
12,500,000 Preferred Options on June 4, 2020. Stephen Holmes, our founder and owner of 1.8% of our outstanding common stock,
owns 11,790,000 Preferred Options which are outstanding as of the date of this prospectus. The Preferred Options held by Mr. Holmes
became exercisable to purchase preferred stock upon the occurrence of the Vensure Asset Sale. Additionally, at some point in the
future we intend to adopt a second grant of options granting an additional 12,500,000 Preferred Options to each of Messrs. Absher
and Holmes whereby each option permits the holder to acquire one share of our preferred stock for $0.0001 per share. See "Risk
Factors — Purchasers in the offering will suffer immediate and substantial dilution if our Option Shareholders exercise their
Preferred Options" for a further discussion of the Preferred Options.
Director Independence
Our board of directors
has determined that we have three board members that qualify as "independent" as the term is used in Item 7(d)(3)(iv)(B)
of Schedule 14A under the Exchange Act, and as defined by Rule 4200(a)(15) of the Nasdaq Marketplace Rules.
71
DESCRIPTION OF CAPITAL STOCK
As of the date of this
prospectus, we are authorized to issue up to 750,000,000 shares of common stock, par value $0.0001 per share and 50,000,000 shares
of preferred stock, par value $0.0001 per share.
The following is a
summary of the material terms of our capital stock and certain provisions of our certificate of incorporation and bylaws. Since
the terms of our certificate of incorporation and bylaws, and Wyoming law, are more detailed than the general information provided
below, you should only rely on the actual provisions of those documents and Wyoming law. If you would like to read those documents,
they are on file with the SEC, as described under the heading "Where You Can Find More Information" below. The summary
below is also qualified by provisions of applicable law.
On November 13, 2019,
our board of directors authorized the Reverse Stock Split. As a result of the Reverse Stock Split, each forty (40) shares of our
issued and outstanding common stock were automatically combined and converted into one issued and outstanding share of common stock.
The Reverse Stock Split affected all issued and outstanding shares of our common stock, as well as common stock underlying stock
options to purchase shares of common stock and warrants outstanding immediately prior to the effectiveness of the Reverse Stock
Split. The Reverse Stock Split did not alter the number of shares of preferred stock underlying the Preferred Options (as defined
below) and did not decrease the number of authorized shares of our common stock or preferred stock, alter the par value of our
common stock or preferred stock, both of which remain at $0.0001 per share, or modify any voting rights or other terms of our capital
stock. Unless otherwise indicated, all information set forth in this prospectus gives effect to the Reverse Stock Split.
As of July 24, 2020,
there were 16,816,686 shares of common stock outstanding.
Common Stock
Voting Rights
.
Holders of our common stock are entitled to one vote for each share held of record on all matters submitted to a vote of the
shareholders. Wyoming law provides for cumulative voting for the election of directors. As a result, any shareholder may cumulate
his or her votes by casting them all for any one director nominee or by distributing them among two or more nominees. This may
make it easier for minority shareholders to elect a director.
Dividends
.
Subject to preferences that may be granted to any then outstanding preferred stock, holders of our common stock are entitled
to receive ratably such dividends as may be declared by our board of directors out of funds legally available therefor as well
as any distributions to the shareholders. The payment of dividends on our common stock will be a business decision to be made by
our board of directors from time to time based upon results of our operations and our financial condition and any other factors
that our board of directors considers relevant. Payment of dividends on our common stock may be restricted by loan agreements,
indentures and other transactions we enter into from time to time.
Liquidation Rights
.
In the event of our liquidation, dissolution or winding up, holders of our common stock are entitled to share ratably in all
of our assets remaining after payment of liabilities and the liquidation preference of any then outstanding preferred stock.
Absence of Other
Rights or Assessments
.
Holders of our common stock have no preferential, preemptive, conversion or exchange rights. There
are no redemption or sinking fund provisions applicable to our common stock. When issued in accordance with our articles of incorporation
and bylaws, shares of our common stock are fully paid and not liable to further calls or assessment by us.
Preferred Stock
Our board of directors
is authorized by our articles of incorporation to establish classes or series of preferred stock and fix the designation, powers,
preferences and rights of the shares of each such class or series and the qualifications, limitations or restrictions thereof without
any further vote or action by our shareholders. Any shares of preferred stock so issued would have priority over our common stock
with respect to dividend or liquidation rights. Any future issuance of preferred stock may have the effect of delaying, deferring
or preventing a change in our control without further action by our shareholders and may adversely affect the voting and other
rights of the holders of our common stock.
Class A Preferred Stock
Voting Rights
.
Holders of preferred stock shall not have voting rights other than those described under the section below entitled "Description
of Capital Stock – Preferred Stock – Protective Provisions."
Dividends
.
Holders of our preferred stock shall not be entitled to receive annual or other dividends.
72
Liquidation Preference
.
In the event of our liquidation or winding up, the holders of the preferred stock will be entitled to receive in preference to
the holders of common stock an amount equal to their purchase price, subject to proportional adjustment for stock splits, stock
dividends, recapitalizations, and the like on a pro rata basis with the common stock.
Conversion
.
Our board of directors and our shareholders recently approved an amendment to our Articles of Incorporation to add conversion rights
to our preferred stock. Holders of our preferred stock shall have the right to convert their preferred stock, on a one-for-one
basis, into shares of our common stock at any time, following at least 20 days after we file an Information Statement with the
SEC regarding such shareholder approval.
Anti-dilution
Protection
. There is anti-dilution protection afforded to the preferred stock solely for proportional adjustments for stock
splits, stock dividends, recapitalizations, and the like and not for other matters such as additional stock issuances or price
adjustments.
Protective Provisions
.
Consent of the holders of 75% of the voting rights of the outstanding preferred stock is required for any amendment or change of
the rights, preferences, privileges, or powers of, or the restrictions provided for the benefit of, the preferred stock.
Option to Acquire Preferred Stock
As previously disclosed,
in September 2016, our founding shareholders, or Option Shareholders, were granted options to acquire our preferred stock, or Preferred
Options. The number of Preferred Options granted were based upon the number of shares held by the Option Shareholders at that time.
The Preferred Options are nontransferable and forfeited upon the sale of the related founding shares of common stock. Upon the
occurrence of certain specified events, the Option Shareholders could exercise each Preferred Option to purchase one share of our
preferred stock for $0.0001 per share. One such event occurred upon the Vensure Asset Sale in January 2020. As of the date of this
prospectus, the Preferred Options are exercisable to purchase up to 11,925,520 shares of our preferred stock which are convertible
into an equal number of shares of common stock. As stated above, the amount of Preferred Options, and the number of shares of preferred
stock issuable upon exercise of the Preferred Options, is based upon the number of shares of common stock held by the Option Shareholders
at the time such options were issued. Accordingly, in order to confirm the original intent of the granting of up to 50,000,000
Preferred Options to Messrs. Absher and Holmes, at some point in the future we intend to adopt a second grant of options granting
an additional 12,500,000 options to each of Messrs. Absher and Holmes whereby each option permits the holder to acquire one share
of our preferred stock for $0.0001 per share. Each share of preferred stock will be convertible into common stock on a one-for-one
basis. See "Risk Factors — Purchasers in the offering will suffer immediate and substantial dilution if our Option
Shareholders exercise their Preferred Options" for a further discussion of the Preferred Options.
The Preferred Option
described above has the following general rights, preferences, privileges and restrictions:
Exercisability
.
The Preferred Option may only be exercised upon (i) the acquisition of a Controlling Interest by a shareholder other than the original
holders. "Controlling Interest" means the ownership of our outstanding voting shares sufficient to enable the acquiring
person, directly or indirectly and individually or in association with others, to exercise one-fifth or more of all of our voting
power in the election of directors or any other business matter on which shareholders have the right to vote under Wyoming law
or (ii) prior to any proposed merger, consolidation (in which our common stock is changed or exchanged) or sale of at least 50%
of our assets or earning power (other than a reincorporation). The right to exercise the Preferred Option shall terminate on December
31, 2023.
Proportional
Adjustment to Preferred Option
. In the event that, at the time the Preferred Option becomes exercisable, the total number
of authorized shares of preferred stock is less than the lesser of (a) the number of shares of common stock held by holders of
our common stock on September 28, 2016, or (b) the number of shares of common stock held by holders of our common stock on the
date on which the Preferred Option becomes exercisable (such lesser amount of shares of common stock hereinafter referred to as
the "Total Holder Shares"), then the number of shares of the preferred stock that each holder can purchase in connection
with the Preferred Option shall be proportionally reduced to a percentage (of such holder's Total Holder Shares) that is
equal to the percentage calculated by dividing the total number of authorized shares of preferred stock by the Total Holder Shares.
Transferability
.
The Preferred Option is not assignable except to any person or entity deemed an Affiliate of the Preferred Option holder as the
term Affiliate is defined under SEC Rule 144.
Effective January 1,
2020, we entered into the Vensure Asset Sale, in which, pursuant to an asset purchase agreement with Shiftable HR Acquisition,
LLC, part of Vensure Employer Services, Inc., we assigned client contracts representing approximately 70% of our billable clients,
which comprised approximately 88% of our quarterly revenue as of November 30, 2019, and certain operating assets, which triggered
the Option Shareholders' right to acquire preferred stock.
73
Pre-Funded Warrants
The following summary
of certain terms and provisions of pre-funded warrants that are being offered hereby is not complete and is subject to, and qualified
in its entirety by, the provisions of the pre-funded warrant, the form of which is filed as an exhibit to the registration statement
of which this prospectus forms a part. Prospective investors should carefully review the terms and provisions of the form of pre-funded
warrant for a complete description of the terms and conditions of the pre-funded warrants.
Duration and
Exercise Price
. Each pre-funded warrant offered hereby will have an initial exercise price per share equal to $0.001. The
pre-funded warrants will be immediately exercisable and may be exercised at any time until the pre-funded warrants are exercised
in full. The exercise price and number of shares of common stock issuable upon exercise is subject to appropriate adjustment in
the event of stock dividends, stock splits, reorganizations or similar events affecting our common stock and the exercise price.
The pre-funded warrants will be issued separately from the accompanying warrants, and may be transferred separately immediately
thereafter.
Exercisability
.
The pre-funded warrants will be exercisable, at the option of each holder, in whole or in part, by delivering to us a duly executed
exercise notice accompanied by payment in full for the number of shares of our common stock purchased upon such exercise (except
in the case of a cashless exercise as discussed below). A holder (together with its affiliates) may not exercise any portion of
the pre-funded warrant to the extent that the holder would own more than 4.99% of the outstanding common stock immediately after
exercise, except that upon at least 61 days' prior notice from the holder to us, the holder may increase the amount of ownership
of outstanding stock after exercising the holder's pre-funded warrants up to 9.99% of the number of shares of our common
stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with
the terms of the pre-funded warrants. Purchasers of pre-funded warrants in this offering may also elect prior to the issuance of
the pre-funded warrants to have the initial exercise limitation set at 9.99% of our outstanding common stock. No fractional shares
of common stock will be issued in connection with the exercise of a pre-funded warrant. In lieu of fractional shares, we will either
pay the holder an amount in cash equal to the fractional amount multiplied by the exercise price or round up to the next whole
share.
Cashless Exercise
.
If, at the time a holder exercises its pre-funded warrants, a registration statement registering the issuance of the shares of
common stock underlying the pre-funded warrants under the Securities Act is not then effective or available and an exemption from
registration under the Securities Act is not available for the issuance of such shares, then in lieu of making the cash payment
otherwise contemplated to be made to us upon such exercise in payment of the aggregate exercise price, the holder may elect instead
to receive upon such exercise (either in whole or in part) the net number of shares of common stock determined according to a formula
set forth in the pre-funded warrants.
Transferability
.
Subject to applicable laws, a pre-funded warrant may be transferred at the option of the holder upon surrender of the pre-funded
warrant to us together with the appropriate instruments of transfer.
Exchange Listing
.
We do not intend to list the pre-funded warrants on Nasdaq or any other national securities exchange or nationally recognized trading
system. The common stock issuable upon exercise of the pre-funded warrants is currently listed on Nasdaq.
Right as a Shareholder
.
Except as otherwise provided in the pre-funded warrants or by virtue of such holder's ownership of shares of our common stock,
the holders of the pre-funded warrants do not have the rights or privileges of holders of our common stock, including any voting
rights, until they exercise their pre-funded warrants.
Fundamental Transaction
.
In the event of a fundamental transaction, as described in the pre-funded warrants and generally including any reorganization,
recapitalization or reclassification of our common stock, the sale, transfer or other disposition of all or substantially all of
our properties or assets, our consolidation or merger with or into another person, the acquisition of more than 50% of our outstanding
common stock, or any person or group becoming the beneficial owner of 50% of the voting power represented by our outstanding common
stock, the holders of the pre-funded warrants will be entitled to receive upon exercise of the pre-funded warrants the kind and
amount of securities, cash or other property that the holders would have received had they exercised the pre-funded warrants immediately
prior to such fundamental transaction. In addition, upon a fundamental transaction, the holder will have the right to require us
to repurchase its pre-funded warrants at their fair value using the Black Scholes option pricing formula; provided, however, that
we will pay such holder using the same type or form of consideration (and in the same proportion) that is being offered and paid
to the holders of our common stock in connection with the fundamental transaction, whether that consideration be in the form of
cash, stock or any combination thereof, or whether the holders of our common stock are given the choice to receive from among alternative
forms of consideration in connection with the fundamental transaction.
Purchase Warrants
The following
summary of certain terms and provisions of purchase warrants that are being offered hereby is not complete and is subject to,
and qualified in its entirety by, the provisions of the purchase warrant, the form of which is filed as an exhibit to the
registration statement of which this prospectus forms a part. Prospective investors should carefully review the terms and
provisions of the form of purchase warrant for a complete description of the terms and conditions of the purchase
warrants.
74
Duration and
Exercise Price
.
The purchase warrants will have an exercise price of $ (no less than 110% of the public offering
price). The exercise price is subject to appropriate adjustment in the event of certain stock dividends and distributions, stock
splits, stock combinations, reclassifications or similar events affecting our common stock and also upon any distributions of assets,
including cash, stock or other property to our stockholders. The purchase warrants
are
exercisable immediately, and at any time up to the date that is five years after their original issuance
.
Exercisability
.
The purchase warrants
will be exercisable, at the option of each holder, in whole or
in part by delivering to us a duly executed exercise notice and, at any time a registration statement registering the issuance
of the shares of common stock underlying the
purchase warrant
s under the Securities
Act is effective and available for the issuance of such shares, or an exemption from registration under the Securities Act is available
for the issuance of such shares, by payment in full in immediately available funds for the number of shares of common stock purchased
upon such exercise.
A holder will not have the right to exercise any portion of the purchase warrant if the holder (together
with its affiliates) would beneficially own in excess of 4.99% (or, upon election of the holder, 9.99%) of the number of shares
of our common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in
accordance with the terms of the purchase warrants. However, any holder may increase or decrease such percentage, provided that
any increase will not be effective until the 61st day after such election.
Cashless Exercise
.
If a registration statement registering the issuance of the shares of common stock underlying
the
purchase warrant
s under the Securities Act is not effective or available and an
exemption from registration under the Securities Act is not available for the issuance of such shares, the holder may elect to
exercise the
purchase warrant
only through a cashless exercise, in which case the
holder would receive upon such exercise the net number of shares of common stock determined according to the formula set forth
in the
purchase warrant
. No fractional shares of common stock will be issued in connection
with the exercise of a
purchase warrant
. In lieu of fractional shares, we will pay
the holder an amount in cash equal to the fractional amount multiplied by the exercise price. Notwithstanding anything to the contrary,
in the event we do not have or maintain an effective registration statement, there are no circumstances that would require us to
make any cash payments or net cash settle the
purchase warrant
s to the holders.
Transferability
.
Subject to applicable laws, the purchase warrants may be offered for sale, sold, transferred or assigned without our consent.
Exchange Listing
.
There is no established trading market for the purchase warrants and we do not expect a market to develop. In addition, we
do not intend to apply for the listing of the purchase warrants on any national securities exchange or other trading market. Without
an active trading market, the liquidity of the purchase warrants will be limited.
Rights as a Stockholder
.
Except as otherwise provided in the purchase warrants or by virtue of such holder's ownership of shares of our common stock,
the holder of a purchase warrant does not have the rights or privileges of a holder of our common stock, including any voting rights,
until the holder exercises the purchase warrant.
Fundamental Transactions
.
If a fundamental transaction occurs, then the successor entity will succeed to, and be substituted for us, and may exercise
every right and power that we may exercise and will assume all of our obligations under the purchase warrants with the same effect
as if such successor entity had been named in the purchase warrant itself. If holders of our common stock are given a choice as
to the securities, cash or property to be received in a fundamental transaction, then the holder shall be given the same choice
as to the consideration it receives upon any exercise of the purchase warrant following such fundamental transaction.
Outstanding Warrants
Prior to this offering,
as of July 24, 2020, we had outstanding warrants to purchase shares of common stock as follows:
Total Outstanding and
Exercisable
Exercise Price Per
Share
Expiration
Date
Warrants issued for placement fees
2,500
$
276.00
June 26, 2022
Warrants issued in June 2018 financing
12,552
$
5.29
December 4, 2023
Warrants issued for June 2018 placement fees
5,422
$
99.60
December 4, 2023
Warrants issued in March 2019 financing
66,288
$
40.00
March 12, 2024
Warrants issued for March 2019 placement fees
3,366
$
70.00
March 12, 2024
Settlement warrants
423,669
$
10.17
March 24, 2025
Warrants issued for May 2020 underwriting fees
111,108
$
5.40
May 26, 2025
Warrants issued in May 2020 Public Offering
1,277,580
$
5.40
May 26, 2025
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The June 2018 Warrants
(as defined below) include certain exercise price protection provisions pursuant to which the exercise price will be adjusted downward
if we issue or sell any shares of common stock or securities convertible into shares of common stock, including in this offering,
at an exercise price per share less than the outstanding warrant's exercise price listed in the table above.
For additional information
on our outstanding warrants, see the section entitled "Description of Capital Stock—Debt and Equity Offerings."
Debt and Equity Offerings
The June 2018 Financing Transaction
On June 4, 2018, we
completed an offer and sale to certain accredited investors, in a private placement, of the following unregistered securities (the
"June 2018 Financing Transaction"):
$10,000,000 of 8%
Senior Secured Convertible Notes
. A total of 250,000 shares of our common stock have been reserved for the repayment and/or
conversion of the June 2018 Notes. The June 2018 Notes may be converted at a conversion price of $99.60 per share. The June 2018
Notes are amortized as follows: commencing on November 1, 2018 and continuing on the first day of each of the following successive
months thereafter until the maturity date of the June 2018 Notes, provided that such date is a Business Day (as defined in the
June 2018 Note (each an "Amortization Payment Date")), we shall redeem the June 2018 Notes, plus interest and make
whole according to an amortization schedule attached to each June 2018 Note (each, an "Amortization Payment"). Each
Amortization Payment shall, at our option, be made in whole or in part, in cash equal to the sum of the Amortization Payment provided
for in the schedule attached to the June 2018 Notes, or, subject to our compliance with the equity conditions set forth in the
June 2018 Note, in common stock at a 15% discount to the lowest volume weighted average price during the ten trading days prior
to the Amortization Payment Date (the "Amortization Conversion Rate"); provided, however, that in the event that a
June 2018 Note holder elects to defer an Amortization Payment, the Amortization Conversion Rate shall be calculated based on the
date that the June 2018 Note holder provides us with notice of its intent to receive an Amortization Payment. Any Amortization
Payment or portion thereof made in cash will be subject to a 10% premium on such payment. No Amortization Payment may be made in
common stock if the price of such common stock is trading below a price of $1.00 on the Amortization Payment Date. Any holder of
a June 2018 Note, at its option and without regard to the actions of any other June 2018 Note holder, shall be entitled to accelerate
each Amortization Payment in up to three separate Amortization Payments each month and demand such payments in common stock pursuant
to the then-current Amortization Conversion Rate. In the event that such a holder elects to accelerate an Amortization Payment,
such accelerated Amortization Payment shall be effected from the last Amortization Payment due. Any holder of a June 2018 Note,
at its option and without regard to the actions of any other June 2018 Note holder, shall be entitled to defer each and any Amortization
Payment in its sole discretion and for as long as it wishes to defer such Amortization Payment and receive such payments in common
stock pursuant to the Amortization Conversion Rate, to be calculated when requested and received. Such deferring holder shall be
entitled to receive such deferred Amortization Payment upon three hours' written notice, which Amortization Payment shall
be settled no later than two trading days after notice has been provided. Each June 2018 Note contains certain ownership limitations
that may restrict its conversion.
Warrants to purchase
up to an aggregate of 30,526 shares of common stock
. In connection with the issuance of the June 2018 Notes, we issued a total
of 30,526 June 2018 Warrants, consisting of 25,104 warrants issued to investors and 5,422 warrants issued to the placement agent.
The 25,104 June 2018 Warrants issued to investors (a) have an initial exercise price of $99.60 per share (subject to adjustment
as set forth therein), (b) become exercisable at any time on or after December 4, 2018, and on or prior to December 4, 2023, (c)
contain certain ownership limitations that may restrict their exercise and (d) became exercisable on a cashless basis on December
4, 2018. The 5,422 June 2018 Warrants issued to the placement agent are exercisable on a cashless basis without any conditions.
The Registration Statement on Form S-3 for the described securities did not register the offer or sale of any of the June 2018
Warrants.
Registration Statement
on Form S-3 for the June 2018 securities
. On October 1, 2018, we filed a Registration Statement on Form S-3 (the "October
Registration Statement") for the resale, from time to time, by certain selling shareholders of up to 255,526 shares of our
common stock, 225,000 shares of which are issuable upon the repayment and/or conversion of the June 2018 Notes and 30,526 shares
of which are issuable upon exercise of the June 2018 Warrants, all issued by us to the selling shareholders on June 4, 2018. The
October Registration Statement was declared effective on October 29, 2018, and as of the date of this prospectus, 152,005 shares
of our common stock have been issued and sold following conversion and/or amortization under the October Registration Statement.
As of the date of this
prospectus, no June 2018 Notes remain outstanding. A total of 12,052 June 2018 Warrants issued to investors are exercisable at
$5.29 per share and 5,222 of the June 2018 Warrants issued to the placement agent are exercisable at $99.60 per share.
76
The December 2018 Settlement Transaction
Limited Settlement
Agreement and Mutual Release dated December 20, 2018
. Due to certain material failures under the June 2018 Financing Transaction,
we entered into a Limited Settlement Agreement and Mutual Release with the investors in the June 2018 Financing Transaction pursuant
to which we issued the December 2018 Notes in the principal amount of $888,888, increasing the total amount due to the investors
under the June 2018 Notes and December 2018 Notes to $10,888,888. The December 2018 Notes have identical terms to the June 2018
Notes.
Registration Statement
on Form S-3 for the December 2018 securities
. On December 24, 2018, we filed a Registration Statement on Form S-3 (the "December
Registration Statement") for the resale, from time to time, by certain selling shareholders of up to 17,778 shares of our
common stock upon the repayment and/or conversion of the December 2018 Notes. The December Registration Statement was declared
effective on February 1, 2019. As of the date of this prospectus, 460 shares of our common stock have been issued or sold following
conversion and/or amortization under the December Registration Statement.
As of the date of this
prospectus, no December 2018 Notes remain outstanding. All December 2018 Notes were either repaid, converted into shares of common
stock, or exchanged for December 2019 Exchange Notes which are no longer outstanding. See "Description of Capital Stock –
Debt and Equity Offerings – The 2019 and 2020 Exchange and Settlement Transactions."
Amendments to the June 2018 Notes
and the December 2018 Notes
On March 11, 2019,
we entered into certain amendment agreements with the holders of the June 2018 Notes and December 2018 Notes which, among other
things, reduced the floor price for amortization payments eligible to be paid, subject to conversion limitations, in shares of
our common stock from $1.25 per share to $1.00 per share. We filed a Current Report on Form 8-K with the SEC on March 13, 2019
describing these amendments.
The March 2019 Financing Transaction
On March 12, 2019,
we completed an offer and sale to certain accredited investors, in a private placement, of the following unregistered securities:
$4,750,000 of Senior
Convertible Notes
. A total of 766,129 shares of common stock have been reserved for the repayment and/or conversion of the
March 2019 Notes. The terms of the March 2019 Notes provide for payment of 110% of all amounts outstanding thereunder (including,
the principal amount of each March 2019 Note together with any accrued and unpaid interest and any other accrued and unpaid charges
thereunder, if any) at maturity on September 12, 2020 (the "Maturity Date"), subject to extension in certain circumstances
at the option of the March 2019 Note holder.
Subject to a 4.99%
beneficial ownership limitation (which may be increased to 9.99%) and an additional 19.9% limitation (collectively with the June
2018 and December 2018 transactions) under the rules and regulations of the principal market until shareholder approval is obtained
(collectively, the "Conversion Limitations"), the holders of the March 2019 Notes are entitled, at any time at their
option, to convert all, or any portion, of the outstanding and unpaid principal, accrued and unpaid interest and fees on the March
2019 Notes into fully paid, nonassessable shares of our common stock. Subject to the Conversion Limitations, each March 2019 Note
may be converted, at the option of the holder thereof, at the fixed price of $66.80 per share, subject to adjustment as described
below or, alternatively, at a variable price calculated by dividing (x) such portion of the principal, accrued and unpaid interest
and fees subject to conversion by (y) the greater of (i) $0.31, and (ii) the lower of the Conversion Price and 85% (subject to
downward adjustment in the case of conversion upon an event of default or bankruptcy) of the lowest volume-weighted average price
per share during the ten consecutive trading days prior to conversion as described more fully below.
Conversion of the March
2019 Notes and exercise of the March 2019 Warrants (defined and described below) would have a potentially dilutive effect to our
existing shareholders for two primary reasons: (i) conversion or exercise would result in the issuance of additional shares of
our common stock thereby reducing the percentage ownership interest of all of our current shareholders; and (ii) conversion or
exercise at a price lower than the price at which our common stock is trading increases the number of shares we will issue and
creates downward pressure on our stock price and value.
Amounts due and owing
under the March 2019 Notes are convertible into shares of our common stock at an initial conversion price of $66.80 (the "initial
conversion price"). The March 2019 Notes contain anti-dilution protection provisions for the lenders whereby the initial
conversion price will be adjusted downward upon the occurrence of any one of more of the following events if such events are for
a consideration per share lower than $66.80 (however, the conversion price of the March 2019 Notes may never be lower than $0.31
per share (the "floor price")):
1.
Issuance of shares of our common stock;
77
2.
Issuance of options to purchase shares of our common stock;
3.
Issuance of convertible securities;
4.
Change in existing option price or rate of conversion;
5.
A subdivision or combination of our common stock (such as a stock split, stock dividend, stock combination, recapitalization,
or similar transaction);
6.
Issuance of variable price securities;
7.
Any other event which would have a dilutive effect on the March 2019 Notes; and
8.
A voluntary adjustment of the initial conversion price by us with the consent of the March 2019 Note holders.
Due to the floor price,
we calculate the maximum number of shares of common stock issuable under the March 2019 Notes to be 383,065 shares if all amounts
under the March 2019 Notes are converted and 71,023 shares if all warrants are exercised for a total of 454,088 shares.
The March 2019 Notes
are also convertible pursuant to alternate conversion features in the event of the following:
1.
In the event of either a bankruptcy or failure to pay any amounts due under the agreements, the March 2019 Notes are convertible
at an alternate conversion price of the greater of (x) $0.31 and (y) the lower of (i) the conversion price then in effect, and
(ii) 75% of the lowest volume-weighted average price per share of our common stock during the ten consecutive trading day period;
2.
In the event of a default under the agreements (other than a bankruptcy or failure to pay as described above), the March 2019
Notes are convertible at an alternate conversion price of the greater of (x) $0.31 and (y) the lower of (i) the conversion price
then in effect, and (ii) 80% of the lowest volume-weighted average price per share of our common stock during the ten consecutive
trading day period; and
3.
At any time, at the option of the holder, the March 2019 Notes are convertible at an alternate conversion price of the greater
of (x) $0.31 and (y) the lower of (i) the conversion price then in effect, and (ii) 85% of the lowest volume-weighted average price
per share of our common stock during the ten consecutive trading day period.
We have the right to
redeem the full amount of unpaid principal, accrued and unpaid interest and any fees on the March 2019 Notes at any time upon notice
to the holders of the March 2019 Notes at a price that is equal to the greater of (i) 100% of the amount of unpaid principal, accrued
and unpaid interest and fees on the March 2019 Note then outstanding during the 45 day calendar period commencing on the issuance
date and thereafter at 115% of the amount of unpaid principal, accrued and unpaid interest and fees on the March 2019 Notes then
outstanding and (ii) the product of (x) the aggregate number of shares then issuable upon conversion of such portion of the March
2019 Notes subject to redemption multiplied by (y) the greatest closing sale price of our common stock on any trading day during
the period commencing on the date immediately preceding our notice of optional redemption and ending on the trading day immediately
prior to the date we make the entire redemption payment.
Warrants to purchase
up to an aggregate of 74,390 shares of common stock
. In connection with the issuance of the March 2019 Notes, we issued a total
of 74,390 March 2019 Warrants, consisting of 71,024 warrants issued to investors and 3,366 warrants issued to the placement agent.
The 71,024 March 2019 Warrants issued to investors (a) have an initial exercise price of $40.00 per share (subject to adjustment
as set forth therein), (b) are exercisable at any time between March 12, 2019 and on or prior to March 12, 2024, (c) contain certain
ownership limitations that may restrict their exercise and (d) are exercisable on a cashless basis if at the time of exercise there
is no effective registration statement registering, or the prospectus contained therein is not available for, the resale of shares
of common stock for which the March 2019 Warrants are exercisable. The 3,366 March 2019 Warrants issued to the placement agent
have an exercise price of $70.00 per share. The Registration Statement on Form S-3 for the described securities did not register
the offer or sale of any of the March 2019 Warrants.
Registration Statement
on Form S-3 for the March 2019 securities
. On April 2, 2019, we filed a Registration Statement on Form S-3, amended on April
29, 2019 (the "April Registration Statement") for the resale, from time to time, by certain selling shareholders of
up to 910,305 shares of our common stock, 766,129 shares of which are issuable upon the repayment and/or conversion of the March
2019 Notes and 144,176 shares of which are issuable upon exercise of the March 2019 Warrants. The April Registration Statement
was declared effective on May 22, 2019, and as of the date of this prospectus, 98,514 shares of our common stock have been issued
and sold following conversion and/or amortization under the April Registration Statement.
78
The 2019 and 2020 Exchange and Settlement
Transactions
December 2019 Exchange
.
In December 2019, we exchanged $2,445,000 of the March 2019 Notes and $222,000 of the June 2018 Notes for $2,933,944 of the June
2018 Exchange Notes. The December Exchange 2019 Notes (a) have a fixed conversion price of $12.20 per share for $293,000 of the
note principal until January 31, 2020, (b) have a fixed conversion price of $40.00 per share for all note principal remaining after
January 31, 2020, (c) have amortization of 12.5% of the note principal balance as of February 1, 2020 each quarter beginning on
April 1, 2020, with payments to be made in cash or in shares of common stock at the fixed conversion price and (d) may be converted
at a default conversion price of a 15% discount to the volume-weighted average price, subject to a minimum conversion price of
$1.84 per share, in the event we do not make an amortization payment. In addition, in connection with this exchange, the investor
who received the December 2019 Exchange Notes also had its March 2019 Warrants amended to fix the exercise price at $40.00 per
share.
January 2020 Settlements
.
In January 2020, we paid approximately $2,600,000 and converted or issued 148,804 shares of common stock to certain investors to
repay all of our outstanding June 2018 Notes and December 2018 Notes. We also fully settled with two investors, which included
the cancellation of their March 2019 Warrants.
March 2020 Settlements.
In March 2020, we (i) further amended the December 2019 Exchange Notes to fix the conversion price at $9.20 per share of common
stock (ii) exchanged $772,000 of the March 2019 Notes with full-ratchet anti-dilution price protection for $997,000 of amended
March 2019 Notes with a fixed conversion price at $9.20 per share of common stock and (iii) amended, cancelled or had holders exercise
for shares of common stock via cashless exercise all March 2019 Warrants which previously included full-ratchet anti-dilution price
protection and issued new warrants to purchase 423,669 shares of common stock at an exercise price of $10.17 per share.
As of July 24, 2020,
there were no convertible notes outstanding, no warrants with full-ratchet anti-dilution protection outstanding and 6,276 June
2018 Warrants outstanding with price protection anti-dilution provisions.
The May 2020 Public Offering
On May 20, 2020,
we entered into an underwriting agreement with A.G.P., in connection with the May 2020 Public Offering of an aggregate of (i)
1,898,850 shares of common stock, (ii) pre-funded warrants to purchase 323,310 shares of common stock and (iii) warrants to
purchase 1,277,580 shares of common stock, which included the partial exercise of A.G.P.'s over-allotment option to
purchase 166,500 additional warrants. The May 2020 Public Offering closed on May 26, 2020 and we received net proceeds of
approximately $10.9 million after deducting underwriting discounts and commissions and estimated expenses payable by us
associated with the May 2020 Public Offering. On June 11, 2020 and July 7, 2020, we closed partial over-allotment options
exercised by A.G.P. to purchase 250,340 additional shares of common stock resulting in net proceeds of an aggregate of
approximately $1.25 million after deducting underwriting discounts and commissions and estimated expenses payable by us.
2017 Stock Option and Share Issuance
Plan
In March 2017, we adopted
the 2017 Plan. The 2017 Plan provides incentives to eligible employees, officers, directors and consultants in the form of incentive
stock options, non-qualified stock options and stock. We have reserved, subject to shareholder approval, a total of 3,000,000 shares
of common stock for issuance under the 2017 Plan. Of these shares, approximately 43,415 shares have been designated by our board
of directors for issuance through July 24, 2020. Approximately 38,000 of the options have been forfeited and returned to the option
pool under the 2017 Plan as a consequence of employment terminations. Unless the Plan Administrator under the 2017 Plan determines
otherwise, each option is immediately exercisable and the shares subject to such option will vest pursuant to each grant notice.
On July 1, 2020, our
board of directors unanimously approved an increase in the number of shares of common stock issuable under our 2017 Plan from 250,000
to 3,000,000, subject to approval by a majority of our shareholders no later than the next regularly scheduled annual shareholders
meeting. Also on July 1, 2020, our board of directors approved the award, primarily to current employees, and subject to shareholder
approval no later than the next regularly scheduled annual meeting, of grants of options to purchase 1,235,159 shares of our common
stock at an exercise price of $5.40 per share, which was the closing price of our common stock as reported by Nasdaq at the close
of trading on the day of our board of directors' action. Of the options awarded, 995,000 are designated as "incentive
stock options", and 280,159 are designated as "non-qualifying" or "non-statutory" options under the
Code. These options have a 10-year life, and will vest over a period of time as follows: 25% vest after a 12-month service period
following the award, and the balance vest in equal quarterly installments over the next 12 quarters of service.
79
Certain Anti-Takeover Effects
Certain provisions
of Wyoming law may have an anti-takeover effect and may delay or prevent a tender offer or other acquisition transaction that a
shareholder might consider to be in his or her best interest. The summary of the provisions of Wyoming law set forth below does
not purport to be complete and is qualified in its entirety by reference to Wyoming law.
The issuance of shares
of preferred stock, the issuance of rights to purchase such shares, and the imposition of certain other adverse effects on any
party contemplating a takeover could be used to discourage an unsolicited acquisition proposal. For instance, the issuance of the
preferred stock, if the option to acquire such shares is exercised, would impede a business combination by the voting rights that
would enable a holder to block such a transaction. In addition, under certain circumstances, the issuance of other preferred stock
could adversely affect the voting power of holders of our common stock.
Under Wyoming law,
a director, in determining what he reasonably believes to be in or not opposed to the best interests of the corporation, does not
need to consider only the interests of the corporation's shareholders in any matter but may also, in his discretion, consider
any of the following:
(i)
The interests of the corporation's employees, suppliers, creditors and customers;
(ii)
The economy of the state and nation;
(iii)
The impact of any action upon the communities in or near which the corporation's facilities or operations are located;
(iv)
The long-term interests of the corporation and its shareholders, including the possibility that those interests may be best
served by the continued independence of the corporation; and
(v)
Any other factors relevant to promoting or preserving public or community interests.
The Preferred Options to acquire 11,925,520 shares of preferred
stock will, if exercised and converted into shares of our common stock, deter a takeover.
Because our board of
directors is not required to make any determination on matters affecting potential takeovers solely based on its judgment as to
the best interests of our shareholders, our board of directors could act in a manner that would discourage an acquisition attempt
or other transaction that some, or a majority, of our shareholders might believe to be in their best interests or in which such
shareholders might receive a premium for their stock over the then market price of such stock. Our board of directors presently
does not intend to seek shareholder approval prior to the issuance of currently authorized stock, unless otherwise required by
law or applicable stock exchange rules.
80
MATERIAL U.S.
FEDERAL INCOME TAX CONSEQUENCES
The
following summary describes the material U.S. federal income tax consequences of the acquisition, ownership and disposition of
our common stock and the acquisition, ownership, exercise, expiration or disposition of warrants acquired in this offering by Non-U.S.
Holders (as defined below). This discussion does not address all aspects of U.S. federal income taxes, does not discuss the potential
application of the alternative minimum tax or Medicare Contribution tax and does not discuss state or local taxes, U.S. federal
gift and estate tax laws, or any non-U.S. tax consequences that may be relevant to Non-U.S. Holders in light of their particular
circumstances.
Special
rules different from those described below may apply to certain Non-U.S. Holders that are subject to special treatment under the
Code, such as:
·
insurance companies, banks and other financial institutions;
·
tax-exempt organizations (including private foundations) and tax-qualified retirement plans;
·
foreign governments and international organizations;
·
broker-dealers and traders in securities;
·
U.S. expatriates and certain former citizens or long-term residents of the United States;
·
persons that own, or are deemed to own, more than 5% of our capital stock;
·
"controlled foreign corporations," "passive foreign investment companies"
and corporations that accumulate earnings to avoid U.S. federal income tax;
·
persons that hold our common stock or warrants as part of a "straddle," "hedge,"
"conversion transaction," "synthetic security" or integrated investment or other risk reduction strategy;
·
persons who do not hold our common stock or warrants as a capital asset within the meaning of Section
1221 of the Code (generally, for investment purposes); and
·
partnerships and other pass-through entities, and investors in such pass-through entities (regardless
of their places of organization or formation).
Such
Non-U.S. Holders are urged to consult their own tax advisors to determine the U.S. federal, state, local and other tax consequences
that may be relevant to them.
Furthermore,
the discussion below is based upon the provisions of the Code, and United States Treasury Regulations, IRS rulings and judicial
decisions thereunder as of the date hereof, and such authorities may be repealed, revoked or modified, possibly retroactively,
and are subject to differing interpretations which could result in U.S. federal income tax consequences different from those discussed
below. We have not requested a ruling from the Internal Revenue Service, or IRS, with respect to the statements made and the conclusions
reached in the following summary, and there can be no assurance that the IRS will agree with such statements and conclusions or
will not take a contrary position regarding the tax consequences described herein, or that any such contrary position would not
be sustained by a court.
Finally,
the discussion below assumes that the pre-funded warrants are characterized for U.S. federal income tax purposes in accordance
with their form as warrants to acquire our common stock. Given the terms of the pre-funded warrants, it is possible that the IRS
could successfully assert that the pre-funded warrants in substance represent direct ownership of our common stock prior to exercise.
Under this treatment, a Non-U.S. Holder of a pre-funded warrant could be subject to the tax consequences described below that are
applicable to a holder of our common stock, including under the heading "Distributions."
Persons considering the
acquisition of a pre-funded warrant are encouraged to consult their own tax advisors concerning the tax characterization of the
pre-funded warrants and the consequences of acquiring, owning or disposing of a pre-funded warrant.
PERSONS
CONSIDERING THE PURCHASE OF OUR COMMON STOCK OR WARRANTS PURSUANT TO THIS OFFERING SHOULD CONSULT THEIR OWN TAX ADVISORS
CONCERNING THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF ACQUIRING, OWNING AND DISPOSING OF OUR COMMON STOCK OR WARRANTS IN
LIGHT OF THEIR PARTICULAR SITUATIONS AS WELL AS ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY OTHER TAXING JURISDICTION,
INCLUDING ANY STATE, LOCAL OR NON-U.S. TAX CONSEQUENCES OR ANY U.S. FEDERAL NON-INCOME TAX CONSEQUENCES, AND THE POSSIBLE
APPLICATION OF TAX TREATIES.
81
For
the purposes of this discussion, a "Non-U.S. Holder" is, for U.S. federal income tax purposes, a beneficial owner of
common stock or warrants that is not a U.S. Holder or a partnership for U.S. federal income tax purposes. A "U.S. Holder"
means a beneficial owner of our common stock or warrants that is for U.S. federal income tax purposes (a) an individual citizen
or resident of the United States, (b) a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes),
created or organized in or under the laws of the United States, any state thereof or the District of Columbia, (c) an estate the
income of which is subject to U.S. federal income taxation regardless of its source, or (d) a trust if it (1) is subject to the
primary supervision of a court within the United States and one or more U.S. persons (within the meaning of Section 7701(a)(30)
of the Code) have the authority to control all substantial decisions of the trust or (2) has a valid election in effect under applicable
U.S. Treasury regulations to be treated as a U.S. person.
If
you are an individual non-U.S. citizen, you may, in some cases, under a "look-back" rule, be deemed to be a resident
alien (as opposed to a nonresident alien) by virtue of being present in the United States for at least 31 days in the calendar
year and for an aggregate of at least 183 days during a three-year period ending in the current calendar year. Generally, for this
purpose, all the days present in the current year, one-third of the days present in the immediately preceding year, and one-sixth
of the days present in the second preceding year, are counted.
Resident
aliens are generally subject to U.S. federal income tax as if they were U.S. citizens. Individuals who are uncertain of their status
as resident or nonresident aliens for U.S. federal income tax purposes are urged to consult their own tax advisors regarding the
U.S. federal income tax consequences of the ownership or disposition of our common stock or warrants.
Exercise
of Warrants
In
general, a Non-U.S. Holder will not recognize gain or loss for U.S. federal income tax purposes upon exercise of a warrant, except
to the extent the Non-U.S. Holder receives a cash payment for any such fractional share that would otherwise have been issuable
upon exercise of the warrant, which will be treated as a sale subject to the rules described under "Gain on Disposition of
Our Common Stock" below. The Non-U.S. Holder will take a tax basis in the shares acquired on the exercise of a warrant equal
to the exercise price of the warrant. The Non-U.S. Holder's holding period in the shares of our common stock acquired on
exercise of the warrant will begin on the date of exercise of the warrant, and will not include any period for which the Non-U.S.
Holder held the warrant.
Expiration
of Warrants
Expiration
of warrants will be treated as if the Non-U.S. Holder sold or exchanged the warrant and recognized a capital loss equal to the
Non-U.S. Holder's tax basis in the warrant. However, a Non-U.S. Holder will not be able to utilize a loss recognized upon
expiration of a warrant against the Non-U.S. Holder's U.S. federal income tax liability unless the loss is effectively connected
with the Non-U.S. Holder's conduct of a trade or business within the United States (and, if an income tax treaty applies,
is attributable to a permanent establishment in the United States) or is treated as a U.S.-source loss and the Non-U.S. Holder
is present 183 days or more in the taxable year of disposition and certain other conditions are met.
Certain
Adjustments to the Warrants
Under
Section 305 of the Code, an adjustment to the number of shares of common stock that will be issued on the exercise of the warrants,
or an adjustment to the exercise price of the warrants, may be treated as a constructive distribution to a Non-U.S. Holder of the
warrants if, and to the extent that, such adjustment has the effect of increasing such Non-U.S. Holder's proportionate interest
in our "earnings and profits" or assets, depending on the circumstances of such adjustment (for example, if such adjustment
is to compensate for a distribution of cash or other property to our shareholders). Adjustments to the exercise price of warrants
made pursuant to a
bona fide
reasonable adjustment formula that has the effect of preventing dilution of the interest of
the holders of the warrants generally should not be considered to result in a constructive distribution. Such constructive distribution
would be treated as a dividend, return of capital or capital gain as described under the heading "Distributions" below.
Any such constructive distribution would be taxable whether or not there is an actual distribution of cash or other property.
In
addition, regulations governing "dividend equivalents" under Section 871(m) of the Code should apply to the pre-funded
warrants. Under those regulations, an implicit or explicit payment under the pre-funded warrants that references a dividend distribution
on our common stock (including an adjustment to the amount due on the pre-funded warrant to take into account a dividend distribution
on our common stock) would be taxable to a Non-U.S. Holder as described under the heading "Distributions" below. Such
dividend equivalent amount would be taxable and subject to withholding whether or not there is actual payment of cash or other
property. Non-U.S. holders are encouraged to consult their own tax advisors regarding the application of Section 871(m) to the
pre-funded warrants.
On
April 12, 2016, the IRS issued proposed regulations addressing the amount and timing of deemed distributions, obligations of
withholding agents and filing and notice obligations of issuers. If adopted as proposed, the regulations would generally
provide that (i) the amount of a deemed distribution is the excess of the fair market value of a warrant immediately after
the number-of-shares or exercise-price adjustment over the fair market value of the warrant without the adjustment, (ii) the
deemed distribution occurs at the earlier of the date the adjustment occurs under the terms of the warrant and the date of
the actual distribution of cash or property that results in the deemed distribution, (iii) subject to certain limited
exceptions, a withholding agent is required to impose any applicable withholding on deemed distributions to a Non-U.S. Holder
and, if there is no associated cash payment, may set off its withholding obligations against other payments to or funds of
such holder and (iv) we are required to report the amount of any deemed distributions on our website or to the IRS and all
holders of warrants (including holders of warrants that would otherwise be exempt from reporting). The final regulations will
be effective for deemed distributions occurring on or after the date of adoption, but holders of warrants and withholding
agents may rely on them prior to that date under certain circumstances.
82
Distributions
We
do not expect to make any distributions on our common stock in the foreseeable future. If we do make distributions on our common
stock, however, such distributions made to a Non-U.S. Holder of our common stock (including constructive distributions or dividend
equivalents deemed paid) will constitute dividends for U.S. tax purposes to the extent paid out of our current or accumulated earnings
and profits (as determined under U.S. federal income tax principles). Distributions in excess of our current and accumulated earnings
and profits will constitute a return of capital that is applied against and reduces, but not below zero, a Non-U.S. Holder's
adjusted tax basis in our common stock. Any remaining excess will be treated as gain realized on the sale or exchange of our common
stock as described below under the section titled "Gain on Disposition of Our Common Stock or Warrants."
Any
distribution on our common stock that is treated as a dividend paid to a Non-U.S. Holder (including constructive distributions
or dividend equivalents deemed paid) that is not effectively connected with the holder's conduct of a trade or business in
the United States will generally be subject to withholding tax at a 30% rate or such lower rate as may be specified by an applicable
income tax treaty between the United States and the Non-U.S. Holder's country of residence. To obtain a reduced rate of withholding
under a treaty, a Non-U.S. Holder generally will be required to provide the applicable withholding agent with a properly executed
IRS Form W-8BEN, IRS Form W-8BEN-E or other appropriate form, certifying the Non-U.S. Holder's entitlement to benefits under
that treaty. Such form must be provided prior to the payment of dividends and must be updated periodically. If a Non-U.S. Holder
holds stock through a financial institution or other agent acting on the holder's behalf, the holder will be required to
provide appropriate documentation to such agent. The holder's agent may then be required to provide certification to the
applicable withholding agent, either directly or through other intermediaries. If you are eligible for a reduced rate of U.S. withholding
tax under an income tax treaty, you should consult with your own tax advisor to determine if you are able to obtain a refund or
credit of any excess amounts withheld by timely filing an appropriate claim for a refund with the IRS.
We
generally are not required to withhold tax on dividends paid (or constructive dividends or dividend equivalents deemed paid) to
a Non-U.S. Holder that are effectively connected with the holder's conduct of a trade or business within the United States
(and, if required by an applicable income tax treaty, are attributable to a permanent establishment that the holder maintains in
the United States) if a properly executed IRS Form W-8ECI, stating that the dividends are so connected, is furnished to us (or,
if stock is held through a financial institution or other agent, to the applicable withholding agent). In general, such effectively
connected dividends will be subject to U.S. federal income tax on a net income basis at the regular graduated rates applicable
to U.S. persons. A corporate Non-U.S. Holder receiving effectively connected dividends may also be subject to an additional "branch
profits tax," which is imposed, under certain circumstances, at a rate of 30% (or such lower rate as may be specified by
an applicable treaty) on the corporate Non-U.S. Holder's effectively connected earnings and profits, subject to certain adjustments.
See
also the section below titled "Foreign Accounts" for additional withholding rules that may apply to dividends paid
to certain foreign financial institutions or non-financial foreign entities.
Gain
on Disposition of Our Common Stock or Warrants
Subject
to the discussions below under the sections titled "Backup Withholding and Information Reporting" and "Foreign
Accounts," a Non-U.S. Holder generally will not be subject to U.S. federal income or withholding tax with respect to gain
realized on a sale or other disposition of our common stock or warrants unless (a) the gain is effectively connected with a trade
or business of the holder in the United States (and, if required by an applicable income tax treaty, is attributable to a permanent
establishment that the holder maintains in the United States), (b) the Non-U.S. Holder is a nonresident alien individual and is
present in the United States for 183 or more days in the taxable year of the disposition and certain other conditions are met,
or (c) we are or have been a "United States real property holding corporation" within the meaning of Code Section 897(c)(2)
at any time within the shorter of the five-year period preceding such disposition or the holder's holding period in the common
stock or warrants.
If
you are a Non-U.S. Holder described in (a) above, you will be required to pay tax on the net gain derived from the sale at
the regular graduated U.S. federal income tax rates applicable to U.S. persons. Corporate Non-U.S. Holders described in (a)
above may also be subject to the additional branch profits tax at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty. If you are an individual Non-U.S. Holder described in (b) above, you will be required to pay a
flat 30% tax on the gain derived from the sale, which gain may be offset by U.S. source capital losses (even though you are
not considered a resident of the United States), provided you have timely filed.
83
U.S. Federal
Income Tax Returns with Respect to Such Losses
With
respect to (c) above, in general, we would be a United States real property holding corporation if U.S. real property interests
as defined in the Code and the Treasury Regulations comprised (by fair market value) at least half of our assets. We believe that
we are not, and do not anticipate becoming, a United States real property holding corporation. However, there can be no assurance
that we will not become a United States real property holding corporation in the future. Even if we are treated as a U.S. real
property holding corporation, gain realized by a Non-U.S. Holder on a disposition of our common stock or warrants will not be subject
to U.S. federal income tax so long as (1) the Non-U.S. Holder owned, directly, indirectly or constructively, no more than five
percent of our common stock at all times within the shorter of (i) the five-year period preceding the disposition or (ii) the holder's
holding period and (2) our common stock is regularly traded on an established securities market. There can be no assurance that
our common stock will qualify as regularly traded on an established securities market.
See
the section titled "Foreign Accounts" for additional information regarding withholding rules that may apply to proceeds
of a disposition of our common stock or warrants paid to foreign financial institutions or non-financial foreign entities.
Backup
Withholding and Information Reporting
Generally,
we or certain financial middlemen must report information to the IRS with respect to any dividends we pay on our common stock including
the amount of any such dividends (including constructive distributions or dividend equivalents deemed paid), the name and address
of the recipient, and the amount, if any, of tax withheld. A similar report is sent to the holder to whom any such dividends are
paid. Pursuant to tax treaties or certain other agreements, the IRS may make its reports available to tax authorities in the recipient's
country of residence.
Dividends
paid by us (or our paying agents) to a Non-U.S. Holder (including constructive distributions or dividend equivalents deemed paid)
may also be subject to U.S. backup withholding. U.S. backup withholding generally will not apply to a Non-U.S. Holder who provides
a properly executed IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable, or otherwise establishes an exemption, provided that the
applicable withholding agent does not have actual knowledge or reason to know the holder is a U.S. person.
Under
current U.S. federal income tax law, U.S. information reporting and backup withholding requirements generally will apply to the
proceeds of a disposition of our common stock or warrants effected by or through a U.S. office of any broker, U.S. or non-U.S.,
unless the Non-U.S. Holder provides a properly executed IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable, or otherwise meets
documentary evidence requirements for establishing non-U.S. person status or otherwise establishes an exemption. Generally, U.S.
information reporting and backup withholding requirements will not apply to a payment of disposition proceeds to a Non-U.S. Holder
where the transaction is effected outside the United States through a non-U.S. office of a non-U.S. broker. Information reporting
and backup withholding requirements may, however, apply to a payment of disposition proceeds if the broker has actual knowledge,
or reason to know, that the holder is, in fact, a U.S. person. For information reporting purposes, certain brokers with substantial
U.S. ownership or operations will generally be treated in a manner similar to U.S. brokers.
Backup
withholding is not an additional tax. If backup withholding is applied to you, you should consult with your own tax advisor to
determine whether you have overpaid your U.S. federal income tax, and whether you are able to obtain a tax refund or credit of
the overpaid amount.
Foreign
Accounts
In
addition, U.S. federal withholding taxes may apply under the Foreign Account Tax Compliance Act ("FATCA"), on
certain types of payments, including dividends, constructive dividends or dividend equivalents deemed paid and, on or after
January 1, 2019, the gross proceeds of a disposition of our common stock or warrants, paid to non-U.S. financial institutions
and certain other non-U.S. entities. Specifically, a 30% withholding tax may be imposed on dividends (including constructive
dividends and dividend equivalents), on or after January 1, 2019, gross proceeds from the sale or other disposition of, our
common stock or warrants paid to a "foreign financial institution" or a "non-financial foreign
entity" (each as defined in the Code), unless (1) the foreign financial institution agrees to undertake certain
diligence and reporting obligations, (2) the non-financial foreign entity either certifies it does not have any
"substantial United States owners" (as defined in the Code) or furnishes identifying information regarding each
substantial United States owner, or (3) the foreign financial institution or non-financial foreign entity otherwise qualifies
for an exemption from these rules. The 30% federal withholding tax described in this paragraph cannot be reduced under an
income tax treaty with the United States. If the payee is a foreign financial institution and is subject to the diligence and
reporting requirements in (1) above, it must enter into an agreement with the U.S. Department of the Treasury requiring,
among other things, that it undertake to identify accounts held by certain "specified United States persons" or
"United States-owned foreign entities" (each as defined in the Code), annually report certain information about
such accounts, and withhold 30% on certain payments to non-compliant foreign financial institutions and certain other account
holders. Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United
States governing FATCA may be subject to different rules.
84
Prospective
investors should consult their tax advisors regarding the potential application of withholding under FATCA to their investment
in our common stock or warrants.
EACH
PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE TAX CONSEQUENCES OF PURCHASING, HOLDING AND DISPOSING OF
OUR COMMON STOCK OR WARRANTS, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLE LAW, AS WELL AS TAX CONSEQUENCES
ARISING UNDER ANY STATE, LOCAL, NON-U.S. OR U.S. FEDERAL NON-INCOME TAX LAWS SUCH AS ESTATE AND GIFT TAX.
85
UNDERWRITING
We have entered into
an underwriting agreement dated                 with A.G.P., as underwriter, with respect to the securities being offered hereby. Subject to
the terms and conditions of the underwriting agreement, we have agreed to sell to the underwriter and the underwriter has agreed
to purchase from us, at the public offering price less the underwriting discounts and commissions set forth on the cover page of
this prospectus, shares of our common stock, purchase warrants and pre-funded warrants.
Pursuant to the terms
and subject to the conditions contained in the underwriting agreement, we have agreed to sell to the underwriter named below, and
the underwriter has agreed to purchase from us, the respective number of shares of common stock, purchase warrants and pre-funded
warrants set forth opposite its name below:
Underwriter
Number of
Shares
Number of
Pre-Funded
Warrants
Number of
Purchase
Warrants
Total
A.G.P./Alliance Global Partners
Total
The
underwriting agreement provides that the obligation of the underwriter to purchase the shares of common stock, purchase warrants
and pre-funded warrants offered by this prospectus is subject to certain conditions. The
underwriter is
obligated
to purchase all of the shares of common stock, purchase warrants and pre-funded warrants offered hereby if any of the shares, purchase
warrants or pre-funded
warrants
are purchased.
Underwriting
Discounts, Commissions and Expenses
We have agreed to sell
the securities to the underwriter at the offering price of $                per share of common stock and purchase warrant or $                per pre-funded
warrant and purchase warrant, as applicable, which represents the offering price of such securities set forth on the cover page
of this prospectus, less the applicable 7.0% underwriting discount.
The underwriter has
advised us that they propose to offer the shares of common stock, purchase warrants and the pre-funded warrants at the public offering
price set forth on the cover page of this prospectus and to certain dealers at that price less a concession not in excess of $
per share of common stock, the purchase warrant and pre-funded warrant. The underwriter may allow, and certain dealers may reallow,
a discount from the concession not in excess of $                  per share of common stock, the purchase warrant and the pre-funded warrant to
certain brokers and dealers. After this offering, the public offering price, concession and reallowance to dealers may be changed
by the representative. No such change shall change the amount of proceeds to be received by us as set forth on the cover page of
this prospectus. The shares of common stock, the purchase warrants and the pre-funded warrants are offered by the underwriter as
stated herein, subject to receipt and acceptance by them and subject to its right to reject any order in whole or in part. The
underwriter has informed us that it does not intend to confirm sales to any accounts over which they exercise discretionary authority.
We have also agreed to reimburse the underwriter for accountable
legal expenses not to exceed $100,000 and non-accountable expenses not to exceed 1% of the aggregate gross proceeds of this offering.
We estimate that expenses payable by us in connection with this offering, including reimbursement of the underwriter's out-of-pocket
expenses, but excluding the underwriting discount referred to above, will be approximately $              .
The following table
shows the underwriting discounts and commissions payable to the underwriter by us in connection with this offering (assuming both
the exercise and non-exercise of the over-allotment option to purchase additional shares of common stock and/or purchase warrants
we have granted to the underwriter):
Per Share
and accompanying
Purchase
Warrant
Per Pre-Funded Warrant
and
accompanying
Purchase Warrant
Total Without
Over-
Allotment
Total With
Over-
Allotment
Public offering price
Underwriting discounts and commissions (7%)
Proceeds, before expenses, to us
86
Over-allotment
Option
Pursuant
to the underwriting agreement, we have granted the underwriter an option, exercisable for up to 45 days from the date of this prospectus,
to purchase up to                             additional shares of common stock and/or additional purchase warrants to purchase up to                           shares of
common stock at the public offering price set forth on the cover page hereto, less the underwriting discounts and commissions
.
The underwriter may exercise the option solely to cover over-allotments, if any, made in connection with this offering.
If
any additional shares of common stock and/or purchase warrants are purchased pursuant to the over-allotment option, the underwriters
will offer these shares of common stock and/or purchase warrants on the same terms as those on which the other securities are being
offered.
Underwriter Warrants
Upon
closing of this offering, we will issue to A.G.P. a compensation warrant entitling A.G.P. or its designees to purchase up to shares
of our common stock (equal to up to 5% of the aggregate number of the shares of common stock and common stock issuable upon exercise
of the pre-funded warrants that we issue in this offering), subject to any reductions necessary to comply with the rules and regulations
of the Financial Industry Regulatory Authority, Inc., or FINRA. This warrant will be exercisable at any time and from time to time,
in whole or in part, during the five-year period commencing six months from the effective date of the registration statement of
which this prospectus forms a part. The warrant will provide for registration rights for the shares underlying the warrant, pursuant
to FINRA Rule 5110(f)(2)G), including a one-time demand registration right and piggyback rights for period of not more than five
years and seven years, respectively, as well as contain customary anti-dilution provisions. Pursuant to FINRA Rule 5110(g),
the underwriter warrants and any shares issued upon exercise of the underwriter warrants shall not be sold, transferred, assigned,
pledged, or hypothecated, or be the subject of any hedging, short sale, derivative, put or call transaction that would result in
the effective economic disposition of the securities by any person for a period of 180 days immediately following the date of effectiveness
or commencement of sales of this offering, except the transfer of any security: (i) by operation of law or by reason of our reorganization;
(ii) to any FINRA member firm participating in the offering and the officers or partners thereof, if all securities so transferred
remain subject to the lock-up restriction set forth above for the remainder of the time period; (iii) if the aggregate amount of
our securities held by the underwriter or related persons do not exceed 1% of the securities being offered; (iv) that is beneficially
owned on a pro rata basis by all equity owners of an investment fund, provided that no participating member manages or otherwise
directs investments by the fund and the participating members in the aggregate do not own more than 10% of the equity in the fund;
or (v) the exercise or conversion of any security, if all securities remain subject to the lock-up restriction set forth above
for the remainder of the time period.
Indemnification
We have agreed to indemnify
the underwriter against certain liabilities, including liabilities under the Securities Act and liabilities arising from breaches
of representations and warranties contained in the underwriting agreement, or to contribute to payments that the underwriter may
be required to make in respect of those liabilities.
Lock-up Agreements
In connection with
this offering, we, along with our directors and executive officers have agreed with the underwriter that for a 90-day "lock-up"
period, commencing from the date of this prospectus, subject to specified exceptions, without the prior written consent of the
underwriter, we and they will not offer, sell, pledge or otherwise dispose of these securities without the prior written consent
of the underwriter.
Price Stabilization, Short Positions
and Penalty Bids
The underwriter has
advised us that it does not intend to conduct any stabilization or over-allotment activities in connection with this offering.
Passive Market Making
In connection
with this offering, the underwriter and any selling group members may engage in passive market making transactions in our
common stock on Nasdaq in accordance with Rule 103 of Regulation M under the Securities Exchange Act of 1934, as amended,
during a period before the commencement of offers or sales of common stock and extending through the completion of the
distribution. A passive market maker must display its bid at a price not in excess of the highest independent bid of that
security.
However, if all independent bids are lowered
below the passive market maker's bid that bid must then be lowered when specified purchase limits are exceeded.
87
Electronic Distribution
This prospectus in
electronic format may be made available on websites or through other online services maintained by the underwriter, or by its affiliates.
Other than this prospectus in electronic format, the information on the underwriter's website and any information contained
in any other website maintained by the underwriter is not part of this prospectus or the registration statement of which this prospectus
forms a part, has not been approved and/or endorsed by us or the underwriter in its capacity as underwriter, and should not be
relied upon by investors.
Other
From time to time,
the underwriter and/or its affiliates have provided, and may in the future provide, various investment banking and other financial
services for us for which services they have received and, may in the future receive, customary fees. In the course of their businesses,
the underwriter and its affiliates may actively trade our securities or loans for its own account or for the accounts of customers,
and, accordingly, the underwriter and its affiliates may at any time hold long or short positions in such securities or loans.
Except for services provided in connection with this offering, the underwriter has not provided any investment banking or other
financial services to us during the 180-day period preceding the date of this prospectus, and we do not expect to retain the underwriter
to perform any investment banking or other financial services for at least 90 days after the date of this prospectus.
Selling Restrictions
This prospectus does
not constitute an offer to sell to, or a solicitation of an offer to buy from, anyone in any country or jurisdiction (i) in which
such an offer or solicitation is not authorized, (ii) in which any person making such offer or solicitation is not qualified to
do so or (iii) in which any such offer or solicitation would otherwise be unlawful. No action has been taken that would, or is
intended to, permit a public offer of the securities or possession or distribution of this prospectus or any other offering or
publicity material relating to the securities in any country or jurisdiction (other than the United States) where any such action
for that purpose is required. Accordingly, the underwriter has undertaken that it will not, directly or indirectly, offer or sell
any securities or have in its possession, distribute or publish any prospectus, form of application, advertisement or other document
or information in any country or jurisdiction except under circumstances that will, to the best of its knowledge and belief, result
in compliance with any applicable laws and regulations and all offers and sales of securities by it will be made on the same terms.
European Economic Area
In relation to each
Member State of the European Economic Area which has implemented the Prospectus Directive (each, a "Relevant Member State")
an offer to the public of any securities may not be made in that Relevant Member State, except that an offer to the public in that
Relevant Member State of any securities may be made at any time under the following exemptions under the Prospectus Directive,
if they have been implemented in that Relevant Member State:
·
to legal entities which are qualified investors as defined under the Prospectus Directive;
·
by the underwriter to fewer than 150, natural or legal persons (other than qualified investors
as defined in the Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of
the representatives of the underwriter for any such offer; or
·
in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that
no such offer of our common stock shall result in a requirement for us or any underwriter to publish a prospectus pursuant to Article
3 of the Prospectus Directive.
For the purposes of
this provision, (1) the expression an "offer of common stock to the public" in relation to any common stock in any
Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer
and any securities to be offered so as to enable an investor to decide to purchase or subscribe for the common stock, as the same
may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State,
(2) the expression "Prospectus Directive" means Directive 2003/71/EC (and amendments thereto, including the 2010 PD
Amending Directive), and includes any relevant implementing measure in each Relevant Member State and (3) the expression "2010
PD Amending Directive" means Directive 2010/73/EU.
88
United Kingdom
This prospectus has
only been communicated or caused to have been communicated and will only be communicated or caused to be communicated as an invitation
or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act of 2000
(the "FSMA")) as received in connection with the issue or sale of the common stock in circumstances in which Section
21(1) of the FSMA does not apply to us. All applicable provisions of the FSMA will be complied with in respect to anything done
in relation to the common stock in, from or otherwise involving the United Kingdom.
Canada
The securities may
be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National
Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined
in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the securities
must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable
securities laws.
Securities legislation
in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus
(including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised
by the purchaser within the time limit prescribed by the securities legislation of the purchaser's province or territory.
The purchaser should refer to any applicable provisions of the securities legislation of the purchaser's province or territory
for particulars of these rights or consult with a legal advisor.
Pursuant
to section 3A.3 of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the
underwriter is
not
required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with
this offering.
Australia
No
placement document, prospectus, product disclosure statement or other disclosure document has been lodged with the Australian Securities
and Investments Commission in relation to the offering. This prospectus does not constitute a prospectus, product disclosure statement
or other disclosure document under the Corporations Act 2001, or the Corporations Act, and does not purport to include the information
required for a prospectus, product disclosure statement or other disclosure document under the Corporations Act.
Any
offer in Australia of the securities may only be made to persons, or the Exempt Investors, who are "sophisticated investors"
(within the meaning of section 708(8) of the Corporations Act), "professional investors" (within the meaning of section
708(11) of the Corporations Act) or otherwise pursuant to one or more exemptions contained in section 708 of the Corporations Act
so that it is lawful to offer the securities without disclosure to investors under Chapter 6D of the Corporations Act.
The
securities applied for by Exempt Investors in Australia must not be offered for sale in Australia in the period of 12 months after
the date of allotment under the offering, except in circumstances where disclosure to investors under Chapter 6D of the Corporations
Act would not be required pursuant to an exemption under section 708 of the Corporations Act or otherwise or where the offer is
pursuant to a disclosure document which complies with Chapter 6D of the Corporations Act. Any person acquiring securities must
observe such Australian on-sale restrictions.
This
prospectus contains general information only and does not take account of the investment objectives, financial situation or needs
of any particular person. It does not contain any securities recommendations or financial product advice. Before making an investment
decision, investors need to consider whether the information in this prospectus is appropriate to their needs, objectives and circumstances
and, if necessar
y, seek expert advice on those matters.
Switzerland
The securities may
not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange, or SIX, or on any other stock exchange
or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for i
ssuance
prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses
under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland.
Neither this document nor any other offering or marketing material relating to the securities or the offering may be publicly distributed
or otherwise made publicly available in Switzerland.
Neither
this document nor any other offering or marketing material relating to the offering, or the securities have been or will be
filed with or approved by any Swiss regulatory authority. This document will not be filed with, and the offer of securities
will not be supervised by, the Swiss Financial Market Supervisory Authority FINMA, and the offer of securities has not been
and will not be
authorized under the Swi
ss Federal Act on Collective Investment Schemes,
or CISA. The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not
extend to acquirers of securities.
89
Dubai International Financial Centre
This prospectus relates
to an Exempt Offer in accordance with the Offered Securities Rules of the Dubai Financial Services Authority, or DFSA. This prospectus
is intended for distribution only to persons of a type specified in the Offered Securities Rules of the DFSA. It must not be delivered
to, or relied on by, any other person. The DFSA has no responsibility for reviewing or verifying any documents relating to Exempt
Offers. The DFSA has not approved this prospectus nor taken steps to verify the information set forth herein and has no responsibility
for the prospectus. The securities to which this prospectus relates may be illiquid and/or subject to restrictions on their resale.
Prospective purchasers of the securities offered should conduct their own due diligence on the securities. If you do not understand
the contents of this prospectus, you should consult an authorized financial advisor.
Hong Kong
The securities have
not been offered or sold and will not be offered or sold in Hong Kong, by means of any document, other than (a) to "professional
investors" as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance
or (b) in other circumstances which do not result in the document being a "prospectus" as defined in the Companies
Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning of that Ordinance. No advertisement,
invitation or document relating to the securities has been or may be issued or has been or may be in the possession of any person
for the purposes of issue, whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed
or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect
to securities which are or are intended to be disposed of only to persons outside Hong Kong or only to "professional investors"
as defined in the Securities and Futures Ordinance and any rules made under that Ordinance.
Japan
The securities have
not been and will not be registered under the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948, as amended)
and, accordingly, will not be offered or sold, directly or indirectly, in Japan, or for the benefit of any Japanese Person or to
others for re-offering or resale, directly or indirectly, in Japan or to any Japanese Person, except in compliance with all applicable
laws, regulations and ministerial guidelines promulgated by relevant Japanese governmental or regulatory authorities in effect
at the relevant time. For the purposes of this paragraph, "Japanese Person" shall mean any person resident in Japan,
including any corporation or other entity organized under the laws of Japan.
90
LEGAL MATTERS
The
validity of the shares of common stock, purchase warrants and pre-funded warrants offered hereby will be passed upon for us by
Bailey, Stock, Harmon, Cottam, Lopez LLP. Certain other matters in connection with this offering will be passed upon for us by
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., New York, New York. Sullivan & Worcester LLP, New York, New York, has
acted as counsel for the
underwriter.
EXPERTS
Our consolidated financial
statements as of August 31, 2019 and 2018 and for the fiscal years then ended have been audited by Marcum LLP as set forth in their
report (which report includes an explanatory paragraph as to our ability to continue as a going concern). We have included our
consolidated financial statements in the prospectus and elsewhere in the registration statement in reliance on Marcum LLP's
report, given on the authority of such firm as experts in accounting and auditing.
91
WHERE YOU CAN FIND MORE INFORMATION
We have filed with
the SEC a registration statement on Form S-1 under the Securities Act with respect to the shares of our common stock, purchase
warrants and pre-funded warrants offered hereby. This prospectus, which constitutes a part of the registration statement, does
not contain all of the information set forth in the registration statement or the exhibits and schedules filed therewith. For further
information about us and our common stock, the purchase warrants and the pre-funded warrants offered hereby, we refer you to the
registration statement and the exhibits and schedules filed therewith. Statements contained in this prospectus regarding the contents
of any contract or any other document that is filed as an exhibit to the registration statement are not necessarily complete, and
each such statement is qualified in all respects by reference to the full text of such contract or other document filed as an exhibit
to the registration statement. The SEC maintains a website that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the SEC. The address is
http://www.sec.gov.
We are subject to the
reporting requirements of the Exchange Act, as amended, and file annual, quarterly and current reports, proxy statements and other
information with the SEC. You can read our SEC filings, including the registration statement, over the Internet at the SEC's
website at
http://www.sec.gov.
We also maintain a website at
http://www.shiftpixy.com
, at which you may access these
materials free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC.
The information contained in, or that can be accessed through, our website is not part of this prospectus. You may also request
a copy of these filings, at no cost, by writing or telephoning us at: 1 Venture, Suite 150, Irvine, CA 92618, (888) 798-9100.
92
INDEX TO FINANCIAL STATEMENTS
Page No.
Condensed Consolidated Balance Sheets as of May 31, 2020 and August 31, 2019
F-2
Condensed Consolidated Statements of Operations for the Three and Nine Months Ended May 31, 2020 and May 31, 2019 (Unaudited)
F-3
Condensed Consolidated Statements of Stockholders' Equity (Deficit) for the Three and Nine Months Ended May 31, 2020 and May 31, 2019 (Unaudited)
F-4
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended May 31, 2020 and May 31, 2019 (Unaudited)
F-7
Notes to the Condensed Consolidated Financial Statements (Unaudited)
F-8
Report of Independent Registered Public Accounting Firm
F-26
Consolidated Balance Sheets for the Years Ended August 31, 2019 and 2018
F-27
Consolidated Statements of Operations for the Years Ended August 31, 2019 and 2018
F-28
Consolidated Statements of Stockholders' Deficit for the Two Years Ended August 31, 2019 and 2018
F-29
Consolidated Statements of Cash Flows for the Years Ended August 31, 2019 and 2018
F-30
Notes to Consolidated Financial Statements
F-31
F-
1
ShiftPixy, Inc.
Condensed Consolidated Balance Sheets
May 31,
2020
August 31,
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 operations
1,749,000
5,567,000
Total assets
$
27,508,000
$
23,796,000
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable and other accrued liabilities
$
2,823,000
$
4,455,000
Payroll 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 operations
2,386,000
10,058,000
Total 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 operations
5,533,000
3,853,000
Total liabilities
21,017,000
36,566,000
Commitments and contingencies
Stockholders' equity (deficit)
Preferred stock, 50,000,000 authorized shares; $0.0001 par value
-
-
Common stock, 750,000,000 authorized shares; $0.0001 par value; 3,857,316 and 909,222 shares issued as of May 31, 2020 and August 31, 2019
-
-
Additional paid-in capital
117,730,000
32,505,000
Treasury stock, at cost-0 and 13,953 shares as of May 31, 2020 and August 31, 2019
-
(325,000
)
Accumulated deficit
(111,239,000
)
(44,950,000
)
Total stockholders' equity (deficit)
6,491,000
(12,770,000
)
Total liabilities and stockholders' equity (deficit)
$
27,508,000
$
23,796,000
See accompanying notes to the unaudited
interim condensed consolidated financial statements.
F-
2
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 (gross billings of $14.4 million and $11.9 million less worksite employee payroll cost of $12.4 million and $10.3 million, respectively for the three months ended; gross billings of $47.0 million and $25.9 million less worksite employee payroll cost of $40.3 million and $22.3 million, respectively for nine months ended)
$
2,014,000
$
1,638,000
$
6,775,000
$
3,658,000
Cost of revenue
1,873,000
1,467,000
6,051,000
3,126,000
Gross profit
141,000
171,000
724,000
532,000
Operating expenses:
Salaries, wages, and payroll taxes
1,793,000
1,152,000
5,246,000
3,182,000
Stock-based compensation – general and administrative
150,000
(5,000
)
895,000
154,000
Commissions
27,000
64,000
137,000
130,000
Professional fees
439,000
1,280,000
2,276,000
2,799,000
Software development
686,000
221,000
1,390,000
1,249,000
Depreciation and amortization
545,000
222,000
1,025,000
603,000
General and administrative
1,054,000
1,541,000
2,617,000
3,654,000
Total operating expenses
4,694,000
4,475,000
13,586,000
11,771,000
Operating Loss
(4,553,000
)
(4,304,000
)
(12,862,000
)
(11,239,000
)
Other (expense) income:
Interest expense
(559,000
)
(4,345,000
)
(2,524,000
)
(6,270,000
)
Expense related to preferred options
(62,091,000
)
-
(62,091,000
)
-
Expense related to modification of warrants
-
-
(22,000
)
-
Loss from debt conversion
(2,842,000
)
-
(3,500,000
)
-
Inducement loss
(57,000
)
(2,273,000
)
(624,000
)
(3,829,000
)
Loss on debt extinguishment
(1,592,000
)
-
(1,592,000
)
-
Change in fair value derivative and warrant liability
6,000
4,748,000
1,777,000
4,748,000
Loss on convertible note settlement
-
-
-
2,611,000
Gain on convertible note penalties accrual
-
-
760,000
-
Total other (expense) income
(67,135,000
)
(1,870,000
)
(67,816,000
)
(2,740,000
)
Loss from continuing operations
(71,688,000
)
(6,174,000
)
(80,678,000
)
(13,979,000
)
Income (Loss) from discontinued operations
Income (Loss) from discontinued operations
(1,490,000
)
1,178,000
(1,293,000
)
4,596,000
Gain from asset sale
-
-
15,682,000
-
Total Income (Loss) from discontinued operations, net of tax
(1,490,000
)
1,178,000
14,389,000
4,596,000
Net loss
$
(73,178,000
)
$
(4,996,000
)
$
(66,289,000
)
$
(9,383,000
)
Net Loss per share, Basic and diluted
Continuing operations
$
(2.73
)
$
(7.92
)
$
(5.49
)
$
(18.54
)
Discontinued operations
Operating income (loss)
(0.06
)
1.51
(0.09
)
6.10
Gain on sale of assets
-
-
1.07
-
Total discontinued operations
(0.06
)
1.51
0.98
6.10
Net Loss per share of common stock – Basic and diluted
$
(2.79
)
$
(6.41
)
$
(4.51
)
$
(12.44
)
Weighted average common stock outstanding – Basic and diluted
26,249,518
779,634
14,708,554
753,808
See accompanying notes to the unaudited
interim condensed consolidated financial statements.
F-
3
ShiftPixy Inc.
Condensed Consolidated Statements of Stockholders'
Equity (Deficit)
For the Three Months Ended May 31, 2020
(Unaudited)
Common Stock
Additional
Total
Stockholders'
Issued
Paid-In
Accumulated
Equity
Shares
Amount
Capital
Deficit
(Deficit)
Balance, March 1, 2020
1,103,643
$
-
$
37,620,000
$
(38,061,000
)
$
(441,000
)
Common stock issued for warrant exercise
6,275
-
33,000
-
33,000
Common stock issued for underwritten offering, net of offering costs
2,222,160
-
10,332,000
-
10,332,000
Stock-based compensation expense
-
-
75,000
-
75,000
Common stock issued upon conversion of convertible notes and interest
441,573
-
4,023,000
-
4,023,000
Reclassification of derivative liabilities to paid in capital
-
-
288,000
-
288,000
Inducement loss on note conversions
1,012
-
57,000
-
57,000
Common stock issued for warrant exchange
82,653
-
552,000
-
552,000
Allocated fair value of beneficial conversion feature – exchanged notes payable
-
-
653,000
-
653,000
Allocated fair value of warrants issued – exchanged notes payable
-
-
2,006,000
-
2,006,000
Expense related to preferred options
-
-
62,091,000
62,091,000
Net Loss
-
-
-
(73,178,000
)
(73,178,000
)
Balance, May 31, 2020
3,857,316
$
-
$
117,730,000
$
(111,239,000
)
$
6,491,000
See accompanying notes
to the unaudited interim condensed consolidated financial statements.
F-
4
ShiftPixy Inc.
Condensed Consolidated Statements of
Stockholders' Equity (Deficit)
For the Nine Months Ended May 31, 2020
(Unaudited)
Common Stock
Additional
Total
Stockholders'
Issued
Paid-In
Treasury
Accumulated
Equity
Shares
Amount
Capital
Stock
Deficit
(Deficit)
Balance, September 1, 2019
909,222
$
-
$
32,505,000
$
(325,000
)
$
(44,950,000
)
$
(12,770,000
)
Treasury stock retired
(13,953
)
-
(325,000
)
325,000
-
-
Common stock issued for note exchange
21,750
-
200,000
-
-
200,000
Common stock issued for services rendered
856
-
75,000
-
-
75,000
Common stock issued for warrant exercise
6,275
33,000
-
-
33,000
Common stock issued for underwritten offering,
    net of offering costs
2,222,160
-
10,332,000
-
-
10,332,000
Common stock issued upon conversion of convertible
    notes and interest
589,695
-
6,238,000
-
-
6,238,000
Reclassification of derivative liabilities to paid
    in capital
-
-
1,979,000
-
-
1,979,000
Inducement loss on note conversions
38,658
-
624,000
-
-
624,000
Common stock issued for warrant exchange
82,653
-
552,000
-
-
552,000
Allocated fair value of beneficial conversion feature
    – exchanged notes payable
-
-
653,000
-
-
653,000
Allocated fair value of warrants issued –
    exchanged notes payable
-
-
2,006,000
-
-
2,006,000
Stock-based compensation expense
-
-
745,000
-
-
745,000
Modification of warrants
-
-
22,000
-
-
22,000
Expense related to preferred options
-
-
62,091,000
-
-
62,091,000
Net Loss
-
-
-
-
(66,289,000
)
(66,289,000
)
Balance, May 31, 2020
3,857,316
$
-
$
117,730,000
$
-
$
(111,239,000
)
$
6,491,000
See accompanying notes to the unaudited
interim condensed consolidated financial statements.
F-
5
ShiftPixy Inc.
Condensed Consolidated Statements of
Stockholders' Deficit
For the Three Months Ended May 31, 2019
(Unaudited)
Common Stock
Issued
Additional
Paid-In
Accumulated
Total
Stockholders'
Shares
Amount
Capital
Deficit
Deficit
Balance, March 1, 2019
802,933
$
-
$
25,846,000
$
(30,610,000
)
$
(4,764,000
)
Common stock issued for services rendered
2,024
-
113,000
-
113,000
Stock-based compensation expense
-
-
(5,000
)
-
(5,000
)
Reclassification of derivative liability upon conversion of related convertible debentures
-
-
12,000
-
12,000
Common stock issued upon conversion of convertible notes and interest
52,211
-
3,948,000
-
3,948,000
Inducement loss from debt conversion
43,787
2,273,000
-
2,273,000
Net Loss
-
-
-
(4,996,000
)
(4,996,000
)
Balance, May 31, 2019
900,955
$
-
$
32,187,000
$
(35,606,000
)
$
(3,419,000
)
ShiftPixy Inc.
Condensed Consolidated Statements of
Stockholders' Deficit
For the Nine Months Ended May 31, 2019
(Unaudited)
Common Stock
Issued
Additional
Paid-In
Accumulated
Total
Stockholders'
Shares
Amount
Capital
Deficit
Deficit
Balance, September 1, 2018
721,295
$
-
$
18,468,000
$
(26,223,000
)
$
(7,755,000
)
Warrants exercised for cash
6,688
-
660,000
-
660,000
Common stock issued for services rendered
2,990
-
225,000
-
225,000
Stock-based compensation expense
-
-
154,000
-
154,000
Reclassification of derivative liability upon conversion of related convertible debentures
-
-
12,000
-
12,000
Common stock issued upon conversion of convertible notes and interest
101,679
-
8,839,000
-
8,839,000
Inducement loss from debt conversion
68,303
-
3,829,000
-
3,829,000
Net Loss
-
-
-
(9,383,000
)
(9,383,000
)
Balance, May 31, 2019
900,955
$
-
$
32,187,000
$
(35,606,000
)
$
(3,419,000
)
See accompanying notes to the unaudited interim condensed consolidated
financial statements.
F-
6
ShiftPixy, Inc.
Condensed Consolidated Statements of
Cash Flows
(Unaudited)
For the Nine Months Ended
May 31,
2020
May 31,
2019
OPERATING ACTIVITIES
Net Loss
$
(66,289,000
)
$
(9,383,000
)
Income from discontinued operations
14,389,000
4,596,000
Net loss from continuing operations
(80,678,000
)
(13,979,000
)
Adjustments to reconcile net loss from continuing operations to net cash used in continuing operating activities:
Expense related to preferred options
62,091,000
-
Depreciation and amortization
1,025,000
603,000
Gain on convertible note settlement
-
(2,611,000
)
Gain on convertible note penalties accrual
(760,000
)
-
Amortization of debt discount and debt issuance cost
6,749,000
3,599,000
Stock issued for services
75,000
225,000
Stock-based compensation- general and administrative
745,000
154,000
Expense related to warrant modification
22,000
-
Inducement loss on note conversions
624,000
3,829,000
Expense related to warrant exchange
552,000
-
Non-cash interest
-
509,000
Change in fair value of derivative and warrant liability
(1,777,000
)
(4,748,000
)
Financing costs
-
2,588,000
Changes in operating assets and liabilities
Accounts receivable
(763,000
)
(58,000
)
Unbilled accounts receivable
(996,000
)
(455,000
)
Prepaid expenses
54,000
(205,000
)
Other current assets
54,000
32,000
Deposits – workers' compensation
3,283,000
(729,000
)
Deposits and other assets
(16,000
)
27,000
Accounts payable
(151,000
)
925,000
Payroll related liabilities
(108,000
)
1,269,000
Accrued workers' compensation
1,665,000
423,000
Other current liabilities
(2,284,000
)
(215,000
)
Total Adjustments
70,084,000
5,162,000
Net cash used in continuing operating activities
(10,594,000
)
(8,817,000
)
Net cash provided by discontinued operating activities
76,000
7,194,000
Net cash used in operating activities
(10,518,000
)
(1,623,000
)
INVESTING ACTIVITIES
Purchase of fixed assets
(81,000
)
(581,000
)
Proceeds from sale of fixed assets
34,000
-
Proceeds from working capital adjustment – sale of assets
1,214,000
-
Proceeds from sale of assets
9,500,000
-
Net cash provided by (used in) investing activities
10,667,000
(581,000
)
FINANCING ACTIVITIES
Proceeds from underwritten public offering, net of offering costs
10,332,000
-
Proceeds from issuance of convertible notes
-
3,750,000
Issuance costs related to convertible notes
-
(485,000
)
Repayment of convertible notes
(1,240,000
)
(436,000
)
Proceeds from exercise of warrants
33,000
660,000
Net cash provided by financing activities
9,125,000
3,489,000
Net increase in cash
9,274,000
1,285,000
Cash - Beginning of Period
1,561,000
1,650,000
Cash -End of Period
$
10,835,000
$
2,935,000
Supplemental Disclosure of Cash Flows Information:
Cash paid for interest
$
315,000
$
226,000
Non-cash Investing and Financing Activities:
Conversion of debt and accrued interest into common stock
$
6,238,000
$
8,839,000
Additional Principal to settle registration rights penalties
-
889,000
Common stock issued for services
75,000
-
Common stock issued for note exchange
200,000
-
Additional principal issued for note exchange
433,000
-
Interest capitalized into notes receivable
59,000
-
Common stock issued in exchange for warrants
552,000
-
Discount recorded for asset sale note receivable
1,818,000
-
Reclassification of derivative liabilities to paid in capital
1,979,000
-
Expense related to warrant modification
22,000
-
See accompanying notes to the unaudited
interim condensed consolidated financial statements.
F-
7
ShiftPixy, Inc.
Notes to the Condensed Consolidated Financial
Statements
(Unaudited)
May 31, 2020
Note 1: Nature of Operations
ShiftPixy, Inc. was incorporated on June
3, 2015. The Company is a specialized staffing service provider that provides solutions for large contingent part-time workforce
demands, primarily in the restaurant and hospitality service trades. The Company's focus is on the restaurant industry in
Southern California.
On March 25, 2020, the Company filed Amended
and Restated Articles of Incorporation (the "Restated Articles of Incorporation") with the Wyoming Secretary of State,
which were approved by the Company's board of directors (the "Board of Directors") and its shareholders representing
a majority of its outstanding shares of capital stock. The Restated Articles of Incorporation, among other things, set conversion
rights for the Company's Class A Preferred Stock, par value $0.0001 per share, to convert into shares of common stock on
a one-for-one basis.
The Company and its wholly-owned subsidiary
Rethink, Inc. ("RT") function as employment administrative services ("EAS") providers including services
such as administrative and processing services, performing functions in the nature of a payroll processor, human resources consultant,
administrator of workers' compensation coverages and claims and provide workers compensation coverage written in the names
of the clients (as may be required by some states). The Company has built a human resources information systems platform to assist
in customer acquisition and hopes that this mechanism may become a way to onboard new clients into the Company's closed proprietary
operating and processing information system (the "ShiftPixy Ecosystem") when eligible clients recognize the value of
the services provided by the parent Company. This platform is expected to facilitate additional value-added services in future
reporting periods. In January 2020, the Company sold Shift Human Capital Management Inc. ("SHCM"), previously a wholly-owned
subsidiary of the Company, and assigned the majority of the Company's billable clients to a third party for cash as described
below in Note 3 and formed RT.
The Company is currently operating in one
reportable segment.
Note 2: Summary of significant accounting
policies
Basis of Presentation
The accompanying unaudited condensed consolidated
financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United
States of America ("GAAP") and the rules of the Securities and Exchange Commission ("SEC") applicable to
interim reports of companies filing as a smaller reporting company. Accordingly, the Company does not include all of the information
and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for fair presentation have been included. The results of operations for the three
and nine months ended May 31, 2020, are not necessarily indicative of the results that may be expected for the year ending August
31, 2020.
For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended August
31, 2019, filed with the SEC on December 13, 2019.
Principles of Consolidation
The Company and its wholly-owned subsidiary
have been consolidated in the accompanying unaudited condensed consolidated financial statements. All intercompany balances have
been eliminated in consolidation.
F-
8
Use of Estimates
The preparation of financial statements
in conformity with GAAP requires the Company to make estimates and assumptions that affect certain reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include:
·
Valuation expense related to preferred stock options
·
Liability for legal contingencies;
·
Useful lives of property and equipment;
·
Assumptions made in valuing embedded derivatives and freestanding equity-linked instruments classified as liabilities;
·
Deferred income taxes and related valuation allowance;
·
Valuation of long-lived assets including long term notes receivable; and
·
Projected development of workers' compensation claims.
Revenue and Direct Cost Recognition
The Company provides an array of human
resources and business solutions designed to help improve business performance.
The Company's revenues are primarily
attributable to fees for providing staffing solutions and EAS/human capital management services. The Company recognizes revenue
when all of the following criteria are met: (i) persuasive evidence of an arrangement exists; (ii) the services have been rendered
to the customer; (iii) the sales price is fixed or determinable; and (iv) collectability is reasonably assured. The Company enters
into contracts with its clients for EAS based on a stated rate and price in the contract. Contracts generally have a term of 12
months but are cancellable at any time by either party with 30 days' notice. Contract performance obligations are satisfied
as services are rendered, and the time period between invoicing and when the performance obligations are satisfied is not significant.
The Company does not have significant financing components or significant payment terms for its customers and consequently has
no material credit losses. Payments for the Company's services are typically made in advance of, or at the time that the
services are provided.
The Company accounts for its EAS revenues
in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC")
605-45,
Revenue Recognition, Principal Agent Considerations
. EAS solutions revenue is primarily derived from the Company's
gross billings, which are based on (i) the payroll cost of the Company's worksite employees ("WSEs") and (ii)
a mark-up computed as a percentage of payroll costs for payroll taxes and workers compensation premiums.
Gross billings are invoiced to each client
concurrently with each periodic payroll of the Company's WSEs which coincides with the services provided and which is typically
a fixed percentage of the payroll processed. Revenues, which exclude the payroll cost component of gross billings and therefore
consist solely of markup, are recognized ratably over the payroll period as WSEs perform their service at the client worksite.
Revenues that have been recognized but not invoiced are included in unbilled accounts receivable on the Company's condensed
consolidated balance sheets, and were $270,000 and $170,000 as of May 31, 2020 and August 31, 2019, respectively.
Consistent with the Company's revenue
recognition policy, direct costs do not include the payroll cost of its WSEs. The cost of revenue associated with the Company's
revenue generating activities is primarily comprised of all other costs related to its WSEs, such as the employer portion of payroll-related
taxes, employee benefit plan premiums and workers' compensation insurance costs.
The Company has evaluated its revenue recognition
policies in conjunction with its future expected business which may be migrating to a staffing business model. For fiscal years
2020 and 2019, there were no revenues which should have been evaluated under a staffing business model. Such a staffing business
model would have included the payroll costs in revenues with a corresponding increase to cost of revenues for payroll costs associated
with staffing services.
Concentration of Credit Risk
The Company considers all highly liquid
investments with an original maturity of three months or less when purchased as cash equivalents. The Company maintains cash with
a commercial bank and from time to time exceed the federally insured limits. The Company has not experienced losses from these
deposits.
No one individual client represents more
than 10% of revenues for the three and nine months ended May 31, 2020, and May 31, 2019, respectively. However, three clients represent
93% of total accounts receivable at May 31, 2020.
F-
9
Impairment and Disposal of Long-Lived
Assets
The Company periodically evaluates its
long-lived assets for impairment in accordance with ASC 360-10,
Property, Plant, and Equipment
. ASC 360-10 requires that
an impairment loss be recognized for assets to be disposed of or held-for-use when the carrying amount of an asset is deemed to
not be recoverable. If events or circumstances were to indicate that any of our long-lived assets might be impaired, the Company
would assess recoverability based on the estimated undiscounted future cash flows to be generated from the applicable asset. In
addition, the Company may record an impairment loss to the extent that the carrying value of the asset exceeded the fair value
of the asset. Fair value is generally determined using an estimate of discounted future net cash flows from operating activities
or upon disposal of the asset. There were no impairments recognized for the periods ended May 31, 2020, and May 31, 2019.
Workers' compensation
Everest Program
Up to July 2018, a portion of the Company's
workers' compensation risk was covered by a retrospective rated policy, which calculates the final policy premium based on
the Company's loss experience during the term of the policy and the stipulated formula set forth in the policy. The Company
funds the policy premium based on standard premium rates on a monthly basis and based on the gross payroll applicable to workers
covered by the policy. During the policy term and thereafter, periodic adjustments may involve either a return of previously paid
premiums or a payment of additional premiums by the Company or a combination of both. If the Company's losses under that
policy exceed the expected losses under that policy, then the Company could receive a demand for additional premium payments.
The Company utilizes a third-party to estimate
its loss development rate, which is based primarily upon the nature of WSEs' job responsibilities, the location of WSEs,
the historical frequency and severity of workers' compensation claims, and an estimate of future cost trends. Each reporting
period, changes in the assumptions resulting from changes in actual claims experience and other trends are incorporated into its
workers' compensation claims cost estimates. As of May 31, 2020, the Company classified $0.1 million in long term accrued
workers' compensation in the Company's condensed consolidated balance sheets.
Sunz Program
Starting in July 2018, the Company's
workers' compensation program for its WSEs has been provided through an arrangement with United Wisconsin Insurance Company
and administered by the Sunz Insurance Company. Under this program, the Company has financial responsibility for the first $0.5
million of claims per occurrence. The Company provides and maintains a loss fund that will be used to pay claims and claim related
expenses. The workers' compensation insurance carrier established monthly funding requirements comprised of premium costs
and funds to be set aside for payment of future claims ("claim loss funds"). The level of claim loss funds is primarily
based upon anticipated WSE payroll levels and expected workers' compensation loss rates, as determined by the insurance carrier.
Monies funded into the program for incurred claims expected to be paid within one year are recorded as Deposit - workers'
compensation, a short-term asset, while the remainder of claim funds are included in deposits- workers' compensation, a long-term
asset in its condensed consolidated balance sheets.
As of May 31, 2020, the Company had $0.5
million in deposit – workers' compensation classified as a short-term asset and $0.3 million classified as a long-term
asset.
The Company's estimate of incurred
claim costs expected to be paid within one year is included in short-term liabilities, while its estimate of incurred claim costs
expected to be paid beyond one year is included in long-term liabilities on its consolidated balance sheets. As of May 31, 2020,
the Company had short term accrued workers' compensation costs of $0.5 million and long term accrued workers' compensation
costs of $1.0 million.
The Company retained workers compensation
asset reserves and workers compensation related liabilities for former WSEs of clients transferred to Shiftable HR Acquisition,
LLC, part of Vensure Employer Services, Inc. ("Vensure") in connection with the Asset Sale (as defined below). 
As of May 31, 2020, the retained workers compensation assets and liabilities are presented as a discontinued operations net asset
or liability.  As of May 31, 2020 the Company had $2.4 million in both short term assets and short term liabilities and had
$1.7 million of long term assets and $5.5 million of long term liabilities.
Because the Company bears the
financial responsibility for claims up to the level noted above, such claims, which are the primary component of its
workers' compensation costs, are recorded in the period incurred. Workers' compensation insurance includes
ongoing health care and indemnity coverage whereby claims are paid over numerous years following the date of injury.
Accordingly, the accrual of related incurred costs in each reporting period includes estimates, which take into account the
ongoing development of claims and therefore requires a significant level of judgment. In estimating ultimate loss rates, the
Company utilizes historical loss experience, exposure data, and actuarial judgment, together with a range of inputs which are
primarily based upon the WSE's job responsibilities, their location, the historical frequency and severity of
workers' compensation claims, and an estimate of future cost trends. For each reporting period, changes in the
actuarial assumptions resulting from changes in actual claims experience and other trends are incorporated into its
workers' compensation claims cost estimates. The estimated incurred claims are based upon: (i) the level of claims
processed during each quarter; (ii) estimated completion rates based upon recent claim development patterns under the plan;
and (iii) the number of participants in the plan.
We expect additional workers compensation
claims to be made by furloughed WSEs as a result of the employment downturn caused by the COVID-19 pandemic. On May 4, 2020, the
State of California indicated that workers who became ill with COVID-19 would have a potential claim against workers compensation
insurance for their illnesses. We expect additional workers compensation claims could be made by employees required to work by
their employers during the COVID-19 pandemic, which could have a material impact to our workers compensation liability estimates.
While we have not seen additional expenses as a result of any such potential claims to date, which would include claims for reporting
periods after May 31, 2020, we will continue to closely monitor all workers compensation claims made during the COVID-19 pandemic.
F-
10
Fair Value of Financial Instruments
ASC 825, "Financial Instruments,"
requires entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized
on the balance sheet, for which it is practical to estimate fair value. ASC 825 defines fair value of a financial instrument as
the amount at which the instrument could be exchanged in a current transaction between willing parties. At May 31, 2020 and August
31, 2019, the carrying value of certain financial instruments (cash, accounts receivable and payable) approximates fair value due
to the short-term nature of the instruments. Convertible notes approximate fair value based on comparison of terms from similar
instruments in the marketplace.
The Company measures fair value under a
framework that utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.
The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level
1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of inputs which prioritize
the inputs used in measuring fair value are:
·
Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access.
·
Level 2: Inputs to the valuation methodology include:
o
Quoted prices for similar assets or liabilities in active markets;
o
Quoted prices for identical or similar assets or liabilities in inactive markets;
o
Inputs other than quoted prices that are observable for the asset or liability;
o
Inputs that are derived principally from or corroborated by observable market data by correlation or other means; and
o
If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability.
·
Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
The Company did not have any Level 1 or
Level 2 assets and liabilities at May 31, 2020 or August 31, 2019. The Company recorded expense related to preferred stock options
in the three and nine months ended May 31, 2020 using Level 2 fair value measurements. See Note 6 for assumptions used for this
valuation. The valuation of the Note Receivable (as defined below) from the Asset Sale (as defined below) and the derivative liabilities
associated with its March 2019 Notes (as defined below) (see Note 5), consisted of conversion feature derivatives and warrants,
are Level 3 fair value measurements.
Level 3 assets and liabilities:
The Note Receivable, as described in
Note 3,
was estimated using a discounted cash flow technique with significant inputs
that are not observable in the market and thus represents a Level 3 fair value measurement as defined in ASC 820. We valued
the Note Receivable on the January 1, 2020 transaction date using a 10% discount rate which contemplates the risk and
probability assessments of the expected future cash flows. The fair value assumptions have not changed as of May 31, 2020 and
any impact to the fair value was immaterial. For the three and nine months ended May 31, 2020 we identified $0.7 and $1.3
million of working capital adjustments, respectively. The significant inputs in the Level 3 measurement not supported by
market activity include the probability
assessments of expected future cash flows related to the acquisitions,
appropriately discounted considering the uncertainties associated with the obligation, and as calculated in accordance with
the terms of the acquisition agreements. We believe there are risks associated with the value of the Note Receivable due to
business impacts of the COVID-19 pandemic. The expected cash payments from the Note Receivable is based on gross profits
generated by the clients transferred to Vensure. Those transferred clients may have their business impacted due to the
pandemic which, in turn, would result in lower gross profits. While we believe the current valuation of the Note Receivable
is properly recorded as of May 31, 2020, a material change in the business transferred may result in an impairment of this
asset. The development and determination of the unobservable inputs for Level 3 fair value measurements and the fair value
calculations are the responsibility of the Company's chief financial officer and are approved by the chief executive
officer.
F-
11
The table below sets forth a summary of
the changes in the fair value of the Company's derivative liabilities classified as Level 3 as of May 31, 2020:
March 2019
Conversion
Feature
March 2019
Warrant
Liability
Total
Balance at August 31, 2019
$
2,852,000
$
904,000
$
3,756,000
Reclassification to APIC due to note settlements, exchanges or conversions
(1,784,000
)
(195,000
)
(1,979,000
)
Change in fair value
(1,068,000
)
(709,000
)
(1,777,000
)
Balance at May 31, 2020 (unaudited)
$
-
$
-
$
-
The Company had no derivative liabilities
as of May 31, 2020 since all the convertible notes were converted to equity or repaid and any warrants requiring accounting as
derivatives were exchanged for shares of common stock and new warrant issuances do not require derivative liability accounting
treatment. As of August 31, 2019, and during the nine months ended May 31, 2020, the Company estimated the fair value of the conversion
feature derivatives embedded in the convertible debentures and the fair value of the warrant liabilities based on weighted probabilities
of assumptions used in the Lattice-based option valuation model. The key valuation assumptions used consist, in part, of the price
of the common stock, a risk free interest rate based on the average yield of a Treasury note and expected volatility of the common
stock, all as of the measurement dates, and the various estimated reset exercise prices weighted by probability.
The Company used the following assumptions
to estimate fair value of the derivatives in March 2020 prior to the amendments and exchanges for the convertible notes and warrants:
March 2019
Conversion
Feature
March 2019
Warrant
Liability
(unaudited)
(unaudited)
Risk free rate
0.08-0.17
%
1.6
%
Market price per share
$
6.68
$
6.68
Life of instrument in years
0.47-1.15
4.0
Volatility
117-139
%
102
%
Dividend yield
0
%
0
%
When the Company changes its valuation
inputs for measuring financial assets and liabilities at fair value, either due to changes in current market conditions or other
factors, it may need to transfer those assets or liabilities to another level in the hierarchy based on the new inputs used. The
Company recognizes these transfers at the end of the reporting period that the transfers occur. For the periods ended May 31, 2020
and May 31, 2019, there were no transfers of financial assets or financial liabilities between the hierarchy levels.
Research and Development
During the three months ended May 31, 2020
and May 31, 2019, the Company incurred research and development costs of approximately $1.5 million and $0.7 million, respectively.
During the nine months ended May 31, 2020 and May 31, 2019, the Company incurred research and development costs of approximately
$3.4 million and $3.1 million, respectively. All costs were related to internally developed or externally contracted software and
related technology for the Company's Human Resources Information System ("HRIS") platform and related mobile
application. In addition, no software costs were capitalized for the three and nine months ended May 31, 2020 and $0 and $0.5 million
for the three and nine months ended May 31, 2019, respectively.
F-
12
Advertising Costs
The Company expenses all advertising as
incurred. The Company recorded net costs totaling $206,000 and $389,000 for the three and nine months ended May 31, 2020, respectively,
and expenses of $366,000 and $948,000 for the three and nine months ended May 31, 2019, respectively.
Convertible Debt
The Company evaluates embedded conversion
features within convertible debt under ASC 815 "Derivatives and Hedging" to determine whether the embedded conversion
feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value
recorded in earnings. If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated
under ASC 470-20 "Debt with Conversion and Other Options" for consideration of any beneficial conversion features.
Reverse Stock Split
On December 17, 2019, the Company effected
a 1 for 40 reverse stock split. All common shares and common stock equivalents are presented retroactively to reflect the reverse
split.
Earnings (Loss) Per Share
The Company utilizes FASB ASC 260, "Earnings
per Share." Basic earnings (loss) per share is computed by dividing earnings (loss) attributable to common stockholders by
the weighted-average number of common stock outstanding during the reporting period. Diluted earnings (loss) per share is computed
similar to basic earnings (loss) per share except that the denominator is increased to include additional common stock equivalents
available upon exercise of stock options and warrants using the treasury stock method. Dilutive common stock equivalents include
the dilutive effect of in-the-money share equivalents, which are calculated based on the average share price for each period using
the treasury stock method, excluding any common stock equivalents if their effect would be anti-dilutive. In periods in which a
net loss has been incurred, all potentially dilutive common stock is considered anti-dilutive and thus is excluded from the calculation.
The number of shares used for the weighted
average number of common stock outstanding for the earnings per share for the three and nine months ended May 31, 2020 was increased
by 24,634,560 shares effective as of January 1, 2020. This increase reflects the inclusion of common stock issuable upon full exercise
of options to purchase a similar number of preferred shares and full conversion of those shares of preferred stock to shares of
common stock. The preferred share option was deemed to be exercisable into preferred shares on the effective date of the Asset
Sale as described in Note 3. The one to one ratio of conversion of shares of preferred stock to shares of common stock was set
on March 25, 2020 as described in Note 6.
Securities used in, or that are excluded
from the calculation of weighted average dilutive common stock, because their inclusion would have been antidilutive are:
For the
Three
Months
Ended
May 31,
2020
For the
Three Months
Ended
May 31,
2019
Options
43,406
48,792
Senior Convertible Notes (Note 5)
-
308,312
Warrants
1,896,209
107,410
Total potentially dilutive shares
1,939,615
464,514
Stock-Based Compensation
At May 31, 2020, the Company has one stock-based
compensation plan under which the Company may issue awards. The Company accounts for this plan under the recognition and measurement
principles of ASC 718,
Compensation- Stock Compensation
, which requires all share-based payments to employees, including
grants of employee stock options, to be recognized in the condensed consolidated statements of operations on their fair values.
The grant date fair value is determined
using the Black-Scholes-Merton pricing model. For all employee stock options, the Company recognizes expense over the requisite
service period on an accelerated basis over the employee's requisite service period (generally the vesting period of the
equity grant).
F-
13
The Company's option pricing model
requires the input of highly subjective assumptions, including the expected stock price volatility and expected term. The expected
volatility is based on the historical volatility of the Company. Any changes in these highly subjective assumptions significantly
impact stock-based compensation expense.
The Company elected to account for forfeitures
as they occur. As such, compensation cost previously recognized for an award that is forfeited because of the failure to satisfy
a service condition is revised in the period of forfeiture.
Treasury Stock
Treasury stock represents shares of common
stock provided to the Company in satisfaction of the related party advance, described in Note 13. Shares of common stock provided
are recorded at cost as treasury stock. The Company retired all of its treasury stock outstanding as of August 31, 2019 in fiscal
2020. Any treasury stock retired is recorded to additional paid-in capital, limited to the amount previously credited to additional
paid-in capital, if any. Any excess is charged to accumulated deficit.
Reclassifications
Certain reclassifications have been made
to prior year's data to confirm to the current year's presentation. Such reclassifications had no impact on the Company's
financial condition, operating results, cash flows or stockholders' equity.
Recent Accounting Standards
In May 2014, the FASB issued Accounting
Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606), which outlines a single comprehensive
model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition
guidance, including industry-specific guidance. The core principle of the revenue model is that "an entity recognizes revenue
to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services." The standard provides enhancements to the quality and consistency
of how revenue is reported by companies, while also improving comparability in the financial statements of companies reporting
using International Financial Reporting Standards or U.S. GAAP. The new standard also will require enhanced revenue disclosures,
provide guidance for transactions that were not previously addressed comprehensively, and improve guidance for multiple-element
arrangements. This accounting standard becomes effective for the Company for annual reporting periods beginning after December
15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. Early adoption is permitted
for annual reporting periods (including interim periods) beginning after December 15, 2016. This new standard permits the use of
either the retrospective or cumulative effect transition method. The Company is continuing to evaluate the impact and believes
that the adoption of Topic 606 will have a minimal impact.
In March 2016, the FASB issued ASU No.
2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations. The purpose of this standard
is to clarify the implementation of guidance on principal versus agent considerations related to ASU 2014-09. The standard has
the same effective date as ASU 2014-09 described above.
In April 2016, the FASB issued ASU No.
2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which provides clarity
related to ASU 2014-09 regarding identifying performance obligations and licensing implementation. The standard has the same effective
date as ASU 2014-09 described above.
In May 2016, the FASB issued ASU 2016-12:
Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which provides narrow scope
improvements and practical expedients related to ASU 2014-09. The purpose of this standard is to clarify certain narrow aspects
of ASU 2014-09, such as assessing the collectability criterion, presentation of sales taxes, and other similar taxes collected
from customers, noncash consideration, contract modifications at transition, completed contracts at transition, and technical correction.
The standard has the same effective date as ASU 2014-09 described above.
In December 2016, the FASB issued ASU 2016-20:
Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers. The amendments in this standard affect
narrow aspects of guidance issued in ASU 2014-09. The standard has the same effective date as ASU 2014-09 described above. Topic
606 is effective for the company beginning with the fiscal year ending August 31, 2020.
In August 2018, the FASB issued ASU
No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair
Value Measurement. For all entities, amendments are effective for fiscal years, and interim periods within those fiscal
years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted
average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of
measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the
initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their
effective date. Early adoption is permitted. An entity is permitted to early adopt any removed or modified disclosures upon
issuance of ASU No. 2018-13 and delay adoption of the additional disclosures until their effective date. The Company is
currently evaluating the potential impact this guidance will have on the condensed consolidated financial statements, if
any.
F-
14
In February 2016, the FASB issued new accounting
guidance on leases ASU 2016-02, Leases. The new standard requires that a lessee recognize assets and liabilities on the balance
sheet for leases with terms longer than 12 months. The recognition, measurement and presentation of lease expenses and cash flows
by a lessee will depend on its classification as a finance or operating lease. The guidance also includes new disclosure requirements
providing information on the amounts recorded in the financial statements. In July 2018, the FASB issued ASU 2018-10, Codification
Improvements to Topic 842, Leases. For entities that early adopted Topic 842, the amendments are effective upon issuance of ASU
2018-10, and the transition requirements are the same as those in Topic 842. For entities that have not adopted Topic 842, the
effective date and transition requirements will be the same as the effective date and transition requirements in Topic 842. In
April 2020, the FASB voted to defer the effective date for private companies for one year. The updated effective date will be for
fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022.
The Company is evaluating the effect of
adopting this new accounting guidance and is currently finalizing its analysis of the financial impact of the adoption. The Company
expects to adopt the guidance using the modified retrospective method.
Note 3 – Discontinued Operations
On January 3, 2020, the Company executed
an asset purchase agreement assigning client contracts comprising approximately 88% of its quarterly revenue through the date of
the transaction, including 100% of its existing professional employer organization ("PEO") business effective as of
December 31, 2019, and the transfer of $1.5 million of working capital assets, including cash balances and certain operating assets
associated with the assigned client contracts included in the agreement (the "Asset Sale"). Gross proceeds from the
Asset Sale were $19.2 million, of which $9.7 million was received at closing and $9.5 million will be paid out in equal monthly
payments over the next four years (the "Note Receivable"), subject to adjustments for working capital and customer
retention over the twelve month period following the Asset Sale.
The following is a reconciliation of the
gross proceeds to the net proceeds from the Asset Sale as presented in the statement of cash flows for the period ending May 31,
2020.
Gross proceeds
$
19,166,000
Cash received at closing – asset sale
(9,500,000
)
Cash received at closing – working capital
(166,000
)
Discount recorded
(1,818,000
)
Less: Transaction reconciliation – working capital adjustment
(1,283,000
)
Adjusted Note Receivable
6,399,000
Short-term note receivable
1,291,000
Long-term note receivable
$
5,108,000
The Asset Sale generated a gain of $15.7
million for the nine months ended May 31, 2020. The Company expects a minimal tax impact from the Asset Sale as it intends to utilize
its net operating losses accumulated since inception to offset the gain resulting from discontinued operations tax provision with
a corresponding offset to the valuation allowance.
The Asset Sale met the criteria of discontinued
operations set forth in ASC 205 and as such the Company has reclassified its discontinued operations for all periods presented
and has excluded the results of its discontinued operations from continuing operations for all periods presented. The Company recorded
the Note Receivable net of a discount using its estimated cost of capital at a discount rate of (10%).
The Asset Sale calls for adjustments to
the Note Receivable either for: (i) working capital adjustments or (ii) in the event that the gross profit of the business transferred
is less than the required amount. Through May 31, 2020, the Company has identified $1,283,000 of working capital adjustments, including
$88,000 related to lower net assets transferred at closing, $201,000 of liabilities paid on behalf of the Company, and $994,000
of cash remitted to the Company's bank accounts, net. Under the terms of the Asset Sale, a reconciliation of the working
capital was to have been completed by April 15, 2020. Due to operational difficulties and quarantined staff caused by
the
outbreak of COVID-19
, the reconciliation remains unresolved. The working capital adjustment recorded as of May 31, 2020
represents the Company's estimate of the reconciliation. There is no assurance that the working capital change identified
as of May 31, 2020 represents the final working capital adjustment.
F-
15
The carrying amounts of the classes of
assets and liabilities from the Asset Sale included in discontinued operations were as follows:
May 31, 2020
August 31, 2019
Unaudited
Unaudited
Cash
$
-
$
-
Accounts receivable and unbilled account receivable
-
8,526,000
Prepaid expenses and other current assets
-
171,000
Deposits – workers' compensation
2,386,000
1,722,000
Total current assets
2,386,000
10,419,000
Fixed assets, net
-
40,000
Deposits – workers' compensation
1,749,000
5,527,000
Total assets
$
4,135,000
$
15,986,000
Accounts payable and other current liabilities
$
-
$
457,000
Payroll related liabilities
-
7,879,000
Accrued workers' compensation cost
2,386,000
1,722,000
Total current liabilities
2,386,000
10,058,000
Accrued workers' compensation cost
5,533,000
3,853,000
Total liabilities
7,919,000
13,911,000
Net assets/(liability)
$
(3,784,000
)
$
2,075,000
Reported results for the discontinued operations by period were
as follows:
For the Three Months Ended
For the Nine Months Ended
May 31, 2020
May 31, 2019
May 31, 2020
May 31, 2019
Revenues (gross billings of $0 and $82.3 million less worksite employee payroll cost of $0 million and $69.7 million, respectively for the three months ended; gross billings of $120.0 million and $221.7 million less worksite employee payroll cost of $103.3 million and $187.3 million, respectively for Nine Months ended)
$
-
$
12,666,000
$
17,138,000
$
34,354,000
Cost of revenue
1,490,000
10,125,000
17,025,000
25,567,000
Gross profit (loss)
(1,490,000
)
2,541,000
113,000
8,787,000
Operating expenses:
Salaries, wages and payroll taxes
-
662,000
658,000
2,414,000
Commissions
-
701,000
748,000
1,777,000
Total operating expenses
-
1,363,000
1,406,000
4,191,000
(Loss) income from discontinued operations
$
(1,490,000
)
$
1,178,000
$
(1,293,000
)
$
4,596,000
Note 4: Going Concern
As of May 31, 2020, the Company had cash
of $10.8 million and a working capital surplus of $3.4 million. During the nine months ended May 31, 2020, the Company used approximately
$10.6 million of cash from its continuing operations and repaid $1.2 million of convertible notes, after receiving $9.5 million
of cash from the Asset Sale described below, and closed an underwritten public offering and receiving $10.3 million, net of offering
costs. The Company has incurred recurring losses resulting in an accumulated deficit of $111.2 million as of May 31, 2020. The
recurring losses and cash used in operations raise substantial doubt as to its ability to continue as going concern within one
year from issuance date of the financial statements.
Historically, the Company's
principal source of financing has come through the sale of its common stock and issuance of convertible notes. The Company
successfully completed an IPO on The Nasdaq Stock Market LLC ("Nasdaq") on June 29, 2017, raising a total of $12
million ($10.9 million net of costs). In June 2018, the Company completed a private placement of 8% senior secured
convertible notes to institutional investors raising $9 million of gross proceeds ($8.4 million net of costs). In March 2019,
the Company completed a private placement of senior secured notes to institutional investors raising $3.75 million ($3.3
million net of costs). Between September 1, 2019 and May 22, 2020 all convertible notes outstanding as of August 31, 2019
were repaid or converted into equity. On May 26, 2020, the Company successfully completed an underwritten public offering
raising a total of $12 million ($10.3 million net of costs) and closed an additional $1.35 million ($1.25 million net of
costs) between June 1, 2020 and July 7, 2020 pursuant to the underwriter's overallotment. The Company's plans and
expectations for the next 12 months include raising additional capital to help fund expansion of its operations, including
the continued development and support of its IT and HR platform. The Company engaged an investment banking firm to assist the
Company in (i) preparing information materials, (ii) advising the Company concerning the structure, price and conditions and
(iii) organizing the marketing efforts with potential investors in connection with a financing transaction.
F-
16
In January 2020, the Company assigned approximately
88% of its customer contracts in exchange for $9.7 million in cash at closing and received an additional $1.0 million of cash,
net of $0.9 million of cash transferred, and expects to receive an additional $7.5 million over the four years following the closing
of the Asset Sale, subject to certain closing conditions. The Company transferred $1.6 million of working capital, including $0.9
million of cash. The business transferred represented approximately $6.0 million of the Company's annualized gross profit.
The Company continues to experience significant
growth in the number of WSEs, which would generate additional administrative fees that would offset the current level of operational
cash burn. The Company retained the high growth business which accounted for over 100% of billings and revenue growth. The Company
also retained the rights to monetize the existing pool of WSEs and has begun to roll out its delivery and scheduling applications
to its customers.
The Company has and will be impacted by
the COVID-19 pandemic. The current business focus is on providing payroll services for the restaurant and hospitality industries
which have seen a significant reduction in payroll and consequently a reduction in payroll processing fees. Between March 1, 2020
and May 31, 2020, the number of our billed clients has been reduced by approximately 20% as a result of workforce reduction from
our clients. To date, some of our clients have received Coronavirus Aid, Relief, and Economic Security Act ("CARES Act")
benefits to offset this reduction, but not at significant levels, and our business has been impacted since the COVID-19 lockdown
starting in March 2020. If the lockdown continues, our clients delay hiring or rehiring employees, or if our clients shut down
operations, our ability to generate operational cash flows may be significantly impaired.
The Company's management believes,
but cannot be certain, that the Company's current cash position, along with its revenue growth and the financing from potential
institutional investors will be sufficient to fund its operations for at least a year from the date these financials are available.
If these sources do not provide the capital necessary to fund the Company's operations during the next twelve months from
the date of this Report, the Company 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 terms advantageous to the Company, or that any such additional financing
will be available to the Company. These condensed consolidated financial statements do not include any adjustments for this uncertainty.
Note 5: Senior Convertible Notes Payable
The Company has issued four series of senior
secured convertible notes payable (collectively, the "Senior Convertible Notes"). In general, each series is convertible
into shares of common stock. At August 31, 2019, the Company had $6.8 million of the Senior Convertible Notes in default. During
the nine months ended May 31, 2020, the Company entered into a series of note amendments, exchanges, and settlements resulting
in the resolution of the default conditions and subsequent repayment or conversion of all Senior Convertible Notes. The Senior
Convertible Notes Payable consist of the following:
May 31
August 31,
2020
2019
(unaudited)
Senior Convertible Notes, Principal
$
-
$
6,808,000
Less: debt discount and deferred financing costs
-
(3,457,000
)
Total outstanding convertible notes, net
$
-
$
3,351,000
Less: current portion of convertible notes payable
-
(3,351,000
)
Long-term convertible notes payable
$
-
$
-
As of August 31, 2019, the Company had
been declared in default of its Senior Convertible Notes for not honoring conversion notices in June 2019. Three of the Company's
five institutional investors had filed litigation and the Senior Convertible Notes were considered to be in default as of August
31, 2019. See also Note 9 for additional information on the litigation related to the Senior Convertible Notes.
During the nine months ended May 31, 2020,
the Company resolved all litigation related to its outstanding notes and all of the Senior Convertible Notes were repaid in cash
or converted into common stock.  On August 31, 2019 the Company had gross principal of $6,808,000 representing:
F-
17
·
June 2018 Senior Convertible Notes due September 6, 2019 with a principal balance of $1,466,000 (the "June 2018 Notes"). The June 2018 Notes were converted or repaid in cash in January 2020 as described in the activity below.
·
Senior Convertible Notes due December 31, 2019 with a principal balance of $867,000 (the "December 2018 Notes"). The December 2018 Notes were either exchanged for December 2019 Exchange Notes and subsequently converted into common shares, converted into common shares in January 2020 or repaid in cash in January 2020 as described in the activity below.
·
Senior Convertible Notes due September 12, 2020 with a principal balance of $4,475,000 (the "March 2019 Notes"). The March 2019 Notes were either exchanged for December 2019 Exchange Notes (as defined below), converted or repaid in cash in January 2020 or exchanged for amended notes in March 2020 which were converted in the quarter ended May 31, 2020.
On December 6, 2019, the Company entered
into an exchange agreement with the holder of $2,445,000 of its March 2019 Notes and $222,000 of its December 2018 Notes for new
senior convertible notes (the "December 2019 Exchange Notes"). The December 2019 Exchange Notes and the related warrant
and note conversion agreement revised the conversion price of the holder's December 2018 Notes and March 2019 Notes to $40.00
per share, extended the term of the notes to March 1, 2022, provided for a revised quarterly amortization schedule beginning April
1, 2020 of 12.5% of the principal balance as of January 31, 2020 payable in cash, and removed certain anti-dilution terms warrants
issued in March 2019 (the "March 2019 Warrants"). The Company agreed to issue an additional $200,000 of consideration
to the holder, payable in common stock, as consideration for this exchange and agreed to increase the principal outstanding on
the notes exchanged by 10% from $222,000 for the December 2018 Notes to $244,000, and from $2,445,000 for the March 2019 Notes
to $2,690,000, for a combined revised principal balance of $2,934,000. On December 11, 2019, the Company issued 21,750 shares of
common stock to the holder in satisfaction of the additional $200,000 of consideration. The Company provided for up to 10% of the
revised combined principal of $2,934,000 to be converted at a reduced price of $12.20 per share until January 31, 2020. In January
2020, the investor converted $293,000 into 24,049 shares of common stock. The Company evaluated the exchange under ASC 470 and
determined that the exchange should be treated as a debt modification. The Company recorded an additional note discount of $467,000
representing the combined additional shares issued, valued at $200,000 and the additional $267,000 in notes issued in the exchange.
December 2019 Exchange
The terms of the December 2019 Exchange
Notes are summarized as follows:
·
Term: April 1, 2022;
·
Coupon: 0%;
·
Default interest rate: 18%;
·
10% of the revised note balance may be converted at $12.20 per share until January 31, 2020
·
Remainder Convertible at the option of the holder at any time at a price of $40 per share but subject to down round price protection;
·
Amortization payment of 12.5% of January 31, 2020 principal balance payable in cash;
·
Alternate conversion percentage is 75% if the alternate conversion is an alternate conversion event of default as a result of bankruptcy or default related to missed amortization payment, subject to a floor conversion price of $1.84 per share, 80% for all alternate event of default conversion, or 85% if such alternate conversion is an alternate optional conversion;
·
Redemption at the option of the Company at 15% premium at any time.
In January 2020, one investor received a legal judgement for
$500,000 plus default interest of $52,000. The judgement was paid in cash in January 2020, which included the repayment of $310,000
principal of the March 2019 Notes. Upon payment of the legal judgement, the litigation was resolved with this investor.
In January 2020, the Company settled all
legal claims with two investors by entering into settlement agreements and by payment of $2,047,000 in cash and the issuance of
103,593 shares of common stock. The settlements resulted in the elimination of combined default penalties, default interest, and
$2,194,000 of principal of the June 2018 Notes, the December 2018 Notes, and the March 2019 Notes.
In January 2020, the Company reduced the
conversion price of the remaining June 2018 Notes and the December 2018 Notes payable to $12.20, and $500,000 of the June 2018
Notes and the December 2018 Notes were converted into 41,004 shares of common stock. An additional 4,207 shares of common stock
were issued in settlement of default interest of $51,000.
In January 2020, one investor converted
$130,000 of the March 2019 Note principal and $28,000 of accrued default interest at $12.20 per share into 12,915 shares of common
stock, and one investor converted $293,000 of the December 2019 Exchange Notes into 24,049 shares at a conversion price of $12.20
per share.
As a result of these settlements and conversions,
the Company recorded $567,000 of additional expense for debt conversion inducement representing the value of the shares issued
at market and the $12.20 per share conversion price on the date of issuance.
F-
18
The Company had previously recorded $1,800,000 of accrued interest
and penalties as of August 31, 2019. As a result of the settlements and resolution of litigation, the Company recorded a gain of
$760,000 for the quarter ended February 29, 2020 and the nine months ended May 31, 2020.
March 2020 Warrant and Note Exchanges
and Note Conversions
Between March 1, 2020 and March 22, 2020,
the conversion terms of the December 2019 Exchange Notes and March 2019 Notes were modified at the mutual agreement of the investors
and the Company to temporarily change the conversion price to a fixed conversion price of $9.20 per share. Three investors converted
$1,047,000 of the Company's Convertible Notes and $25,000 of accrued default interest into 135,508 shares of common stock
at a conversion price of $9.20 per share. The Company recorded an additional loss on note conversion of $413,000 representing the
pro rata portion of the unamortized note discount and deferred financing fees.
On March 23, 2020, the Company entered
into the following Amendment and Exchange Agreements (the "Amendment and Exchange Agreements") with certain institutional
investors, pursuant to which the Company amended and restated certain existing March 2019 Notes including the capitalization of
$59,000 of accrued default interest (the "Amended and Restated Notes") and issued (i) convertible notes in an aggregate
principal amount of $167,000 convertible into shares of common stock at a conversion price of $9.20 per share of common stock (the
"Exchange Notes"), (ii) warrants to purchase an aggregate of 162,950 shares of common stock at an exercise price of
$10.17 per share of common stock (the "Exchange Warrants") and (iii) an aggregate of 82,654 shares of common stock:
·
On March 23, 2020, the Company entered into an Amendment and Exchange Agreement with Alpha Capital Anstalt ("Alpha") pursuant to which the Company (a) issued to Alpha an Amended and Restated Note in an aggregate principal amount of $723,000, including capitalization of $51,000 of accrued default interest, and (b) in exchange for outstanding warrants to purchase shares of common stock held by Alpha, issued to Alpha (i) 66,123 shares of common stock, (ii) a March 2020 Exchange Warrant to purchase 130,360 shares of common stock and (iii) a March 2020 Exchange Note in an aggregate principal amount of $145,000.
·
On March 23, 2020, the Company entered into an Amendment and Exchange Agreement with Osher Capital Partners LLC ("Osher") pursuant to which the Company (a) issued to Osher an Amended and Restated Note in an aggregate principal amount of $108,000, including the capitalization of $8,000 of accrued default interest and (b) in exchange for outstanding warrants to purchase shares of common stock held by Osher, issued to Osher (i) 16,531 shares of common stock, (ii) a March 2020 Exchange Warrant to purchase 32,590 shares of common stock and (iii) a March 2020 Exchange Note in an aggregate principal amount of $22,000.
On March 24, 2020, the Company entered
into an Exchange Agreement (the "Exchange Agreement" and, together with the Amendment and Exchange Agreements, the
"March 2020 Agreements") with CVI Investments, Inc. ("CVI") pursuant to which CVI exchanged its outstanding
senior convertible note due 2022 for (i) a warrant to purchase 260,719 shares of common stock (the "CVI Exchange Warrant"
and, together with the Exchange Warrants the "March 2020 Exchange Warrants") and (b) a senior convertible note in an
aggregate principal amount of $1,829,000 convertible into shares of common stock at a conversion price of $9.20 per share (the
"CVI Exchange Note", and together with the Exchange Notes, the "March 2020 Exchange Notes").
The Company evaluated the March 2020 Agreements
as an exchange under ASC 470 and determined that the exchanges should be treated as debt extinguishments and reissuances. The Company
accelerated the remaining unamortized discount and deferred financing fees as of the date of the exchange and recorded the fair
value of the shares issued in exchange for the warrants cancelled as a loss on exchange of $1,592,000. The Company valued the revised
conversion features of the Amended and Restated Notes, the March 2020 Exchange Notes and the March 2020 Exchange Warrants using
the binomial method and recorded a discount of $2,825,000 on the exchange dates. The Company used the following assumptions to
value the conversion features and March 2020 Exchange Warrants:
March 2020
Conversion
Feature
March 2020
Exchange
Warrants
(unaudited)
(unaudited)
Risk free rate
0.08-0.17
%
0.038
%
Market price per share
$
6.63-6.68
$
6.63- 6.68
Life of instrument in years
0.47-1.15
5.5
Volatility
117-139
%
117
%
Dividend yield
0
%
0
%
Between March 24, 2020 and May 18,
2020 CVI converted $1,829,000 of its senior convertible notes into 198,756 shares of common stock, Alpha converted $868,000
of its senior convertible notes into 94,298 shares of common stock and Osher converted $130,000 of its senior convertible
notes into 14,023 shares of common stock. These conversions resulted in full acceleration of all unamortized debt discount to
expense of $2,419,000, recorded as other expense in the statement of operations as loss on conversion.
F-
19
Certain conversions during the quarter
ended May 31, 2020 resulted in shares issued below the closing market price on the date of conversion. The Company recorded $57,000
of additional loss on conversion to the statement of operations for the three months ended May 31, 2020 representing the difference
in fair value between the closing share price and the conversion price on the date of issuance.
The following table rolls forward the Senior
Convertible Notes balances and related deferred financing costs and note discount balances from August 31, 2019 to May 31, 2020:
Gross
Principal
Deferred
Financing
Costs
Note
Discount
Net
Balance at August 31, 2019
$
6,808,000
$
(344,000
)
$
(3,113,000
)
$
3,351,000
Repayments in cash
(1,240,000
)
-
-
(1,240,000
)
Conversions to common stock
(6,060,000
)
89,000
3,402,000
(2,569,000
)
Notes issued – December 2019 exchange
267,000
-
-
267,000
Additional note discount issued – December 2019 exchange
-
-
(467,000
)
(467,000
)
Acceleration of discount and deferred financing cost - extinguishment
-
88,000
960,000
1,048,000
Additional notes issued – March 2020 exchange
166,000
-
-
166,000
Interest capitalized – March 2020 exchange
59,000
-
-
59,000
Additional note discount issued – March 2020 exchange
-
-
(2,825,000
)
(2,825,000
)
Amortization of interest expense
-
167,000
2,043,000
2,210,000
Balance at May 31, 2020
$
-
$
-
$
-
$
-
During the three and nine months ended May 31, 2020, the Company
amortized $555,000 and $2,210,000, respectively, and for the three and nine months ended May 31, 2019, the Company amortized $722,000
and $1,433,000, respectively, to interest expense from the combined amortization of deferred financing costs and note discounts
recorded at issuance for the June 2018 Notes, the March 2019 Notes, March 2019 Exchange Notes, and the December 2019 Exchange Notes
(as defined above).
Note 6: Stockholders' Equity
Preferred Stock
As previously disclosed by the Company,
in September 2016, the founding shareholders of the Company were granted options to acquire preferred stock of the Company (the
"Preferred Options"). The number of Preferred Options granted were based upon the number of shares held at that time. 
These Preferred Options are nontransferable and forfeited upon the sale of the related founding shares of common stock.  Upon
the occurrence of certain specified events, such founding shareholders could exercise each Preferred Option to purchase one share
of preferred stock of the Company at an exercise price of $0.0001 per share. The preferred stock underlying the Preferred Options
does not include any rights to dividends or preference upon liquidation of the Company and is convertible into shares of common
stock on a one-for-one basis pursuant to the Restated Articles of Incorporation. The Preferred Options became exercisable to purchase
shares of preferred stock upon the Asset Sale in January 2020. On March 25, 2020 the Company recorded an expense related to preferred
options in other expense of $62.1 million representing the Black-Scholes value of 24,634,560 options exercisable and exchangeable
into an equal number of shares of common stock.
The Company initially evaluated the preferred
options using the Level 1 market price on the March 25, 2020 date and concluded that the market price on that date represented
an illiquid market price and therefore not a reliable valuation metric. The Company then evaluated the preferred options on the
March 25, 2020 date and valued the preferred options using Level 2 inputs of an estimated market price based on the cash per share
received from the May 2020 Public Offering, as adjusted for the fair value of the warrants issued in conjunction with the May 2020
offering. The resulting allocated common share price was then discounted for a lack of marketability due to the lock-up provisions
of the shares issuable to arrive at a preferred option fair value of $2.52 per option. The Company used the following assumptions
to value the expense related to the preferred options:
Option life of 3.77 years, Risk free rate
of 0.47%, volatility of 134%, exercise price of $0.0001 per share and a fair value of $3.62 per common share.
F-
20
On June 4, 2020, Scott Absher, the
Company's Chief Executive Officer, exercised 12,500,000 Preferred Options for 12,500,000 shares of preferred stock.
Immediately thereafter, Mr. Absher converted all 12,500,000 shares of preferred stock into 12,500,000 shares of common stock.
These shares of common stock are subject to a two-year lockup from the date of the conversion. As of the date of this filing,
12,134,560 Preferred Options remain outstanding and exercisable. The right to exercise the options terminates on December 31,
2023. As stated above, the amount of the Preferred Options, and the number of shares of preferred stock issuable upon
exercise of such options, is based upon the number of shares of common stock held by such founding shareholders at the time
such options were issued. Accordingly, in order to confirm the original intent of the granting of up to 50,000,000 of such
options to two of our founding shareholders, Mr. Absher and Stephen Holmes, at some point in the future the Company intends
to adopt a second grant of options, exercisable upon the occurrence of certain specified events, granting an additional
12,500,000 options to each of Messrs. Absher and Holmes whereby each option permits the holder to acquire one share of
preferred stock of the Company for $0.0001 per share.  Each share of preferred stock will be convertible into common
stock on a one-for-one basis.
The May 2020 Public Offering
On May 20, 2020, the Company entered into
an underwriting agreement (the "Underwriting Agreement") with A.G.P./Alliance Global Partners ("A.G.P."),
in connection with a public offering (the "May 2020 Offering") of an aggregate of (i) 1,898,850 shares of our common
stock, (ii) pre-funded warrants to purchase 323,310 shares of common stock (the "Pre-Funded Warrants") and (iii) warrants
to purchase 1,277,580 shares of common stock (the "May 2020 Common Warrants"), which included the partial exercise
of A.G.P.'s over-allotment option to purchase 166,500 additional Common Warrants.
Each share of common stock and Pre-Funded
Warrant sold in the May 2020 Offering was sold together with a Common Warrant as a fixed combination, with each share of common
stock and Pre-Funded Warrant sold being accompanied by a Common Warrant to purchase 0.5 shares of common stock. The shares of common
stock and accompanying Common Warrants were sold at a price to the public of $5.40, less underwriting discounts and commissions
and the Pre-Funded Warrants and accompanying Common Warrants were sold at a price to the public of $5.399, less underwriting discounts
and commissions. The Common Warrants were immediately exercisable and will expire on May 26, 2025 and have an exercise price of
$5.40 per share, subject to anti-dilution and other adjustments for certain stock splits, stock dividends, or recapitalizations.
The May 2020 Offering closed on May 26,
2020 for gross proceeds of approximately $12.0 million, prior to deducting $1.7 million of costs consisting of underwriting discounts
and commissions and offering expenses payable by the Company, which includes a partial exercise of the underwriter's over-allotment
option to purchase additional Common Warrants. All Pre-Funded Warrants issued or issuable were exercised on the closing date of
May 26, 2020. Pursuant to the Underwriting Agreement, the Company, upon closing of the Offering, issued to A.G.P. warrants to purchase
up to 111,108 shares of common stock (the "Underwriter Warrants"), which is 5.0% of the aggregate number of shares
of common stock and shares of common stock issuable upon exercise of the Pre-Funded Warrants sold in the May 2020 Offering.
The Underwriter Warrants are exercisable at any time and from time to time, in whole or in part, commencing from six months after
the closing date and ending five years from the closing date, at a price per share equal to $5.94, which is 110% of the public
offering price per share.
On June 11, 2020 the Company closed an
over-allotment option from the May 2020 Offering for additional gross proceeds of approximately $0.9 million, prior to deducting
underwriting discounts and commissions and offering expenses payable by the Company, representing the partial exercise of A.G.P.'s
over-allotment option to purchase 166,500 shares of common stock at $5.40 per share.
On July 7, 2020, the Company closed an over-allotment option
from the May 2020 Offering for additional gross proceeds of approximately $0.45 million, prior to deducting underwriting discounts
and commissions and offering expenses payable by us, representing the partial exercise of A.G.P.'s over-allotment option
to purchase 83,840 shares of common stock at $5.40 per share.
Common Stock and Warrants
On December 17, 2019, the Company effected
a 1 for 40 reverse stock split. All common stock and common stock equivalents are presented retroactively to reflect the reverse
split.
During the nine months ended May 31, 2020,
the Company issued the following:
·
2,222,160 shares of common stock were issued pursuant to the May 2020 Offering at $5.40 per share as described above.
·
628,353 shares of common stock were issued for the conversion of $6,060,000 of June 2018 Notes, December 2018 Notes, March 2019 Notes, and December 2019 Exchange Notes payable and $178,000 of related default interest payable.
·
82,653 shares of common stock valued at $552,000 were issued to two senior convertible note holders as an inducement to eliminate the March 2019 Warrants and as partial consideration to amend the senior notes to a fixed conversion price.
·
21,750 shares of common stock valued at $200,000 was issued as an inducement to exchange $2.7 million of March 2019 Notes for $2.9 million of December 2019 Exchange Notes.
·
6,275 shares of common stock were issued for a warrant exercise for cash proceeds of $33,000.
·
856 shares of common stock were issued to two directors for services valued at $75,000.
F-
21
Number
of
shares
Weighted
average
remaining
life
(years)
Weighted
average
exercise
price
Warrants outstanding, August 31, 2019
107,409
4.3
$
83.21
Issued
1,840,773
5.1
7.03
(Cancelled)
(45,698
)
4.3
78.13
(Exercised)
(6,275
)
3.6
5.29
Warrants outstanding, May 31, 2020
1,896,209
5.0
$
8.42
Warrants exercisable, May 31, 2020
1,472,540
4.9
$
7.91
The warrant reconciliation table above
excludes 323,310 "pre-funded" warrants that were originally subscribed to be issued in conjunction with the underwritten
offering closing on May 26, 2020. The "pre-funded" warrants were to be sold at $5.399 per share and exercisable at
$0.001 per share but were all exercised and fully paid prior to the May 26, 2020 closing. The 323,310 shares are included in the
2,222,160 common share count reported above for the underwritten public offering.
The following tables summarize our warrants
outstanding as of May 31, 2020:
Warrants
Outstanding
Weighted average
Life of Outstanding Warrants in years
Exercise
price
May 2020 Offering Common Warrants
1,277,580
5.0
$
5.40
May 2020 Offering Underwriter Warrants
111,108
5.0
5.40
March 2020 Exchange Warrants (1)
423,669
5.3
10.17
Amended March 2019 Warrants (2)
66,288
4.0
40.00
March 2019 Services Warrants
3,366
4.0
70.00
June 2018 Warrants
6,276
3.8
40.00
June 2018 Services Warrants
5,422
3.8
99.60
2017 PIPE Warrants
2,500
2.3
276.00
1,896,209
5.0
$
7.91
(1)
Warrants were issued in conjunction with the March 2020 Agreements as described in Note 5 above.  Warrants are not exercisable until September 23, 2020.
(2)
Warrants include 13,015 March 2019 Warrants that were amended in December 2019 to modify the exercise price to a fixed exercise price of $40.00 per share from $70 per share and an additional 53,273 warrants issued during the December 2019 Note exchange.
All warrants outstanding and exercise prices have been adjusted
to reflect the 1:40 reverse split.
Note 7: Stock Based Compensation
The Company granted no options during the
nine months ended May 31, 2020. The Company recognized approximately $75,000 and $745,000 of compensation expense for the three
and nine months ended May 31, 2020, respectively. During the nine months ended May 31, 2020, the Company fully vested all options
granted to personnel who were terminated as a result of the Asset Sale which resulted in the acceleration of 9,737 options and
$483,000 of stock-based compensation recorded in stock-based compensation – general and administrative.
At May 31, 2020, the total unrecognized
deferred share-based compensation expected to be recognized over the remaining weighted average vesting periods of 0.9 years for
outstanding grants was $0.6 million.
F-
22
A summary of option activity was as follows:
Options Outstanding and Exercisable
Weighted
Average
Weighted
Number
Remaining
Average
of
Contractual
Exercise
Options
Life
Price
(In years)
Balance, August 31, 2019
50,749
9.0
$
95.20
Granted
–
–
–
Exercised
–
–
–
Forfeited
(7,343
)
8.5
69.85
Balance at May 31, 2020
43,406
8.4
$
99.55
Options outstanding as of May 31, 2020
had aggregate intrinsic value of $0.
Option vesting activity was as follows:
Weighted
Weighted
Number
Remaining
Average
of
Contractual
Exercise
Options Vested
Options
Life
Price
(In years)
Balance, August 31, 2019
10,291
8.0
$
152.80
Vested
17,310
8.4
91.85
Exercised
–
–
–
Forfeited
(1,305
)
5.2
140.09
Balance at May 31, 2020
26,296
7.9
$
118.41
The following table summarizes information about stock options
outstanding and vested at May 31, 2020:
Options Outstanding and Exercisable
Options Vested
Weighted
Average
Weighted
Weighted
Weighted
Number
Remaining
Average
Number
Remaining
Average
of
Contractual
Exercise
of
Contractual
Exercise
Exercise Prices
Options
Life
Price
Options
Life
Price
(In years)
(In years)
$18.80-$40.00
5,375
9.0
$
24.35
758
9.0
$
29.38
$40.01–$80.00
13,729
8.8
51.21
7,473
8.8
51.22
$80.01–$120.00
10,553
8.0
102.93
6,881
8.0
102.56
$120.01–$160.00
12,625
7.3
155.28
10,060
7.2
155.26
$160.01-$391.60
1,124
7.1
391.60
1,124
7.1
391.60
43,406
8.2
$
99.55
26,296
7.9
$
118.41
The number of options and exercise prices
have been presented retroactively for the 1 for 40 December 17, 2019 reverse split.
Note 8: Related Parties
J. Stephen Holmes, our Sales Manager, is
an advisor to and significant shareholder of the Company. The Company incurred $180,000 and $540,000 in professional fees for management
consulting services in the three and nine months ended May 31, 2019 and $180,000 and $540,000 in the three and nine months ended
May 31, 2020, respectively.
On December 23, 2019, the Company issued
428 shares to each of Messrs. Higgins and White, both directors of the Company, in settlement of shares promised in December 2018
but not issued. The fair value on the date issued for the combined issuance of 856 shares was $75,000.
F-
23
Note 9: Contingencies
Certain conditions may exist as of the
date the financial statements are issued, which may result in a loss to the Company, but which will be resolved only when one or
more future events occur or fail to occur. The Company's management, in consultation with its legal counsel as appropriate,
assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment.
During the ordinary course of business,
the Company is subject to various claims and litigation. Management believes that the outcome of such claims or litigation will
not have a material adverse effect on the Company's financial position, results of operations or cash flow.
Convertible Note Related Litigation
During 2019, three of the Company's
note holders filed legal complaints. During the nine months ended May 31, 2020 all Convertible Note related litigation was resolved
as follows:
Alpha Capital v. ShiftPixy, Inc.
On July 3, 2019, the Company was served
with a complaint filing by Alpha Capital Anstalt ("ACA") in the United States District Court, Southern District of
New York alleging breach of contract in refusing to honor the conversion of certain convertible notes, specifically one for $310,000
submitted on June 20, 2019. ACA sought an injunction requiring the Company to issue 25,000 shares of common stock, damages for
the claimed breaches, and attorneys' fees. In August 2019, the court denied the motion for a preliminary injunction but granted
accelerated discovery which was completed in September 2019. As of November 30, 2019, the Company had convertible notes outstanding
with ACA for approximately $1.7 million consisting of $0.3 million of the June 2018 Notes, $0.2 million of the December 2018 Notes
and $1.2 million of the March 2019 Notes. In January 2020, Alpha was awarded a judgement for $500,000 consisting of the $310,000
of notes and $190,000 of damages and accrued interest of $51,000. On January 16, 2020 Alpha Capital converted all remaining June
2018 Note and December 2018 Note balances at $12.20 per share. On January 20, 2020, the Company paid the damages award including
interest in cash and resolved the litigation.
Dominion Capital LLC v. ShiftPixy, Inc.
On July 18, 2019, the Company was served
with a complaint filing by Dominion Capital LLC ("Dominion") in the United States District Court, Southern District
of New York alleging breach of contract in refusing to honor the conversion of certain convertible notes. Dominion sought injunctive
relief, injunction to prohibit buyback, breach of contract on the June 2018 Notes, the December 2018 Notes, and the March 2019
Notes, and declaratory judgment. In August 2019, the court denied the motion for a preliminary injunction but granted accelerated
discovery which was completed in September 2019. On January 22, 2020, the Company settled all claims and repaid all remaining notes
and cancelled all related warrants by issuing 83,593 shares of common stock on the date of issuance and paid cash of $1,322,000.
MEF I, LP v. ShiftPixy, Inc.
On August 27, 2019, MEF I, LP ("MEF")
filed a complaint in the United States District Court, Southern District of New York. MEF sought monetary relief of $2.1 million
and to appoint themselves as receiver of the Company. As of August 31, 2019, the Company had convertible notes outstanding to MEF
at approximately $0.7 million face value consisting of approximately $0.5 million and $0.2 million for the June 2018 Notes and
the December 2018 Notes, respectively. In November 2019, the Company filed a motion in response to the receiver request. On January
17, 2020, the Company and MEF I settled all claims, pursuant to which the Company repaid all note principal remaining, accrued
damages, and accrued interest and cancelled the June 2018 Warrants with the issuance of 20,000 shares of common stock and payment
of $725,000 in cash.
See also Note 5 above.
Kadima Ventures
The Company is in a dispute with its
former software developer, Kadima Ventures ("Kadima"), over incomplete but paid for software development work. In
May 2016, the Company entered into a contract with Kadima for the development and deployment of user features that were
proposed by Kadima for an original build cost of $2.2 million to complete. This proposal was later revised upward to
approximately $7.2 million to add certain features to the original proposal. As of the date of this Report, the Company has
paid approximately $11 million to Kadima, but has never been provided access to the majority of the promised software. Kadima
refused to continue development work, denied access to developed software, and refuses to surrender to the Company any
software that it has developed unless the Company pays an additional $12.0 million above the $11.0 million already paid. In
addition to the non-delivery of the paid for user features, Kadima asserts that it is owed additional funds to turn over the
work completed. In April 2019, Kadima filed a complaint against the Company in the Superior Court of the State of Arizona,
Maricopa County, alleging claims for breach of contract, promissory estoppel and unjust enrichment, and seeking damages in
excess of $11.0 million. The Company vigorously disputes and denies each of Kadima's claims, including that it owes any
sums to Kadima, and further believes that it is entitled, at a minimum, to a refund of a substantial portion of the sums that
it has already paid, along with the release of the software modules currently being withheld. In June, 2020 the Company
engaged in mediation discussions with Kadima in an attempt to resolve the matter, which was unsuccessful. On July 14, 2020
the Company filed an answer to Kadima's complaint, which denied Kadima's claims and asserted counter-claims for
breach of contract and fraud.
F-
24
Splond Litigation
On April 8, 2019, claimant, Corey Splond,
filed a class action lawsuit, on behalf of himself and other similarly situated individuals, in the Eighth Judicial District Court
for the State of Nevada, Clark County, naming the Company and its client as defendants, and alleging violations of certain wage
and hour laws. This lawsuit is in the initial stages, and the Company denies any liability. Even if the plaintiff ultimately prevails,
the potential damages recoverable will depend substantially upon whether the Court determines in the future that this lawsuit may
appropriately be maintained as a class action.  Further, in the event that the Court ultimately enters a judgment in favor
of plaintiff, the Company believes that it would be contractually entitled to be indemnified by its client against at least a portion
of any damage award.
Note 10: Subsequent Events
Litigation:
On June 29, 2020, the Company was served
with a complaint filed by one of its former clients in the Superior Court of the State of California, Orange County, naming the
Company, two of its officers, and one of its former subsidiaries as defendants. The Complaint asserts multiple causes of action,
all of which stem from the former client's claim that the Company is obligated to reimburse it for sums it paid in settlement
of a separate lawsuit brought by one of its employees pursuant to the California Private Attorneys General Act of 2004. This underlying
lawsuit alleged that our former client was responsible for multiple violations of the California Labor Code. The Company and the
officers named as defendants deny the former client's allegations, and the Company intends to defend the lawsuit vigorously.
Employee Stock Option Plan Increase:
On July 1, 2020, the Board of Directors
unanimously approved an increase in the number of shares of common stock issuable under our of the Company's 2017 Stock Option/Stock
Issuance Plan from 250,000 to 3,000,000, subject to approval by a majority of the Company's shareholders no later than the
next regularly scheduled annual shareholders meeting. Also on July 1, 2020, our Board approved the award, primarily to current
employees, and subject to shareholder approval no later than the next regularly scheduled annual meeting, of grants of options
to purchase 1,235,159 shares of the Company's common stock at an exercise price of $5.40 per share, which was the closing
price of our stock as reported by Nasdaq at the close of trading on the day of the Board's action. Of the options awarded,
995,000 are designated as "incentive stock options", and 280,159 are designated as "non-qualifying" or
"non-statutory" options under the Internal Revenue Code. These options have a 10-year life, and will vest over a four
year period, with 25% vesting on July 1, 2021, and the remainder vesting ratably on a quarterly basis over the following three
years.
Additional COVID-19 Lockdown:
On July 13, 2020 the Governor of the State
of California re-implemented additional COVID-19 related lockdown provisions in most of the counties in the state, including those
located in Southern California where most of our clients reside.  These lockdown provisions will likely require that in-person
dining be prohibited for at least one month.  We believe that the impact to our business will be primarily felt based upon
the negative effect on those clients that rely more heavily upon in-person dining, but we have not had an opportunity to evaluate
fully the probable impact of this lockdown development on our overall customer base as of the date of these condensed consolidated
financial statements.
Management has evaluated subsequent events
pursuant to the issuance of the interim unaudited consolidated financial statements and has determined that, other than listed
above, no other reportable subsequent events exist through the date of these condensed consolidated financial statements.
F-
25
Report
of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of
ShiftPixy, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated
balance sheets of ShiftPixy, Inc. (the "Company") as of August 31, 2019 and 2018, the related consolidated statements
of operations, stockholders' deficit and cash flows for each of the two years in the period ended August 31, 2019, and the
related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present
fairly, in all material respects, the financial position of the Company as of August 31, 2019 and 2018, and the results of its
operations and its cash flows for each of the two years in the period ended August 31, 2019, in conformity with accounting principles
generally accepted in the United States of America.
Explanatory Paragraph – Going Concern
The accompanying consolidated financial
statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 4, the
Company has a significant working capital deficiency, has incurred significant losses and needs to raise additional funds to meet
its obligations and sustain its operations. These conditions raise substantial doubt about the Company's ability to continue as
a going concern. Management's plans in regard to these matters are also described in Note 4. The consolidated financial statements
do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits.
We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB")
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with
the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have,
nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required
to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the
effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures
to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures
in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a
reasonable basis for our opinion.
/s/
    Marcum
llp
Marcum
llp
We have served as the Company's auditor since 2017.
New York, NY
December 13, 2019, except as to Note 16 as to which the date
is March 27, 2020 and Notes 3 and 13 as to which the date is May 19, 2020.
F-
26
ShiftPixy Inc.
Consolidated Balance Sheets
August 31,
2019
August 31,
2018
ASSETS
Current assets
Cash
$
1,561,000
$
1,650,000
Accounts receivable, net
86,000
36,000
Unbilled accounts receivable
1,402,000
547,000
Deposit – workers' compensation
235,000
83,000
Prepaid expenses
349,000
445,000
Other current assets
244,000
259,000
Current assets of discontinued operations
10,154,000
7,427,000
Total current assets
14,031,000
10,447,000
Fixed assets, net
3,320,000
2,990,000
Deposits – workers' compensation
754,000
110,000
Deposits and other assets
124,000
121,000
Non current assets of discontinued operations
5,567,000
2,134,000
Total assets
$
23,796,000
$
15,802,000
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable and other accrued liabilities
$
4,455,000
$
3,185,000
Payroll related liabilities
2,559,000
976,000
Convertible notes, net
3,351,000
6,172,000
Accrued workers' compensation costs
235,000
15,000
Default penalties accrual
1,800,000
3,500,000
Derivative liability
3,756,000
-
Current liabilities of discontinued operations
16,032,000
8,808,000
Total current liabilities
32,188,000
22,656,000
Non-current liabilities
Accrued workers' compensation costs
525,000
45,000
Non-current liabilities of discontinued operations
3,853,000
856,000
Total liabilities
36,566,000
23,557,000
Commitments and contingencies
Stockholders' deficit
Preferred stock, 50,000,000 authorized shares; $0.0001 par value
-
-
Common stock, 750,000,000 authorized shares; $0.0001 par value; 907,048 and 721,295 shares issued as of August 31, 2019 and August 31, 2018
-
-
Additional paid-in capital
32,505,000
18,468,000
Treasury stock, at cost- 13,953 shares and 0 shares as of August 31, 2019 and August 31, 2018
(325,000
)
-
Accumulated deficit
(44,950,000
)
(26,223,000
)
Total stockholders' deficit
(12,770,000
)
(7,755,000
)
Total liabilities and stockholders' deficit
$
23,796,000
$
15,802,000
The accompanying notes are an integral part of these consolidated financial statements.
F-
27
ShiftPixy Inc.
Consolidated Statements of Operations
For the Years Ended
August 31,
2019
August 31,
2018
Revenues (gross billings of $39.3 million and $12.1 million less worksite employee payroll cost of $33.9 million and $10.3 million, respectively for the year ended)
$
5,423,000
$
1,819,000
Cost of revenue
4,594,000
1,488,000
Gross profit
829,000
331,000
Operating expenses:
Salaries, wages, and payroll taxes
4,670,000
2.941,000
Commissions
200,000
93,000
Professional fees
3,918,000
2,078,000
Software development
1,209,000
3,828,000
General and administrative
6,502,000
4,189,000
Total operating expenses
16,499,000
13,129,000
Operating Loss
(15,670,000
)
(12,798,000
)
Other (expense) income:
Interest expense
(8,507,000
)
(1,751,000
)
Loss on debt extinguishment
(3,927,000
)
-
Change in fair value derivative and warrant liability
2,569,000
-
Gain (Loss associated with note defaults, net
811,000
(3,500,000
)
Total other (expense) income \
(9,054,000
)
(5,251,000
)
Loss from continuing operations
(24,724,000
)
(18,049,000
)
Total Income from discontinued operations, net of tax
5,997,000
1,226,000
Net income (loss)
$
(18,727,000
)
$
(16,823,000
)
Net Income (Loss) per share, Basic and diluted
Continuing operations
$
(30.23
)
$
(25.06
)
Discontinued operations
7.33
1.70
Net income (loss) per common share – Basic and diluted
$
(22.90
)
$
(23.36
)
Weighted average common shares outstanding – Basic and diluted
817,720
720,253
The accompanying notes are an integral part of these consolidated financial statements.
F-
28
ShiftPixy Inc.
Consolidated Statements of Stockholders'
Deficit
Common Stock
Issued
Additional
Paid-In
Treasury
Accumulated
Total
Stockholders'
Shares
Amount
Capital
stock
Deficit
Deficit
Balance, August 31, 2017
719,064
$
-
$
15,016,000
$
-
$
(9,400,000
)
$
5,616,000
Warrants exercised for cash
938
-
75,000
-
-
75,000
Warrants issued with convertible debt
-
-
859,000
-
-
859,000
Intrinsic value due to beneficial conversion feature
-
-
2,155,000
-
-
2,155,000
Stock-based compensation expense
-
-
200,000
-
-
200,000
Common stock issued for services rendered
1,293
-
163,000
-
-
163,000
Net Loss
-
-
-
-
(16,823,000
)
(16,823,000
)
Balance, August 31, 2018
721,295
$
-
$
18,468,000
$
-
$
(26,223,000
)
$
(7,755,000
)
Warrants exercised for cash
6,688
-
660,000
-
-
660,000
Common stock issued for services rendered
4,985
-
263,000
-
-
263,000
Stock-based compensation expense
-
-
369,000
-
-
369,000
Reclass of derivative liability upon conversion of related convertible notes
-
-
12,000
-
-
12,000
Common shares issued upon conversion of convertible notes and interest
105,776
-
8,904,000
-
-
8,904,000
Shares issued to induce debt conversion
68,304
-
3,829,000
-
-
3,829,000
Treasury stock received for settlement of note receivable
-
-
-
(325,000
)
-
(325,000
)
Net Loss
-
-
-
-
(18,727,000
)
(18,727,000
)
Balance, August 31, 2019
907,048
$
-
$
32,505,000
$
(325,000
)
$
(44,950,000
)
$
(12,770,000
)
The accompanying notes are an integral part of these consolidated
financial statements.
F-
29
ShiftPixy Inc.
Consolidated Statements of Cash Flows
For the
Years Ended
OPERATING ACTIVITIES
August 31,
2019
August 31,
2018
Net loss
$
(18,727,000
)
$
(16,823,000
)
Income from discontinued operations
5,997,000
1,226,000
Net loss from continuing operations
(24,724,000
)
(18,049,000
)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
837,000
272,000
Inducement loss on Note Conversions
3,829,000
-
Excess of derivative liabilities over Notes at issuance
2,588,000
-
Amortization of note discount and financing costs
5,607,000
951,000
Stock issued for services
263,000
163,000
Stock based compensation
369,000
200,000
Loss (Gain) associated with note defaults, net
(811,000
)
3,500,000
Interest paid in common shares
509,000
-
Change in fair value derivative and warrant liability
(2,569,000
)
-
Changes in operating assets and liabilities
Accounts receivable
(50,000
)
289,000
Unbilled accounts receivable
(857,000
)
(547,000
)
Prepaid expenses
97,000
(93,000
)
Other current assets
15,000
(243,000
)
Deposits – workers' compensation
(794,000
)
(124,000
)
Deposits and other assets
(3,000
)
6,000
Accounts payable
1,372,000
76,000
Payroll related liabilities
1,584,000
590,000
Accrued workers' compensation costs
700,000
60,000
Other current liabilities
(25,000
)
1,677,000
Net cash used in continuing operating activities
(12,063,000
)
(11,352,000
)
Net cash provided by(used in) discontinued operating activities
9,978,000
1,815,000
Net cash used in operating activities
(2,086,000
)
(9,538,000
)
INVESTING ACTIVITIES
Purchase of fixed assets
(1,167,000
)
(3,019,000
)
Issuance of related party note receivable
(325,000
)
-
Net cash used in investing activities
(1,492,000
)
(3,019,000
)
FINANCING ACTIVITIES
Proceeds from issuance of convertible notes
3,750,000
9,000,000
Issuance costs related to convertible notes
(485,000
)
(765,000
)
Repayment of convertible notes
(436,000
)
-
Proceeds from exercise of warrants
660,000
75,000
Net cash provided by financing activities
3,489,000
8,310,000
Net decrease in cash and cash equivalents
(89,000
)
(4,247,000
)
Cash - beginning of year
1,650,000
5,897,000
Cash - end of year
$
1,561,000
$
1,650,000
SUPPLEMENTAL INFORMATION:
Cash paid during the year for:
Interest
$
226,000
$
133,000
Income taxes
$
–
$
–
Non-cash investing and financing activities:
Conversion of debt and accrued interest into common stock
$
8,904,000
$
–
Additional principal to settle registration rights penalties
$
889,000
$
–
Discharge of related party note receivable for common shares
$
325,000
$
–
Allocated fair value of beneficial conversion feature
$
1,479,000
$
–
Allocated fair value of warrants included with convertible notes
$
2,271,000
$
–
Debt discount due to the intrinsic value of beneficial conversion feature
$
–
$
924,000
Debt discount due to warrants included with convertible notes
$
–
$
859,000
The accompanying notes are an integral part of these consolidated
financial statements.
F-
30
ShiftPixy. Inc.
Notes to Consolidated Financial Statements
Note 1: Nature of Operations
ShiftPixy, Inc. (the "Company")
was incorporated on June 3, 2015. The Company is a specialized staffing service provider that provides solutions for large contingent
part-time workforce demands, primarily in the restaurant, hospitality and maintenance service trades. The Company's focus
is on the restaurant industry in Southern California.
Both ShiftPixy, Inc and its wholly-owned
subsidiary, Shift Human Capital Management Inc. ("SHCM"), function as an employment administrative services ("EAS")
provider including services such as administrative and processing services, performing functions in the nature of a payroll processor,
human resources consultant, administrator of workers' compensation coverages and claims and provides workers compensation
coverage written in the names of the clients (as may be required by some states). The Company has built a human resources information
systems platform to assist in customer acquisition and hopes that this mechanism may become a way to onboard new clients into the
ShiftPixy Ecosystem when eligible clients recognize the value of the services provided by the parent Company.
Note 2: Summary of significant accounting
policies
Basis of Presentation
The consolidated financial statements of
the Company are prepared in conformity with accounting principles generally accepted in the United States of America ("U.S.
GAAP") and the rules and regulations of the Securities and Exchange Commission ("SEC").
Principles of Consolidation
The Company and its wholly-owned
subsidiary have been consolidated in the accompanying consolidated financial statements. All intercompany balances have been eliminated
in consolidation.
Use of Estimates
The preparation of financial
statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include:
·
Liability for legal contingencies;
·
Useful lives of software, property and equipment;
·
Assumptions made in valuing equity instruments;
·
Assumptions made in valuing embedded derivatives and freestanding equity-linked instrument classified
as liabilities;
·
Deferred income taxes and related valuation allowance; and
F-
31
·
Projected development of workers' compensation claims.
Revenue and Direct Cost Recognition
The Company provides an array
of human resources and business solutions designed to help improve business performance.
The Company accounts for its
EAS revenues in accordance with Accounting Standards Codification ("ASC") 605-45,
Revenue Recognition, Principal
Agent Considerations
. EAS solutions revenue is primarily derived from the Company's gross billings, which are based on
(i) the payroll cost of the Company's worksite employees and (ii) a mark-up computed as a percentage of payroll costs for
payroll taxes and workers compensation premiums.
The Company's revenues
are primarily attributable to fees for providing staffing solutions and EAS/HCM ("Employment Administration Services"/
"Human Capital Management") services. The Company recognizes revenue when all of the following criteria are met: (i)
persuasive evidence of an arrangement exists; (ii) the services have been rendered to the customer; (iii) the sales price is fixed
or determinable, and (iv) collectability is reasonably assured. The Company enters into contracts with its clients for EAS services
based on a stated rate and price in the contract. Contracts generally have a term of 12 months but are cancellable at any time
by either party with 30 days' notice. Contract performance obligations are satisfied as services are rendered and the term
between invoicing and when the performance obligations are satisfied is not significant. The Company does not have significant
financing components or significant payment terms for its customers and consequently has no material credit losses.
Gross billings are invoiced to
each client concurrently with each periodic payroll of the Company's worksite employees which coincides with the services
provided and which is typically a fixed percentage of the payroll processed. Revenues, which exclude the payroll cost component
of gross billings and therefore consist solely of markup are recognized ratably over the payroll period as worksite employees perform
their service at the client worksite. Revenues that have been recognized but not invoiced are included in unbilled accounts receivable
on the Company's consolidated balance sheets and were $1,137,000 and $310,000 for the years ended August 31, 2019 and August
31, 2018, respectively.
Consistent with the Company's
revenue recognition policy, direct costs do not include the payroll cost of its worksite employees. The cost of revenue associated
with the Company's revenue generating activities is primarily comprised of all other costs related to its worksite employees,
such as the employer portion of payroll-related taxes, employee benefit plan premiums and workers' compensation insurance
costs.
The Company has evaluated its
revenue recognition policies in conjunction with its future expected business which may be migrating to a staffing business model.
For fiscal years 2018 and 2019, there were no revenues which should have been evaluated under a staffing business model. Such a
staffing business model would have included the payroll costs in revenues with a corresponding increase to cost of revenues for
payroll costs associated with staffing services.
The Company reviewed the costs associated
with acquiring its customers under ASC 340-10
Other Assets and Deferred Costs
and determined that no such costs should be
capitalized. Costs relating to its customers are typically commissions paid as a percentage of some of the Company's revenue
components and are expensed as they are incurred because the terms of its contracts generally are cancellable by either party with
a 30-day notice. These costs are recorded in commissions in the Consolidated Statement of Operations.
Segment Reporting
The Company operates as one reportable
segment under ASC 280,
Segment Reporting
. The Chief operating decision maker regularly reviews the financial information
of the Company at a consolidated level in deciding how to allocate resources and in assessing performances. The Company expects
to operate in multiple segments in the future as its business evolves and will evaluate these changes prospectively.
Cash and Cash Equivalents
The Company considers all highly
liquid investments with an original maturity of three months or less when purchased as cash equivalents. The Company had no such
investments as of August 31, 2019 or 2018.
Concentration of Credit Risk
The Company maintains cash with
a commercial bank, which is insured by the Federal Insurance Corporation ("FDIC"). At various times, the Company has
deposits in this financial institution in excess of the amount insured by the FDIC. The Company has not experienced any losses
related to these balances and believes its credit risk to be minimal. As of August 31, 2019, there were $2,354,000 of cash in excess
of the amounts insured by the FDIC.
The Company had no individual
client that represented more than 10% of its annual revenues for either fiscal years 2019 or 2018. Four clients represent 92% of
total accounts receivable at August 31, 2019, compared to four clients representing approximately 86% of its total accounts receivable
at August 31, 2018.
Fixed Assets
Fixed assets are recorded at cost,
less accumulated depreciation and amortization. Expenditures for major additions and improvements are capitalized and minor
replacements, maintenance, and repairs are charged to expense as incurred. When fixed assets are retired or otherwise
disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included
in the results of operations for the respective period. Leasehold improvements are being amortized over the shorter of the
useful life or the initial lease term.
F-
32
Fixed assets are recorded at cost and are
depreciated over the estimated useful lives of the related assets using the straight-line method. The estimated useful lives of
property and equipment for purposes of computing depreciation are as follows:
Equipment:
5 years
Furnitures & Fixtures:
5 - 7 years
The amortization of these assets is included
in depreciation expense on the consolidated statements of operations.
Computer Software Development
Software development costs relate
primarily to software coding, systems interfaces and testing of the Company's proprietary employer information systems and
are accounted for in accordance with Accounting Standards Codification ("ASC") 350-40, Internal Use Software.
Internal software development costs are
capitalized from the time the internal use software is considered probable of completion until the software is ready for use. Business
analysis, system evaluation and software maintenance costs are expensed as incurred. The capitalized computer software development
costs are reported under the section fixed assets, net in the consolidated balance sheets.
The Company determined that there
were no material internal software development costs for the years ended August 31, 2018 or 2019. All capitalized software recorded
was purchased from third party vendors. Capitalized software development costs are amortized using the straight-line method over
the estimated useful life of the software, generally five years.
Impairment and Disposal of Long-Lived
Assets
The Company periodically evaluates
its long-lived assets for impairment in accordance with ASC 360-10,
Property, Plant, and Equipment
. ASC 360-10 requires
that an impairment loss be recognized for assets to be disposed of or held-for-use when the carrying amount of an asset is deemed
to not be recoverable. If events or circumstances were to indicate that any of its long-lived assets might be impaired, the Company
would assess recoverability based on the estimated undiscounted future cash flows to be generated from the applicable asset. In
addition, the Company may record an impairment loss to the extent that the carrying value of the asset exceeded the fair value
of the asset. Fair value is generally determined using an estimate of discounted future net cash flows from operating activities
or upon disposal of the asset.
Workers' compensation
Everest Program
Up to July 2018, a portion of the Company's
workers' compensation risk was covered by a retrospective rated policy, which calculates the final policy premium based on
the Company's loss experience during the term of the policy and the stipulated formula set forth in the policy. The Company
funds the policy premium based on standard premium rates on a monthly basis and based on the gross payroll applicable to workers
covered by the policy. During the policy term and thereafter, periodic adjustments may involve either a return of previously paid
premiums or a payment of additional premiums by the Company or a combination of both. If the Company's losses under that
policy exceed the expected losses under that policy, then the Company could receive a demand for additional premium payments.
The Company utilizes a third-party to estimate
its loss development rate, which is based primarily upon the nature of worksite employees' job responsibilities, the location
of worksite employees, the historical frequency and severity of workers' compensation claims, and an estimate of future cost
trends. Each reporting period, changes in the assumptions resulting from changes in actual claims experience and other trends are
incorporated into its workers' compensation claims cost estimates. As of August 31, 2019, the Company classified $0.1 million
in short term accrued workers' compensation and $0.1 million in long-term accrued workers' compensation in the Company's
consolidated balance sheets.
Sunz Program
Starting in July 2018, the Company's
workers' compensation program for its worksite employees has been provided through an arrangement with United Wisconsin Insurance
Company ("UWIC") and administered by Sunz. Under this program, the Company has financial responsibility for the first
$0.5 million of claims per occurrence. The Company provides and maintains a loss fund that will be used to pay claims and claim
related expenses. The workers' compensation insurance carrier established monthly funding requirements comprised of premium
costs and funds to be set aside for payment of future claims ("claim loss funds"). The level of claim loss funds is
primarily based upon anticipated worksite employee payroll levels and expected worker's compensation loss rates, as determined
by the insurance carrier. Monies funded into the program for incurred claims expected to be paid within one year are recorded as
Deposit - workers' compensation, a short-term asset, while the remainder of claim funds are included in deposits- workers'
compensation, a long-term asset in its consolidated balance sheets.
F-
33
As of August 31, 2019, the Company had
$0.2 million in deposit – workers' compensation classified as a short-term asset and $0.8 million classified as a long-term
asset.
The Company's estimate of incurred
claim costs expected to be paid within one year is included in short-term liabilities, while its estimate of incurred claim costs
expected to be paid beyond one year is included in long-term liabilities on its consolidated balance sheets. As of August 31, 2019,
the Company had short term accrued workers' compensation costs of $0.1 million and long-term accrued workers' compensation
costs of $0.5 million.
Because the Company bears the
financial responsibility for claims up to the level noted above, such claims, which are the primary component of its workers'
compensation costs, are recorded in the period incurred. Workers' compensation insurance includes ongoing health care and
indemnity coverage whereby claims are paid over numerous years following the date of injury. Accordingly, the accrual of related
incurred costs in each reporting period includes estimates, which takes into account the ongoing development of claims and therefore
requires a significant level of judgment. In estimating ultimate loss rates, the Company utilizes historical loss experience, exposure
data, and actuarial judgment, together with a range of inputs which are primarily based upon the worksite employee's job
responsibilities, their location, the historical frequency and severity of workers' compensation claims, and an estimate
of future cost trends. For each reporting period, changes in the actuarial assumptions resulting from changes in actual claims
experience and other trends are incorporated into its workers' compensation claims cost estimates. The estimated incurred
claims are based upon: (i) the level of claims processed during each quarter; (ii) estimated completion rates based upon recent
claim development patterns under the plan; and (iii) the number of participants in the plan.
Debt issuance Costs and Debt discount
Debt issuance costs and debt
discounts are being amortized over the lives of the related financings on a basis that approximates the effective interest method.
Costs and discounts are presented as a reduction of the related debt in the accompanying consolidated balance sheets. Portions
attributable to notes converted into equity are accelerated to interest expense upon conversion.
Beneficial Conversion Features
The intrinsic value of a beneficial conversion
feature ("BCF") inherent to a convertible note payable, which is not bifurcated and accounted for separately from the
convertible note payable and may not be settled in cash upon conversion, is treated as a discount to the convertible note payable.
This discount is amortized over the period from the date of issuance to the stated maturity using the straight-line method which
approximates the effective interest method. If the note payable is retired prior to the end of the contractual term, the unamortized
discount is expensed in the period of retirement to interest expense. In general, the BCF is measured by comparing the effective
conversion price, after considering the relative fair value of detachable instruments included in the financing transaction, if
any, to the fair value of the common shares at the commitment date to be received upon conversion.
Derivative financial instruments
When a Company issues debt that contains
a conversion feature, it first evaluates whether the conversion feature meets the requirement to be treated as a derivative: a)
the settlement amount is determined by one or more underlying, typically the price of the Company's stock, b) the settlement
amount is determined by one or more notional amounts or payments provisions or both, generally the number of shares upon conversion;
c) no initial net investment, which typically excludes the amount borrowed; and d) net settlement provision, which in the case
of convertible debt generally means the stock received upon conversion can be readily sold for cash. There are certain scope exceptions
from derivative treatment, but these typically exclude conversion features that provide for a variable number of shares. When ShiftPixy,
Inc., issues warrants to purchase its common stock, the Company evaluates whether they meet the requirements to be treated as derivative.
Generally, warrants would be treated as a derivative if the provisions of the warrants agreements create uncertainty as to a) the
number of shares to be issued upon exercise, or b) whether shares may be issued upon exercise. If the conversion feature within
convertible debt or warrants meet the requirements to be treated as a derivative, ShiftPixy estimates the fair value of the derivative
liability using the lattice-based option valuation model upon the date of issuance. If the fair value of the derivative liability
is higher than the face value of the convertible debt, the excess is immediately recognized as interest expense. Otherwise, the
fair value of the derivative is recorded as a liability with an offsetting amount recorded as a debt discount, which offsets the
carrying amount of the debt. The derivative liability is revalued at the end of each reporting period and any change in fair value
is recorded as a change in fair value in the consolidated statement of operations. The debt discount is amortized through interest
expense over the life of the debt. Derivative instrument liabilities and the host debt agreements are classified on the consolidated
balance sheets as current or non-current based on whether settlement of the derivative instrument could be required within twelve
months of the consolidated balance sheet date.
The accounting treatment of derivative
financial instruments requires that the Company record the embedded conversion option and warrants at their fair values as of the
inception date of the agreement and at fair value as of each subsequent balance sheet date. Any change in fair value is recorded
as non-operating, non-cash income or expense for each reporting period at each balance sheet date. The Company reassesses the classification
of its derivative instruments at each balance sheet date. If the classification changes as a result of events during the period,
the contract is reclassified as of the date of the event that caused the reclassification.
F-
34
Fair Value of Financial Instruments
FASB ASC 825, "Financial
Instruments," requires entities to disclose the fair value of financial instruments, both assets and liabilities
recognized and not recognized on the balance sheet, for which it is practical to estimate fair value. FASB 825 defines fair
value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between
willing parties. At August 31, 2019 and August 31, 2018, the carrying value of certain financial instruments (cash, accounts
receivable and payable, and other financial instruments) approximates fair value due to the short-term nature of the
instruments. Convertible notes approximate fair value based on comparison of terms from similar instruments in the
marketplace.
The Company measures fair value under a
framework that utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.
The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level
1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of inputs which prioritize
the inputs used in measuring fair value are:
·
Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets
or liabilities in active markets that the Company has the ability to access.
·
Level 2: Inputs to the valuation methodology include:
·
Quoted prices for similar assets or liabilities in active markets;
·
Quoted prices for identical or similar assets or liabilities in inactive markets
·
Inputs other than quoted prices that are observable for the asset or liability;
·
Inputs that are derived principally from or corroborated by observable market data by correlation
or other means.
·
If the asset or liability has a specified (contractual) term, the level 2 input must be observable
for substantially the full term of the asset or liability
·
Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value
measurement.
The Company did not have any
Level 1 or Level 2 assets and liabilities at August 31, 2019. The derivative liabilities associated with its March 2019 Convertible
Notes (see Note 9), consisted of conversion feature derivatives and warrants at August 31, 2019, are Level 3 fair value measurements.
The table below sets forth a summary of
the changes in the fair value of the Company's derivative liabilities classified as Level 3 for the year ended August 31,
2019:
Conversion
Features
Warrant
Liability
Total
Balance at August 31, 2018
$
-
$
-
$
-
Initial recognition
2,421,000
3,917,000
6,338,000
Reclassification to equity
(13,000
)
(13,000
)
Change in fair value
444,000
(3,013,000
)
(2,569,000
)
Balance at August 31, 2019
$
2,852,000
$
904,000
$
3,756,000
At August 31, 2019, the Company
estimated the fair value of the conversion feature derivatives embedded in the convertible debentures based on weighted probabilities
of assumptions used in the Lattice-based option valuation model. The key valuation assumptions used consists, in part, of the price
of the Company's common stock, a risk free interest rate based on the average yield (1.76%) of a Treasury note and expected
volatility of the Company's common stock (100%) all as of the measurement dates, and the various estimated reset exercise
prices weighted by probability.
At August 31, 2019, the Company estimated
the fair value of the warrant liabilities based on the Lattice-based option valuation model. The key valuation assumptions used
consists, in part, of the price of the Company's common stock, a risk-free interest rate based on the average yield of a
Treasury note (1.39%) and expected volatility of the Company's common stock (119%) all as of the measurement dates.
When the Company changes its
valuation inputs for measuring financial assets and liabilities at fair value, either due to changes in current market conditions
or other factors, it may need to transfer those assets or liabilities to another level in the hierarchy based on the new inputs
used. The Company recognizes these transfers at the end of the reporting period that the transfers occur. For the periods ended
August 31, 2019 and August 31, 2018, there were no transfers of financial assets or financial liabilities between the hierarchy
levels.
Advertising Costs
The Company expenses advertising costs
when incurred. Advertising costs incurred amounted to approximately $1.2 million and $0.5 million for the years ended August 31,
2019, and 2018, respectively.
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35
Research and Development
During the years ended August
31, 2019 and 2018 the Company incurred research and development costs of approximately $2.3 million and $4.0 million, respectively.
All costs were related to internally developed and contracted software and related technology for the Company's HRIS system
and related mobile application. In addition, $0.9 million and $2.8 million of software costs were capitalized for the years ended
August 31, 2019 and 2018, respectively.
Income Taxes
The Company accounts for income taxes pursuant
to Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 740, "Income
Taxes." Under FASB ASC 740 deferred income taxes are provided on a liability method whereby deferred tax assets are recognized
for deductible temporary differences and operating loss carryforwards and deferred tax liabilities are recognized for taxable temporary
differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some
portion or all of the deferred tax assets will not be realized. The provision for income taxes represents the tax expense for the
period, if any, and the change during the period in deferred tax assets and liabilities. Deferred tax assets and liabilities are
adjusted for the effects of changes in tax laws and rates on the date of enactment.
FASB ASC 740 also provides criteria for
the recognition, measurement, presentation and disclosure of uncertain tax positions. Under FASB ASC 740, the impact of an uncertain
tax position on the income tax return may only be recognized at the largest amount that is more-likely-than-not to be sustained
upon audit by the relevant taxing authority.
Share-Based Compensation
At August 31, 2019 and 2018, the Company
has one stock-based compensation plan under which the Company may issue both share and stock option awards. The Company accounts
for this plan under the recognition and measurement principles of ASC 718, Compensation- Stock Compensation, which requires all
share-based payments to employees, including grants of employee stock options, to be recognized in the consolidated statements
of operations on their fair values. Share grants are valued at the closing market price on the date of issuance which approximates
fair value.
For option grants, the grant
date fair value is determined using the Black-Scholes-Merton ("Black-Scholes") pricing model. Option grants are typically
issued with vesting depending on a term of service. For all employee stock options granted, the Company recognizes expense over
the requisite service period over the employee's requisite service period (generally the vesting period of the equity grant).
The Company's option pricing
model requires the input of highly subjective assumptions, including the expected stock price volatility and expected term. The
expected volatility is based on the historical volatility of the Company since its Initial Public Offering. Any changes in these
highly subjective assumptions significantly impact stock-based compensation expense.
Following the adoption of Accounting Standards
Update ASU 2016-09, the Company elected to account for forfeitures as they occur. Any compensation cost previously recognized for
an unvested award that is forfeited because of a failure to satisfy a service condition is reversed in the period of the forfeiture.
Earnings (Loss) Per Share
The Company utilizes FASB ASC 260, "Earnings
per Share." Basic loss per share is computed by dividing loss attributable to common stockholders by the weighted-average
number of common shares outstanding during the reporting period. Diluted loss per share is computed similar to basic loss per share
except that the denominator is increased to include additional common share equivalents available upon exercise of stock options
and warrants using the treasury stock method. Dilutive common share equivalents include the dilutive effect of in-the-money share
equivalents, which are calculated based on the average share price for each period using the treasury stock method, excluding any
common share equivalents if their effect would be anti-dilutive.
The table below shows earnings per common
share and diluted earnings per common share and reconciles the numerator and denominator of both earnings per common share calculations.
For the year ended August 31,
2019
2018
Losses per common share:
Loss from continuing operations
$
(24,724,000
)
$
(18,049,000
)
Income from continuing operations
5,997,000
1,226,000
Net loss allocated to common shareholders
$
(18,727,000
)
$
(16,823,000
)
Weighted average shares outstanding
817,720
720,253
Loss from continuing operations per common share
$
(30.24
)
$
(25.06
)
Income from continuing operations per common share
7.34
1.70
Basic and Fully Diluted net loss per common share
$
(22.90
)
$
(23.36
)
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36
Securities that are excluded from the calculation
of weighted average dilutive common shares, because their inclusion would have been antidilutive are:
For the year
ended
August 31, 2019
For the year
ended
August 31, 2018
Options
50,749
33,594
Senior Secured Convertible Notes (Note 9)
491,868
100,402
Warrants
107,410
94,470
Total potentially dilutive shares
650,027
228,466
Treasury Stock
Treasury stock represents shares
of common stock provided to the company in satisfaction of the related party advance, described in Note 12: Related Parties. Shares
provided are recorded at cost as treasury stock. The Company intends to retire all treasury stock outstanding as of August 31,
2019 in fiscal 2020. Any treasury stock retired is recorded to additional paid-in capital, limited to the amount previously credited
to additional paid-in capital, if any. Any excess is charged to accumulated deficit.
Revision of Financial Statements
During 2019, the Company determined that
it had improperly calculated the volatility of the Company's common stock, which had been used to calculate the relative
fair value of the warrants issued in connection with the June 2018 convertible notes. This resulted in an overstatement of the
net carrying amount of the convertible note by the understatement of the corresponding debt discount with the offset to additional
paid-in capital as of February 28, 2019. The Company assessed the materiality of the misstatements in accordance with Staff Accounting
Bulletin No. 99, "Materiality" and No. 108, "Quantifying Misstatements", and concluded that this error
was not qualitatively material on the Company's consolidated balance sheet, statements of operations, statements of cash
flows, statement of stockholders' deficit and net loss for the periods then ended.
The effect of this revision on the line
items within the Company's consolidated financial statements as of August 31, 2018, was as follows:
August 31, 2018
As Previously
Reported
Adjustments
As Restated
Convertible note, net
$
7,156,000
(985,000
)
$
6,171,000
Additional Paid-In Capital
17,234,000
1,231,000
18,465,000
Accumulated deficit
(25,977,000
)
(246,000
)
(26,223,000
)
Net Loss
$
(16,577,000
)
(246,000
)
$
(16,823,000
)
Net loss per share – Basic and diluted
$
(23.02
)
-
$
(23.36
)
Reclassifications
Certain reclassifications have been made
to prior year's data to confirm to the current year's presentation. Such reclassifications had no impact on the Company's
financial condition, operating results, cash flows or stockholder's equity.
Significant Recent Accounting Standards
In May 2014, the FASB issued
ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which outlines a single comprehensive model for entities to
use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including
industry-specific guidance. The core principle of the revenue model is that "an entity recognizes revenue to depict the transfer
of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled
in exchange for those goods or services." The standard provides enhancements to the quality and consistency of how revenue
is reported by companies, while also improving comparability in the financial statements of companies reporting using International
Financial Reporting Standards or U.S. GAAP. The new standard also will require enhanced revenue disclosures, provide guidance for
transactions that were not previously addressed comprehensively, and improve guidance for multiple-element arrangements. This accounting
standard becomes effective for the Company for reporting periods beginning after December 15, 2018, and interim reporting periods
within annual reporting periods beginning after December 15, 2019. Early adoption is permitted for annual reporting periods (including
interim periods) beginning after December 15, 2016. This new standard permits the use of either the retrospective or cumulative
effect transition method.
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37
In March 2016, the FASB issued ASU No.
2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations. The purpose of this standard
is to clarify the implementation of guidance on principal versus agent considerations related to ASU 2014-09. The standard has
the same effective date as ASU 2014-09 described above.
In April 2016, the FASB issued ASU No.
2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which provides clarity
related to ASU 2014-09 regarding identifying performance obligations and licensing implementation. The standard has the same effective
date as ASU 2014-09 described above.
In May 2016, the FASB issued ASU 2016-12:
Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which provides narrow scope
improvements and practical expedients related to ASU 2014-09. The purpose of this standard is to clarify certain narrow aspects
of ASU 2014-09, such as assessing the collectability criterion, presentation of sales taxes, and other similar taxes collected
from customers, noncash considerations, contract modifications at transition, completed contracts are transition, and technical
correction. The standard has the same effective date as ASU 2014-09 described above.
In December 2016, the FASB issued ASU 2016-20:
Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers. The amendments in this standard affect
narrow aspects of guidance issued in ASU 2014-09. The standard has the same effective date as ASU 2014-09 described above. Topic
606 is effective for the company beginning with the fiscal year ending August 31, 2020. The Company has evaluated Topic 606 and
we plan to utilize the modified retrospective transition method upon the adoption of ASC 606. The Company is still in the process
of finalizing its evaluation for the adoption of ASC 606, however, no material difference is expected.
In February 2016, the FASB issued new accounting
guidance on leases ASU 2016-02, Leases. The new standard requires that a lessee recognize assets and liabilities on the balance
sheet for leases with terms longer than 12 months. The recognition, measurement and presentation of lease expenses and cash flows
by a lessee will depend on its classification as a finance or operating lease. The guidance also includes new disclosure requirements
providing information on the amounts recorded in the financial statements.
In March 2019, the FASB issued ASU 2019-01,
which added guidance to ASC 842 that is similar to the guidance in ASC 840-10-55-44 and states that, for lessors that are not manufacturers
or dealers, the fair value of the underlying asset is its cost, less any volume or trade discounts, as long as there isn't
a significant amount of time between acquisition of the asset and lease commencement. The amendments also clarify that lessors
in the scope of ASC 942 must classify principal payments received from sales-type and direct financing leases in investing activities
in the statement of cash flows. In addition, the amendments clarify that entities are not subject to the transition disclosure
requirements in ASC 250-10-50-3 related to the effect of an accounting change on certain interim period financial information.
In November 2019, the FASB issued ASU 2019-10,
which provides a one-year deferral of the effective dates of the new lease standard. The ASU is effective for fiscal years beginning
after December 15, 2020 and interim periods within fiscal years beginning after December 15, 2021. The Company is currently evaluating
the impact that this standard will have on its consolidated financial statement.
In June 2018, the FASB issued ASU 2018-07,
which simplifies the accounting for nonemployee share-based payment transactions. The amendments specify that Topic 718 applies
to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor's
own operations by issuing share-based payment awards. The standard will be effective for the Company in the first quarter of fiscal
year 2020, although early adoption is permitted (but no sooner than the adoption of Topic 606). The Company does not expect that
the adoption of this ASU will have a significant impact on its consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13,
Fair Value Measurement (Topic 820). The ASU eliminates such disclosures as the amount of and reasons for transfers between Level
1 and Level 2 of the fair value hierarchy. The ASU adds new disclosure requirements for Level 3 measurements. This ASU is effective
for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted
for any eliminated or modified disclosures. The Company is evaluating the effect of adopting this new accounting guidance to determine
the impact it may have on the Company's financial statements.
In November 2016, the FASB issued Accounting
Standards Update 2016-18, Statement of Cash Flows (Topic 230): Restricted cash (ASU 2016-18), which requires companies to include
amounts generally described as restricted cash and restricted cash equivalents in cash and cash equivalents when reconciling beginning-of-period
and end-of-period total amounts shown in the statement of cash flow. This guidance is effective for fiscal year beginning after
December 15, 2018 and early adoption is permitted. The Company does not expect the adoption of ASU 2016-18 to have a material impact
on the Company's financial statements.
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Note 3 – Discontinued Operations
On January 3, 2020, the Company
executed an asset purchase agreement assigning client contracts comprising approximately 88% of its quarterly revenue through
the date of the transaction, including 100% of its existing professional employer organization ("PEO") business
effective as of December 31, 2019 and the transfer of $1.5 million of working capital assets, including cash balances and
certain operating assets associated with the assigned client contracts included in the agreement (the "Asset
Sale"). The following discloses the amounts disclosed as discontinued operations in the recast financial statements
In accordance with the provisions of ASC
205-20,
Presentation of Financial Statements
, we have separately reported the assets and liabilities of the discontinued
operations in the consolidated balance sheets. The assets and liabilities have been reflected as discontinued operations in the
consolidated balance sheets as of August 31, 2019 and 2018 and consist of the following:
August 31, 2019
August 31, 2018
Cash
$
-
$
-
Accounts receivable and unbilled account receivable
8,261,000
5,721,000
Prepaid expenses and other current assets
171,000
118,000
Deposits – workers' compensation
1,722,000
1,588,000
Total current assets
10,154,000
7,427,000
Fixed assets, net
40,000
42,000
Deposits – workers' compensation
5,527,000
2,091,000
Total assets
$
15,721,000
$
9,560,000
Accounts payable and other current liabilities
$
457,000
$
18,000
Payroll related liabilities
13,853,000
8,501,000
Accrued workers' compensation cost
1,722,000
290,000
Total current liabilities
16,032,000
8,808,000
Accrued workers' compensation cost
3,853,000
856,000
Total liabilities
19,885,000
9,664,000
Net assets/(liability)
$
(4,164,000
)
$
(104,000
)
In accordance with the provisions of ASC 205-20, we have separately
reported the results of operations from in the results of continuing operations in the consolidated statements of operations. The
results of operations from discontinued operations for the years ended August 31, 2019 and 2018, have been reflected as discontinued
operations for the years ended December 31, 2019 and 2018, and consist of the following:
For the Year Ended
August 31, 2019
August 31, 2018
Revenues (gross billings of $313.3 million and $210.3 million less worksite employee payroll cost of $265.3 million and $177.2 million, respectively for the year ended)
$
48,013,000
$
33,139,000
Cost of revenue
36,452,000
27,970,000
Gross profit (loss)
11,561,000
5,169,000
Operating expenses:
Salaries, wages and payroll taxes
3,032,000
2,442,000
Commissions
2,532,000
1,501,000
Total operating expenses
5,564,000
3,943,000
Operating income from discontinued operations
5,997,000
1,226,000
Provision for income tax expense from discontinued operations
-
-
Net income from discontinued operations
$
5,997,000
$
1,226,000
The Company utilized fully reserved net
operating loss carryforwards of approximately $7,223,000 to offset income from discontinuing operations as follows:
For the Year Ended
August 31, 2019
August 31, 2018
Provision of income tax expense:
Federal tax expense
$
1,260,000
$
265,000
State tax expense
540,000
92,000
Total tax expense
1,800,000
357,000
Tax benefit for utilization of tax loss carryforwards
(1,800,000
)
(357,000
)
Provision for income tax expense from discontinued operations
$
--
$
--
F-
39
Note 4: Going Concern
As of August 31, 2019, the Company had
cash of $1.6 million and a working capital deficiency of $15.9 million. During the year ended August 31, 2019, the Company used
approximately $2.1 million of cash in its operations, of which $9.5 million was used in continuing operations and $7.4 million
was provided by discontinued operations. Cash used in continuing operations consisted of a net loss of $24.7 million, reduced by
net non-cash charges of $10.6 million and working capital changes of $4.6 million. Cash provided by discontinued operations consisted
of income of $6.0 million and $1.4 million in working capital changes. For the most recent quarter ending August 31, 2019, cash
flows used in operations were $0.5 million. The Company has incurred recurring losses resulted in an accumulated deficit of $45
million as of August 31, 2019. These conditions raise substantial doubt as to the Company's ability to continue as going
concern within one year from issuance date of the financial statements.
The ability of the Company to continue
as a going concern is dependent upon generating profitable operations in the future and obtaining additional funds by way of public
or private offering to meet the Company's obligations and repay its liabilities when they become due. The Company has a recurring
revenue business model that generated $12.4 million of gross profit for the year of which $3.6 million is attributable to the fourth
fiscal quarter. Approximately 12% or of the recurring business gross profit represents continuing operations. On an annualized
basis, a projected twelve-month gross profit based solely on the fourth quarter would be $14.4 million in total or approximately
$1.7 million from continuing operations. For the year ended August 31, 2019, the Company had $17.0 million of continuing operating
expenses, of which $1.4 million was non-cash depreciation and share based compensation. Of the remaining $15.6 million, $4.9 million
was for software development and marketing related spending for the HRIS and mobile application systems, including licensing and
related salaries and consulting fees, with an additional $1.4 million for legal services, settlements and costs.
The Company's plans and expectations
for the next 12 months include raising additional capital to help fund expansion of its operations, including the continued development
and support of its IT and HR platform and settling its outstanding debt as it comes due. The Company engaged an investment banking
firm to assist the Company in (i) preparing information materials, (ii) advising the Company concerning the structure, price and
conditions and (iii) organizing the marketing efforts with potential investors in connection with a financing transaction. With
the added development and marketing investment into the mobile application, the Company anticipates the need to raise additional
capital coupled with using its actual cash position and continue leveraging its payables until it reaches breakeven at about 25,000
worksite employees.
Historically, the Company's principal
source of financing has come through the sale of its common stock and issuance of convertible notes. The Company successfully completed
an Initial Public Offering (IPO) on NASDAQ on June 29, 2017, raising a total of $12 million ($10.9 million net of costs). In June
2018, the Company completed a private placement of 8% senior secured convertible notes to institutional investors raising $9 million
of gross proceeds ($8.4 million net of costs). In March 2019, the Company completed a private placement of senior secured notes
to institutional investors raising $3.75 million ($3.3 million net of costs).
The Company believes that its
current cash position, along with its revenue growth and the financing from potential institutional investors will be sufficient
to fund its operations for at least a year from the date these financials are available. If these sources do not provide the capital
necessary to fund the Company's operations during the next twelve months from the date of this report, the Company may need
to curtail certain aspects of its operations or expansion activities, consider the sale of its 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 terms advantageous to the Company or that any such additional financing would be available to the Company. As such, these conditions
raise substantial doubt as to its ability to continue as a going concern within one year from the issuance date of the financial
statements. These consolidated financial statements do not include any adjustments from this uncertainty.
Note 5: Accounts Receivable
Accounts receivables, which represent
outstanding gross billings to clients, are reported net of allowance for doubtful accounts. The Company establishes an allowance
for doubtful accounts based on management's assessment of the collectability of specific accounts and by making a general
provision, based on its past experiences, for other potentially uncollectible amounts. The provision for doubtful accounts during
the fiscal years ending August 31, 2019 and 2018 was not material.
The Company makes an accrual
at the end of each accounting period for the obligations associated with the earned but unpaid wages of its worksite employees
and for the accrued gross billings associated with such wages. These accruals are included in unbilled accounts receivable. The
Company generally requires clients to pay invoices for service fees no later than 1 day prior to the applicable payroll date. As
such the Company generally does not require collateral.
F-
40
Note 6: Fixed Assets
Fixed assets consisted of the following
at August 31, 2019 and 2018:
August 31,
2019
August 31,
2018
Equipment
$
282,000
$
154,000
Furniture & fixtures
412,000
329,000
Software
3,737,000
2,797,000
Leasehold improvements
41,000
41,000
4,472,000
3,321,000
Accumulated depreciation & amortization
(1,152,000
)
(331,000
)
Fixed assets, net
$
3,320,000
$
2,990,000
Depreciation and amortization expense for
the years ended August 31, 2019 and 2018, was $839,000 and $274,000, respectively.
Software consists primarily of
customized software purchased from third party providers and which is incorporated into the Company's HRIS platform and related
mobile application.
Information related to capitalized software
costs is as follows:
August 31,
2019
August 31,
2018
Software costs capitalized
$
3,737,000
$
2,797,000
Software costs amortized
(904,000
)
(190,000
)
Software costs, Net
$
2,833,000
$
2,607,000
The Company has evaluated certain development
costs of its software solution in accordance with ASC Topic 350-40, Internal Use Software, which outlines the stages of computer
software development and specifies when capitalization of costs is required. Projects that are determined to be in the development
stage are capitalized and amortized over their useful lives of five years. Projects that are determined to be within the preliminary
stage are expensed as incurred. For the years ended August 31, 2019 and 2018 no internally developed software was capitalized.
A substantial portion of the capitalized software is attributable to a third party with whom the Company is in litigation. The
Company evaluated the asset value as of August 31, 2019 and determined that no asset impairment is required for this customized
third party software.
Amortization expense included in the depreciation
and amortization expense disclosed above for the years ended August 31, 2019 and 2018, was $714,000 and $190,000, respectively.
The weighted average remaining life of amortizable software assets was 3.56 years as August 31, 2019. Amortization expense for
capitalized software is expected to approximate the following for each of the next five fiscal years and thereafter:
Amount
2020
$
814,000
2021
814,000
2022
744,000
2023
458,000
2024
$
3,000
Note 7: Workers Compensation
The Company has two workers compensation
programs in effect during the years ended August 31, 2019 and 2018. The Everest program covered corporate and worksite employees
from July 1, 2017 until June 30, 2018 and the SUNZ program covered corporate and worksite employees since July 1, 2018. The following
table summarizes the workers' compensation deposit for the years ended August 31, 2019 and 2018:
Everest
Program
SUNZ
Program
Total
Workers' Comp Deposit at August 31, 2017
$
2,335,000
$
-
$
2,335,000
Premiums paid
(819,000
)
-
(819,000
)
Paid in deposits
-
2,386,000
2,386,000
Claim losses
-
(28,000
)
(28,000
)
Workers' Comp Deposit at August 31, 2018
$
1,516,000
2,358,000
$
3,874,000
Premiums paid
(144,000
)
-
(144,000
)
Paid in deposits
-
7,730,000
7,730,000
Claim losses
(149,000
)
(1,850,000
)
(1,999,000
)
Deposit refund
(1,223,000
)
-
(1,223,000
)
Workers' Comp Deposit at August 31, 2019
$
-
8,238,000
$
8,238,000
Less Current Amount
-
(1,957,000
)
(1,957,000
)
Long Term Balance at August 31, 2019
$
-
6,281,000
$
6,281,000
F-
41
The following reconciles the workers comp
deposits for continuing and discontinued operations as of August 31, 2018 and 2019:
Everest
Program
SUNZ
Program
Total
Workers' comp deposit at August 31, 2018
$
1,516,000
$
2,358,000
$
3,874,000
Workers' comp deposit from discontinued operations (See Note 3)
(1,441,000
)
(2,240,000
)
(3,681,000
)
Workers' comp deposit from continuing operations
75,000
118,000
193,000
Less Current Amount
(32,000
)
(51,000
)
(83,000
)
Long Term Balance at August 31, 2018
$
43,000
$
67,000
$
110,000
Everest
Program
SUNZ
Program
Total
Workers' comp deposit at August 31, 2019
$
-
$
8,238,000
$
8,238,000
Workers' comp deposit from discontinued operations (See Note 3)
-
(7,249,000
)
(7,249,000
)
Workers' comp deposit from continuing operations
-
989,000
989,000
Less Current Amount
-
(235,000
)
(235,000
)
Long Term Balance at August 31, 2019
$
-
$
754,000
$
754,000
The following table summarizes the accrued
workers' compensation liability for the years ended August 31, 2019 and 2018:
Everest
Program
SUNZ
Program
Total
Workers' Comp Liability at August 31, 2017
$
-
$
-
$
-
Claim loss development
572,000
662,000
1,234,000
Paid in losses
-
(28,000
)
(28,000
)
Workers' Comp Liability at August 31, 2018
572,000
634,000
1,206,000
Claim loss development
-
7,129,000
7,129,000
Paid in losses
(149,000
)
(1,850,000
)
(1,999,000
)
Workers' Comp Liability at August 31, 2019
423,000
5,913,000
6,336,000
Less Current Amount
(159,000
)
(1,798,000
)
(1,957,000
)
Long Term Balance at August 31, 2019
$
264,000
4,115,000
$
4,379,000
The following reconciles the workers comp
liabilities for continuing and discontinued operations as of August 31, 2018 and 2019:
Everest
Program
SUNZ
Program
Total
Workers' comp liability at August 31, 2018
$
572,000
$634,000
$
1,206,000
Workers' comp liability from discontinued operations (See Note 3)
(544,000
)
(602,000
)
(1,145,000
)
Workers' comp liability from continuing operations
28,000
32,000
60,000
Less Current Amount
(7,000
)
(8,000
)
(15,000
)
Long Term Balance at August 31, 2018
$
21,000
24,000
$
45,000
Everest
Program
SUNZ
Program
Total
Workers' comp liability at August 31, 2019
$
423,000
$5,913,000
$
6,336,000
Workers' comp liability from discontinued operations (See Note 3)
(372,000
)
(5,204,000
)
(5,576,000
)
Workers' comp liability from continuing operations
51,000
709,000
760,000
Less Current Amount
(16,000
)
(219,000
)
(235,000
)
Long Term Balance at August 31, 2019
$
35,000
490,000
$
525,000
Note 8: Accrued Payroll and
Related Liabilities
Accrued payroll liabilities consisted of
the following at August 31, 2019 and 2018:
F-
42
August 31,
2019
August 31,
2018
Accrued Payroll
$
899,000
$
459,000
Accrued Payroll Taxes
1,297,000
230,000
Corporate employee accrued paid time off
363,000
287,000
Accrued Payroll and related liabilities
$
2,559,000
$
976,000
Accrued payroll and accrued payroll
taxes represent payroll liabilities associated with its client worksite employees as well as corporate employees of the Company.
Note 9: Senior Secured Convertible
Notes Payable (in default)
The Company has issued three
series of senior secured convertible notes payable. In general, each series is convertible into common shares of the Company. Senior
Secured Convertible Notes Payable consist of the following:
August 31,
August 31,
2019
2018
Senior Secured Convertible notes, Principal
$
6,808,000
$
10,000,000
Less debt discount and deferred financing costs
(3,457,000
)
(3,829,000
)
Total outstanding convertible notes, net
$
3,351,000
$
6,171,000
Less current portion of convertible notes payable
3,351,000
)
(6,171,000
)
Long-term convertible notes payable
$
-
$
-
The following table rolls forward
the Convertible Notes Payable balances from August 31, 2018 to August 31, 2019:
Gross
Principal
Deferred
Financing
Costs
Note
Discount
Net
Balance at August 31, 2018
$
10,000,000
$
(617,000
)
$
(3,212,000
)
$
6,171,000
Issuance of Notes Payable
5,639,000
(485,000
)
(4,750,000
)
404,000
Conversion of Principal into Equity
(8,395,000
)
-
-
(8,395,000
)
Amortization of Interest Expense
-
758,000
4,849,000
5,607,000
Repayment of Principal in cash
(436,000
)
-
-
(436,000
)
Balance at August 31, 2019
$
6,808,000
$
(344,000
)
$
(3,113,000
)
$
3,351,000
Less Current Amount
(6,808,000
)
344,000
3,113,000
(3,351,000
)
Long Term Balance at August 31, 2019
$
-
$
-
$
-
$
-
The following table outlines the gross
principal balance rollforward for each series from August 31, 2018 to August 31, 2019. Each series is described in further detail
below.
June 2018
Notes
December 2018
Notes
March 2019
Notes
Total
Gross Balance at August 31, 2018
$
10,000,000
$
-
$
-
$
10,000,000
Issuance of Notes Payable
-
889,000
4,750,000
5,639,000
Repayment of Principal in cash
(436,000
)
-
-
(436,000
)
Conversion of Principal into Equity
(8,098,000
)
(22,000
)
(275,000
)
(8,395,000
)
Gross Balance at August 31, 2019
$
1,466,000
$
867,000
$
4,475,000
$
6,808,000
Less Discount and Debt Issuance Costs:
Debt Issuance Costs
(27,000
)
-
(317,000
)
(344,000
)
Deferred Financing Costs
(5,000
)
-
(3,108,000
)
(3,113,000
)
Carrying Balance at August 31, 2019
$
1,434,000
$
867,000
$
1,050,000
$
3,351,000
Less Current Amount
(1,434,000
)
(867,000
)
(1,050,000
)
(3,351,000
)
Long Term Balance at August 31, 2019
$
-
$
-
$
-
$
-
During the years ended August 31, 2019
and 2018 the Company amortized $5,607,000 and $951,000, respectively, to interest expense from the combined amortization of deferred
financing costs and note discounts recorded at issuance for the June 2018 and March 2019 Notes.
F-
43
During the year ended August
31, 2019, investors converted $8,395,000 of principal and $509,000 of interest expense into approximately 172,500 shares of common
stock of the company. The Company has been converting the convertible notes in its shares of common stock at a fifteen percent
(15%) discount to the lowest volume weighted average price ("VWAP") whereas the terms of the agreement state that such
discount to the original conversion price of $99.60 should have been initiated on or after the maturity date of the convertible
notes or September 4, 2019. The accounting standards require the recognition through earnings of an inducement charge equal to
the fair value of the consideration delivered in excess of the consideration issuable under the original conversion terms. Included
in the 172.500 shares issued for the 2019 conversions were approximately 67,500 shares valued at $3.9 million on the date of issuance
at fair value and issued related to consideration delivered in excess of the consideration issuable under the original conversion
terms. This resulted in a non-cash charge of $3.9 million for the year ended August 31, 2019 recorded as loss on debt extinguishment
in the statement of operations. There were no conversions of convertible notes during fiscal 2018.
On June 3, 2019, one of its institutional
investors filed claim in the United States District Court, Southern District of New York seeking preliminary injunctive relief
against the Company to immediately deliver one million shares of the Company's common stock and to honor all future conversion
requests duly submitted in accordance with the terms of the notes.
On June 7, 2019, and June 10,
2019, the Company received notices from two of its institutional investors that the Company was in default due to missed principal
and interest payments under the terms of the Notes. On June 27, 2019, the Company reported that is has informed its convertible
note holders that it will cease honoring conversion requests of the 2018 and 2019 Notes forcing a voluntary default of these instruments.
The Company is pursuing a renegotiation and amendment of these instruments in an effort to avoid litigation. The Company is requesting
to amend the terms of the notes to remove the conversion features and revise the cash amortization, among other items.
See also Note 14 for litigation
related to the Convertible Notes Payable.
From June 10, 2019 until year
end, the Company has accrued interest at the default interest rate for all note series representing approximately $0.3 million
of additional interest payable. The Company has accrued an additional $1.8 million to accrued default liabilities as of August
31, 2019 and charged to a loss on note default on the statement of operations for the year ending August 31, 2019, representing
potential liability associated with the default of the notes payable for default premium, potential liquidating damages, and other
costs associated with the notes in default.
June 2018 Senior Convertible Notes
(in default)
On June 4, 2018, the Company
issued $10 million of senior convertible notes ("June 2018 Notes") to institutional investors with an original issue
discount of $1 million for a purchase price of $9 million. The notes bear interest at a rate of 8%, with one year's interest
guaranteed, and have a maturity date of September 4, 2019. The Notes remain outstanding as of November 22, 2019. The company received
cash proceeds of $8.4 million representing the $9 million purchase price, reduced by approximately $0.6 million of financing costs
directly related to the issuance of the June 2018 Notes.
Concurrent with the sale of the
June 2018 Notes, the Company granted warrants to purchase 25,100 shares of common stock to its institutional investors and warrants
to purchase 5,422 shares of common stock to its investment banker as placement fees, at an exercise price of $99.60, subject to
down round price protection adjustment, as defined in the agreements. The warrants were valued at the date of issuance using the
lattice-based option pricing model at $86.80 per warrant. Both the June 2018 Notes and the related warrants were issued with registration
rights, whereby the Company was obligated to register the shares underlying the June 2018 Notes or was subject to registration
rights penalties. During the year ended August 31, 2018, the Company accrued a loss of $3,500,000 for penalties associated with
the registration rights penalties. With the issuance of the December 2018 Notes described below, the Company reduced the loss accrual
to $889,000 and recorded a gain of $2,611,000 to the statement of operations during the year ended August 31, 2019. Combined with
the $1.8 million loss described above for the 2019 default loss estimate resulted in a net gain of $811,000 for the year ended
August 31, 2019.
F-
44
The terms of June 2018 notes are summarized
as follows:
·
Term: September 4, 2019;
·
Coupon: 8%; Default interest rate: 18%;
·
Convertible at the option of the holder at any time;
·
Conversion price is initially set at $99.60 but subject to down round price protection. After maturity,
the conversion price will be set subsequently at the lesser of the then conversion price and 85% of the volume weighted average
price for the trading date immediately prior to the application conversion date; and
·
Monthly amortization of principal either in cash at a 10% premium or in stock, subject to equity
conditions, at a 15% discount to the lowest volume weighted average price, at the option of the Company.
Debt issuance costs
The Company paid approximately $0.8 million
of incremental issuance costs directly attributable to the issuance of the senior secured convertible notes. These costs were recorded
as a discount to the convertible notes and they are amortized straight line over the term to interest expense, which approximates
the effective interest method.
Debt Discount
During the year ended August
31, 2018, the Company recorded an aggregate debt discount of $4.1 million for the June 2018 Notes. The debt discount includes an
initial $1 million resulting from the original issuance discount on the convertible notes and an initial $2.2 million resulting
from the fair value of the warrants and $0.9 million resulting from the beneficial conversion feature on the non-detachable conversion
option. The Company evaluated the warrants and determined that the warrants did not qualify for derivative accounting as the warrants
contained a set exercise price with an adjustment only based upon customary items including stock dividends and splits, subsequent
rights offering and pro rata distributions and subject to down round price protection. The Company reviewed the guidance under
ASC 470 Debt and allocated the proceeds from the sale of a debt instrument with stock purchase warrants based on the relative fair
values of the debt instrument without the warrants and of the warrants themselves at time of issuance. As a result, the Company
allocated $2.2 million to the warrants and was recorded as a debt discount with an offset to additional paid in capital in the
accompanying financial statements.
The Company valued the issued
warrants using the Lattice pricing model at $52.80 per warrant 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 122%. The debt discount is amortized straight-line
over the stated life of the obligation, which approximates the effective interest method. Any conversions results in a pro-rata
acceleration of unamortized debt discount and debt issuance costs to interest expense on the date of conversion.
Event of default – August 2018
At the June 2018 issuance, the Company
executed registration rights agreements with each of its institutional investors. These registration rights agreements require,
among other things, that the initial registration statement should be (a) filed within 30 days of June 4, 2018, and (b) declared
effective within 90 days of June 4, 2018. The Company's registration statement was filed on October 1, 2018 and it was declared
effective by the SEC on October 29, 2018; thus, both the filing and effectiveness deadlines were missed.
The Company recorded in its consolidated
financial statements the mandatory default amount as stipulated in the convertible note agreements. As of August 31, 2018, the
Company recorded approximately $3.5 million, which is reported under current liabilities in its consolidated statement of operations,
and a further $0.6 million of accrued interest.
On December 20, 2018, the Company entered
into settlement agreements with its institutional investors, which resolved all disputes relating to technical defaults by the
Company in failing to meet deadlines for filing a registration statement and for having a registration statement effective by the
SEC. As a result of such settlement, the Company increased the principal amount of the convertible notes by issuing $889,000 of
December 2018 Notes in full settlement of the previously accrued $3.5 million default. The Company accrued an additional $1.8 million
in liquidating damages and recognized an $811,000 gain on recovery of these accrued penalties.
December 2018 Notes (in default)
On December 20, 2018, the Company
entered into settlement agreements with its institutional investors, which resolved all disputes relating to technical defaults
by the Company in failing to meet deadlines for filing a registration statement and for having a registration statement effective
by the SEC. As a result of such settlement, the Company issued additional notes ("December 2018 Notes" in the amount
of $889,000 on substantially the same terms as the June 2018 Notes except that the stated interest rate was 0% and the term of
the December 2018 Notes was December 31, 2019. There was no recorded discount or deferred financing costs for the December 2018
Notes issued.
March 2019 Bridge Financing (in default)
On March 12, 2019, the
Company issued convertible notes in the principal amount of $4,750,000 with an original issue discount of $1 million for a
purchase price of $3,750,000 to certain of its existing institutional investors ("March 2019 Notes") and mature
on September 12, 2020. The Company received net cash proceeds of $3.3 million to be used for mobile application development
and working capital. The Company incurred approximately $0.5 million of debt issuance costs that are incremental costs
directly related to the issuance of the bridge financing senior convertible notes payable.
F-
45
The terms of the March 2019 convertible
notes are summarized as follows:
·
Term: September 12, 2020;
·
Coupon: 0%;
·
Default interest rate: 18%;
·
Original issue discount: $1,000,000;
·
Convertible at the option of the holder at any time;
·
Initial conversion price is set at $66.80 but subject to down round price protection;
·
Alternate conversion price at the greater of the floor price of $12.40 and the lower of the conversion
price in effect and alternate conversion percentage of the lowest VWAP of the common share during the 10 consecutive trading day
prior to the applicable conversion date;
·
Alternate conversion percentage is 75% if the alternate conversion is an alternate conversion event
of default as a result of bankruptcy or 80% for all alternate event of default conversion or 85% is such alternate conversion is
an alternate optional conversion;
·
Redemption at the option of the Company at 15% premium at any time after 45 days from March 12,
2019.
In connection with the note,
the Company issued 74,390 warrants ("March 2019 Warrants"), exercisable at $70.00, with a five-year term. The Company
evaluated the warrants issued and determined that they were derivative liabilities. The Company estimated the fair value of the
warrants using the Lattice pricing model. The key valuation assumptions used consist, in part, of the price of the Company's
common stock of $63.60, a risk-free interest rate of 2.49% and expected volatility of the Company's common stock of 122%,
resulting in a fair value of $3,917,000.
The Company estimated the aggregate fair
value of the conversion feature derivative embedded in the debenture ("March 2019 Conversion Feature") at issuance
at $2,421,000 based on weighted probabilities of assumptions using the Lattice pricing model. The key valuation assumptions used
consist, in part, of the price of the Company's common stock of $63.60, a risk-free interest rate of 2.49% and expected volatility
of the Company's common stock of 122%, and the various estimated reset exercise prices weighted by probability.
This resulted in the calculated fair value
of the debt discount resulted from bifurcating the warrants and the conversion feature being greater than the face amount of the
debt and the original issue discount, and the excess amount of $2.6 million was immediately expensed as financing costs.
March 2019 Derivative Liabilities:
Both the March 2019 Warrants and the March
2019 Conversion Feature are accounted for as derivative liabilities. As such, each derivative is marked to market at each reporting
date. Prior to March 2019, the Company had no derivative liabilities. The following table provides the activity for the Company's
derivative liabilities for the year ended August 31, 2019.
March 2019
Conversion
Feature
March 2019
Warrant
Liability
Total
Balance at August 31, 2018
$
-
$
-
$
-
Initial recognition
2,421,000
3,917,000
6,338,000
Reclassification to equity
(13,000
)
(13,000
)
Change in fair value
444,000
(3,013,000
)
(2,569,000
)
Balance at August 31, 2019
$
2,852,000
$
904,000
$
3,756,000
F-
46
The Company used the following assumptions
to estimate fair value of the derivatives as of August 31, 2019, using the default rate of 75% of market price as a conversion
price:
March 2019
Conversion
Feature
March 2019
Warrant
Liability
Risk free rate
1.76
%
1.39
%
Market price per share
$
19.04
$
19.04
Life of instrument in years
1.04
4.47
Volatility
100
%
119
%
Dividend yield
0
%
0
%
Note 10: Stockholders' Equity
Preferred Stock
In September 2016, the Company
issued options to purchase preferred stock at $0.0001 per share. This issuance was approved by its shareholders. 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, which
accounts for approximately 25.6 million shares, or (b) the number of shares of common stock held by such shareholder on date of
the shareholder's exercise of the aforesaid option. The preferred stock that is the subject of such contingent option provides
a right to 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 contingent 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 Shares
During the year ended August 31, 2019,
the Company issued 6,688 shares of common stock following the exercise of warrants and received gross proceeds of $660,000. During
the year ended August 31, 2018, the Company issued 938 shares of common stock following the exercise of warrants with an exercise
price of $80.00 and received gross proceeds of $75,000.
As described more fully in Note 9, during
the year ended August 31, 2019, the Company issued 174,081 shares of common stock in satisfaction of principal and accrued interest
following conversion of convertible notes into shares of common stock.
Issuances of common shares to
directors for services
The Company awards shares of
common stock to its independent directors under its 2017 Stock Option / Stock Issuance Plan (the "Plan") as compensation
for their services as directors. These awards are typically valued at market value on the date of the award. For the year ended
August 31, 2019 the Company issued 4,985 shares valued at $263,000 to its directors.
Treasury Stock
In June 2019, the Company advanced
$325,000 in cash to Steven Holmes, a significant shareholder and service provider to the Company. In July 2019, Mr. Holmes repaid
the advance by returning 13,954 shares of Mr. Holmes common share holdings, valued at $23.28 per share in full settlement of the
advance and which was the market value on the date of settlement. The shares were retired in fiscal 2019 in accordance with company
policy. See also Note 12.
Common Stock Warrants
During the year ended August
31, 2018, the Company issued warrants to purchase 30,523 shares of common stock to investors in connection with the senior secured
convertible notes, with exercise price of $99.60 per warrant with expiration date of 5 years and subject to down round price protection
and reset the warrant price to $70.00 in 2019 concurrent with the March 2019 Note financing warrant issuance. The Company valued
the warrants at issuance using the Lattice 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 120%. The Company valued the revised warrants
on March 12, 2019 using the Lattice option-pricing model with the following assumptions: dividend yield of zero, years to maturity
of 4.2 years, risk free rates of 2.41 percent, and annualized volatility of 122%.
During the year ended August 31,
2019, the Company issued warrants to purchase 74,390 shares of common stock in connection with the March 2019 Notes, with
exercise price of $70.00 per warrant with expiration date of 5 years. The Company valued the issued warrants using the
Black-Scholes option-pricing model at $52.80 per warrant with the following assumptions: dividend yield of zero, years to
maturity of 5 years, risk free rates of 2.49%, and annualized volatility of 122%. The fair value of the warrants issued were
incorporated into the financing loss and March 2019 Notes discount described in Note 9 above.
F-
47
The following tables summarize
the Company's warrants outstanding as of August 31, 2019 and 2018:
Number of
shares
Weighted
average
remaining
life (years)
Weighted
average
exercise price
Warrants outstanding, August 31, 2017
64,887
1.5
$
119.60
Issued
30,526
5.3
$
99.60
(Exercised)
(938
)
1.2
80.00
(Cancelled)
-
-
-
(Expired)
-
-
-
Warrants outstanding, August 31, 2018
94,475
2.13
$
113.60
Issued
74,390
5.0
$
70
(Exercised)
(6,688
)
0.45
98.80
(Cancelled)
-
-
-
(Expired)
(54,761
)
-
114.80
Warrants outstanding, August 31, 2019
107,416
4.42
$
74.80
The following table summarizes information
about warrants outstanding as of August 31, 2019:
Exercise
price
Warrants
Outstanding
Weighted
average
life of
outstanding
warrants in
years
March 2019 Notes Warrants
$
70.00
74,390
4.6
June 2018 Notes Warrants
$
70.00
30,526
3.8
2017 PIPE Warrants
$
276.00
2,500
2.9
107,416
4.4
Note 11: Share based compensation
In March 2017, the Company adopted
the 2017 Stock Option / Stock Issuance Plan (the "Plan"). The Plan provides incentives to eligible employees, officers,
directors and consultants in the form of incentive stock options ("ISOs"), non-qualified stock options ("NQs"),
each of which is exercisable into shares of common stock ("Options") or shares of common stock ("share grants").
The Company has reserved a total of 250,000 shares of common stock for issuance under the Plan as of August 31, 2019.
Of these shares, as of August 31, 2019, approximately 82,500
options and 7,500 shares have been designated by the Board of Directors for issuance and approximately 32,500 of the options have
been forfeited and returned to the option pool under the Plan due to employment terminations. As of August 31, 2019, approximately
195,000 shares remain issuable of which 167,500 are eligible to be issued as ISOs and 195,000 are eligible to be issued as either
share grants or NQ stock options.
During 2018 and 2019 both common share
grants and stock options were issued to employees and non-officer directors of the Company. Shares issued for services for 2019
and 2018 consist solely of grants to non-officer directors.
For all options granted thus far to August
31, 2019, each option is immediately exercisable and has a term of service vesting provision over a period of time as follows:
25% vest after a 12-month service period following the award, and the balance vest in equal monthly installments over the next
36 months of service. All options granted to date have a ten year term.
F-
48
Share grants are issued at fair value,
considered to be the market price on the grant date. The fair value of option awards is estimated on the grant date using the Black-Scholes
stock option pricing model and the following assumptions:
2019
2018
Expected life
4.0 years
4.0 years
Estimated volatility
119
%
121
%
Risk-free interest rate
1.70%-2.90
%
2.01%-2.83
%
Dividends
-
-
Estimates of fair value are not intended
to predict actual future events or the value ultimately realized by employees who receive equity awards, and subsequent events
are not indicative of the reasonableness of the original estimates of fair value made by us.
Following the adoption of Accounting Standards
Update ASU 2016-09, the Company elected to account for forfeitures as they occur. Any compensation cost previously recognized for
an unvested award that is forfeited because of a failure to satisfy a service condition is reversed in the period of the forfeiture.
Share based compensation expense consisted
of the following for the years ended August 31, 2019 and 2018:
Year ended
August 31,
2019
Year ended
August 31,
2018
Shares issued for services
$
263,000
$
163,000
Employee stock options
369,000
200,000
Balance at August 31, 2019
$
632,000
$
363,000
At August 31, 2019, the total unrecognized
deferred share-based compensation expected to be recognized over the remaining weighted average vesting periods of 1.7 years for
outstanding grants was $1.6 million.
A summary of option activity was as follows:
Options Outstanding and Exercisable
Weighted
Average
Weighted
Number
Remaining
Average
of
Contractual
Exercise
Options
Life
Price
(In years)
Balance, August 31, 2017
19,750
9.58
$
184.80
Granted
23,719
10.0
$
105.60
Exercised
–
–
$
–
Forfeited
(9,750
)
8.49
$
154.80
Balance, August 31, 2018
33,719
9.77
$
138.00
Granted
36,073
10.0
$
63.60
Exercised
–
–
$
–
Forfeited
(19,042
)
8.06
$
111.20
Balance at August 31, 2019
50,750
8.95
$
95.20
Options outstanding as of August 31, 2019
and 2018 had aggregate intrinsic value of $575,000 and $1,000 respectively.
Option vesting activity was as follows:
Weighted
Weighted
Number
Remaining
Average
of
Contractual
Exercise
Options Vested
Options
Life
Price
(In years)
Balance, August 31, 2017
--
--
$
-
Vested
5,364
8.83
$
184.80
Exercised
–
–
$
–
Forfeited
(850
)
8.54
$
177.20
Balance, August 31, 2018
4,514
8.57
$
182.40
Vested
7,410
–
$
137.20
Exercised
–
–
$
–
Forfeited
(1,633
)
8.10
$
164.40
Balance at August 31, 2019
10,291
8.04
$
152.80
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49
The following table summarizes information
about stock options outstanding and vested at August 31, 2019:
Options Outstanding and Exercisable
Options Vested
Weighted
Average
Weighted
Weighted
Weighted
Number
Remaining
Average
Number
Remaining
Average
of
Contractual
Exercise
of
Contractual
Exercise
Exercise Prices
Options
Life
Price
Options
Life
Price
(In years)
(In years)
$18.80-40.00
8,125
9.77
$
22.40
–
–
$
–
$40.01–$80.00
15,761
9.59
$
51.60
–
–
$
–
$80.01–$120.00
12,864
8.67
$
104.00
4,202
8.63
$
105.20
$120.01–$160.00
12,625
8.04
$
155.20
5,373
7.60
$
158.40
$160.01-$391.60
1,375
7.88
$
391.60
716
7.88
$
391.60
50,750
8.95
$
95.20
10,291
8.04
$
152.80
Note 12: Related Parties
Scott Absher, Chief Executive Officer,
Director, and a significant shareholder of the Company became a Company employee on April 1, 2016. During the year ended August
31, 2019 and 2018, the Company recorded $750,000 and $750,000, respectively as compensation for his role as CEO in accordance with
his employment agreement. On March 15, 2017, Scott Absher was granted 1,250 options to purchase common stock as part of the 2017
Plan, exercisable on March 15, 2017, with an expiration date of March 14, 2027, at an exercise price of $160.00.
J. Stephan Holmes is an advisor
to and a significant shareholder of the Company. The Company incurred $720,000 and $700,000 in such professional fees to J. Stephen
Holmes for management consulting services for the year ended August 31, 2019 and 2018, respectively and recorded in professional
fees on the statement of operations. On March 15, 2017, Stephan Holmes was granted 1,250 options to purchase common stock as part
of the 2017 Plan, exercisable on March 15, 2017, with expiration date of March 14, 2027, at an exercise price of $160.00.
In June 2019 the Company advanced
Mr. Holmes $325,000 in cash and recorded the advance as a short term note receivable. In July 2019, Mr. Holmes provided 13,954
shares of common stock of the Company valued at $23.20 per share in satisfaction of the cash advance.
On May 15, 2017, Mark Absher, Director,
In-House Counsel, and brother of Scott Absher, was granted 1,250 options to purchase common stock as part of the 2017 Plan, exercisable
on March 15, 2017 with expiration date of March 14, 2027, at an exercise price of $160.00. On May 10, 2018, Mark Absher was also
granted an additional 1,250 options to purchase common stock at an exercise price of $100.00 and exercisable in May 2018 with expiration
date in May 2028. During the year ended August 31, 2019 and 2018, the Company recorded $275,000 and $300,000, respectively as compensation
for his role as Registered In-House Counsel in accordance with his employment agreement. Mark Absher resigned in February 2019
and all options granted were cancelled during the fiscal year ending August 31, 2019.
For the year ended August 31,
2019 the following issuances were made to the Company's directors:
Date Issued
Shares
Issue Price
per Share
Value
Ken Weaver
August 2019
1,995
$
18.80
(A)
$
37,500
Ken Weaver
May 2019
1,202
$
31.20
(B)
37,500
Ken Weaver
November 2018
308
$
122.00
(C)
37,500
Sean Higgins
September 2018
329
$
114.00
(D)
37,500
Sean Higgins
April 2019
412
$
91.20
(E)
37,500
Whitney White
September 2018
329
$
114.00
(D)
37,500
Whitney White
April 2019
412
$
91.20
(E)
37,500
4,987
$
262,500
(A)
Represents share grant for services performed between June 1, 2019 and November 30, 2019 and awarded in August 2019.
(B)
Represents share grant for services performed between December 1, 2019 and May 31, 2019 and awarded in May 2019.
(C)
Represents share grant for services performed between June 1, 2018 and November 30, 2018 and awarded by the Board of Directors
in August 2018.
F-
50
(D)
On September 28, 2017 the Company awarded two directors 658 shares of common stock of which 50% vested on the date marking
their six-month service anniversary and 50% for the remaining service through November 28, 2018.
(E)
Represents share grant for services performed between September 29, 2018 and March 28, 2019 and awarded in March 2019
Note 13: Income Taxes
Current income taxes are based upon the
year's income taxable for federal and state tax reporting purposes. Deferred income taxes (benefits) are provided for certain
income and expenses, which are recognized in different periods for tax and financial reporting purposes.
Deferred tax assets and liabilities are
computed for differences between the financial statements and tax bases of assets and liabilities that will result in taxable or
deductible amounts in the future based on enacted tax laws and rates applicable to the period in which the differences are expected
to affect taxable income. The Company's deferred income taxes arise from the temporary differences between financial statement
and income tax recognition of net operating losses. These loss carryovers would be limited under the Internal Revenue Code should
a significant change in ownership occur within a three-year period.
As of August 31, 2019, and 2018,
the Company had cumulative net operating loss carryforwards of approximately $30,686,000 and $26,673,000 respectively, which begin
to expire in 2029. The deferred tax assets primarily comprise net operating loss carryforwards and other net temporary deductible
differences such as stock-based compensation, deferred rent, depreciation and workers' compensation accrual. The ultimate
realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those
temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, the projected
future taxable income and tax planning strategies in making this assessment. Based on management's analysis, they concluded
that it was more likely than not that the deferred tax asset would not be realized. Therefore, the Company established a full valuation
allowance against the deferred tax assets. The change in the valuation allowance in 2019 and 2018 was approximately $3,359,000
and $3,163,000, respectively.
Significant components of the net deferred
tax assets as reflected on the Consolidated Balance Sheets are as follows:
August 31,
2019
2018
in thousands
Deferred tax liabilities:
Depreciation
$
(122,000
)
$
(21,000
)
Software development costs
(845,000
)
(835,000
)
Total deferred tax liabilities
(967,000
)
(856,000
)
Deferred tax assets:
Net operating loss carryforward
7,000,000
7,653,000
Business interest
2,539,000
-
Workers' compensation accruals
1,763,000
360,000
Stock-based compensation
354,000
172,000
Deferred rent
15,000
16,000
Total deferred tax assets
11,671,000
8,201,000
Valuation allowance
(10,704,000
)
(7,345,000
)
Total net deferred tax assets
$
967,000
$
856,000
Net deferred tax assets
$
-
$
-
Income tax expense consists of the following
For the Year Ended
August 31,
2019
2018
Current
Federal
$
-
$
-
State
-
-
Total current
-
-
Deferred
Federal
3,162,000
2,729,000
State
197,000
407,000
Total deferred
3,359,000
3,136,000
Change in valuation allowance
$
(3,359,000
)
$
(3,136,000
)
Total Income Tax Expense (Benefit)
$
-
$
-
F-
51
The reconciliation of the statutory federal
rate to the Company's effective income tax rate is as follows:
August 31,
August 31,
2019
2018
Pre-tax book loss
$
2,673,000
$
3,880,000
Non-deductible penalties and other permanent differences
(430,000
)
(177,000
)
State taxes (8.84%)
1,116,000
1,374,000
Redetermination of prior year taxes
-
-
Enactment of the 2017 Tax Reform Act
-
(1,941,000
)
Change in valuation allowance
(3,359,000
)
(3,136,000
)
Net income tax provision
$
-
$
-
In December 2017, the Tax Cuts and Jobs
Act was enacted, which reduces the U.S. statutory corporate tax rate from a maximum rate of 35% to 21% for the tax years beginning
after December 31, 2017. For a corporation whose fiscal year begins before December 31, 2017 and ends after December 31, 2017,
the IRS has issued guidance, in notice 2018-38, regarding the calculation of a blended current year tax rate. The Company followed
this guidance in the calculation of the prior year tax benefit for the fiscal year ended August 31, 2018. The Calculation resulted
in a 25% effective tax rate for fiscal year 2018. The Tax Cuts and Jobs Act resulted in the re-measurement of the federal portion
of the Company's deferred tax assets and valuation allowance as of August 31, 2018 from 35% to the new 21% tax rate. As a
result, the reduction of the corporate tax rate resulted in a write-down of the gross deferred tax assets of approximately $1,277,000
and a corresponding write-down of the valuation allowance.
The Company's continuing practice
is to recognize interest and/or penalties related to income tax matters in income tax expense. As of August 31, 2019, and 2018,
the Company had no accrued interest and penalties related to uncertain tax positions.
The Company's net operating
losses ("NOL") may be limited by the provisions of IRC Section 382, for which the Company has not performed an analysis
of the potential limitations. These limitations will be imposed when the Company attains taxable income against which the NOL will
be utilized. The company had a NOL of $3,843,000 during the period ending August 31, 2019. This NOL has an indefinite life but
are limited to 80%. As explained above, the Company has determined that it is more likely than not that the Company's deferred
tax assets related to NOL Carryforwards will not be utilized.
The Company is subject to taxation
in the U.S. The tax years for 2016 and forward are subject to examination by tax authorities. The Company is not currently under
examination by any tax authority.
Management has evaluated tax positions
in accordance with FASB ASC 740, and has not identified any tax positions, other than those discussed above, that require disclosure.
Note 14: Commitments and Contingencies
Software License
The Company licenses software from a third
party for utilization in its mobile application and HRIS system. The license agreement is for three years and contains an annual
escalation beginning in May 2020. The license is month to month and is cancelable but is subject to a cancellation penalty calculated
as 30% of the remaining contracted license payments if cancelled by the Company. Future minimum license payments under the license
agreement at August 31, 2019, are as follows:
Years ended August 31,
2020
$
922,000
2021
1,015,000
2022
817,000
Total minimum payments
$
2,754,000
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52
Operating Lease
Effective April 15, 2016, the
Company entered into a non-cancelable five-year operating lease for its Irvine facility. On July 25, 2017, the Company entered
into a non-cancelable operating lease for expansion space at its Irvine offices with a termination date that coincides with the
termination date of the prior lease and extended the terms of the original lease to extend until 2022. The leases for certain facilities
contain escalation clauses relating to increases in real property taxes as well as certain maintenance costs.
Future minimum lease payments under non-cancelable
operating leases at August 31, 2019, are as follows:
Years ended August 31,
2020
$
382,000
2021
382,000
2022
319,000
Total minimum payments
$
1,083,000
Non-contributory 401(k) Plan
The Company has a non-contributory 401(k)
Plan (the "401(k) Plan"). The 401(k) Plan covers all non-union employee who are at least 21 years of age and have completed
3 months of service. There were no employer contributions to the Plan for the years ended August 31, 2019 and 2018.
Share Repurchase Plan
On July 9, 2019, the Company's
Board of Directors authorized the repurchase of up to 250,000 shares of its outstanding common shares as market conditions warrant
over a period of 18 months. The Company has not implemented the share repurchase plan to date and has not repurchased any shares
under the plan.
Litigation
Certain conditions may exist as of the
date the financial statements are issued, which may result in a loss to the Company, but which will be resolved only when one or
more future events occur or fail to occur. The Company's management, in consultation with its legal counsel as appropriate,
assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment.
During the ordinary course of business,
the Company is subject to various claims and litigation. Management believes that the outcome of such claims or litigation will
not have a material adverse effect on the Company's financial position, results of operations or cash flow.
Convertible Note related litigation:
During 2019, three of the Company's
note holders have filed complaints:
Alpha Capital v. ShiftPixy, Inc.
On July 3, 2019 ShiftPixy was
served with a complaint filing by Alpha Capital Anstalt (ACA) in the United States District Court, Southern District of New York
alleging breach of contract in refusing to honor the conversion of certain convertible notes, specifically one for $310,000 submitted
on June 20, 2019. ACA sought an injunction requiring the Company to issue 25,000 common shares, damages for the claimed breaches,
and attorney's fees. In August 2019, the court denied the motion for a preliminary injunction but granted accelerated discovery
which was completed in September 2019. As of August 31, 2019, the Company had convertible notes outstanding with ACA for approximately
$1.7 million consisting of $0.3 million of the June 2018 series, $0.2 million of the December 2018 series and $1.2 million of the
March 2019 series.
Dominion Capital LLC v. ShiftPixy;
On July 18, 2019 ShiftPixy was
served with a complaint filing by Dominion Capital LLC in the United States District Court, Southern District of New York alleging
breach of contract in refusing to honor the conversion of certain convertible notes. Dominion sought injunctive relief, injunction
to prohibit buyback, breach of contract on the June 2018, December 2018, and March 2019 notes, and declaratory judgment. In August
2019, the court denied the motion for a preliminary injunction but granted accelerated discovery which was completed in September
2019. As of August 31, 2019, the Company had convertible notes outstanding with Dominion for approximately $1.5 million consisting
of $0.7 million of the June 2018 series, $0.2 million of the December 2018 series and $0.6 million of the March 2019 series.
F-
53
Both ACA and Dominion have filed
for summary judgment on their cases. The court referred those motions to a magistrate judge for a report and recommendation, and
the magistrate judge filed his report on November 22, 2019, recommending that the court enter judgment for money damages in both
cases consistent with the amounts accrued for by the Company, denying permanent injunctive relief, and granting declaratory relief
with respect to the stock buyback program. The Company is awaiting a response from the court as of the date of this filing.
MEF I, LP v. ShiftPixy, Inc.;
On August 27, 2019 MEF filed a complaint
in the United States District Court, Southern District of New York based upon the Company's refusal to convert June 2018
notes. MEF seeks monetary relief of $2.1 million and seeks to appoint themselves as receiver of the Company. As of August 31, 2019
the Company had convertible notes outstanding to MEF at approximately $0.7 million face value consisting of approximately $0.5
million and $0.2 million for the June 2018 and December 2018 notes respectively. In November 2019 the Company filed a motion in
response to the receiver request. A hearing on the receiver matter was conducted on November 20, 2019 and the Company is awaiting
a response from the court on the hearing as of the date of this filing.
Lyons Capital, LLC Litigation
On June 21, 2018, ShiftPixy was
served with a summons and complaint in connection with a claim by Lyons Capital, LLC, arising out of a contract wherein ShiftPixy,
Inc., agreed to pay Lyons Capital, LLC, a total of 210,000 shares of the company's common stock in exchange for introductions
to brokers, research coverage, funds, investment banking firms, and market makers as well as board representation and business
opportunities and for promotion of the company at Lyons Capital, LLC's annual conference. This lawsuit was settled during
fiscal 2019 for an immaterial amount which was included in general and administrative expenses on the statement of operations.
Kadima Ventures
The Company is in dispute with its software
developer, Kadima Ventures, over incomplete but paid for software development work. In May 2016, the Company entered into a contract
with Kadima Ventures for the development and deployment of user features that were proposed by Kadima for an original build cost
of $8.5 million to complete. As of the date of this filing, the Company has spent approximately $11 million but has not received
the majority of certain software modules. In addition to the non-delivery of the paid for user features, Kadima Ventures asserts
that it is owed additional funds to turn over the work completed. The Company initiated litigation to force the delivery of the
software modules paid for through fiscal 2019 and exit the development engagement. In April 2019, Kadima filed a complaint against
ShiftPixy in the County of Maricopa, AZ alleging breach of contract, promissory estoppel and unjust enrichment and has demands
for an additional $10 million prior to releasing the remaining features. The parties agreed to a transfer of the matter to an Arizona
Commercial Court with the expectation that the matter would be sent to arbitration or mediation. In October 2019, Kadima provided
the software code to a third party for technical evaluation of the software in question. The Company expects to enter into mediation
once the technical evaluation is completed later in fiscal 2020. An answer to the Complaint is due January 31, 2020.
Splond Litigation
On April 8, 2019, claimant, Corey Splond,
filed a class action lawsuit, naming ShiftPixy, Inc. and its client as defendants, claiming that he was scheduled to work for more
than 8 hours during 24-hour periods without being paid overtime, to which he was entitled. In addition, claimant is seeking waiting
time penalties for the delay in payment. This lawsuit is in the initial stages; the financial impact to the Company, if any, cannot
be estimated. No liability has been recorded for this matter at this time. In the event of an unfavorable outcome the Company's
client is contractually obligated to indemnify the Company for misreported hours and portions of the claim would be covered under
the Company's employment practices liability insurance.
Note 15: Subsequent Events
On November 14, the Company filed a preliminary
proxy requesting a 1 for 40 reverse split of our common shares. We have received the majority shareholder approval for the reverse
split and the Company expects the reverse split to be effective on December 16, 2019.
On December 4, 2019 the Company received
a notice from the Nasdaq Capital Market stating that the Company will be delisted on December 13, 2019 unless the Company files
for a hearing by December 11, 2019. The Company requested a hearing on December 9, 2019 and has a hearing scheduled for January
23, 2020.
On December 5, 2019, the Company
entered into an exchange agreement with the holder of a majority of its March 2019 Convertible Notes. The exchange agreement
and the related revised March 2019 note agreement revised the conversion price to $40.00 per share, extended the term of the
March 2019 notes to March 1, 2022, provided for a revised quarterly amortization schedule beginning April 1, 2020, and
removed certain anti-dilution terms of the related March 2019 warrants. The holder also exchanged $222,000 of December 2018
Notes by extending the term to coincide with the revised term of the March 2019 notes and for the revised amortization
schedule. The Company agreed to issue an additional $200,000 of consideration to the holder, payable in common stock, as
consideration for this exchange and agreed to increase the principal outstanding on the notes exchanged by 10% from $222,000
for the December 2018 notes to $244,000 and from $2,445,000 for the March 2019 notes to $2,890,000. On December 11, 2019, the
Company issued 21,750 shares of common stock to the holder in satisfaction of the additional $200,000 of consideration.
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54
Management has evaluated subsequent events
pursuant to the issuance of the consolidated financial statements and has determined that no additional subsequent events occurred
through the date of this filing that would require disclosure.
Note 16: Reverse Stock Split
On December 17, 2019, the Company implemented a 1 for 40 reverse
stock split for all common share and common share equivalents including, options, warrants, and convertible notes. All common shares
and common share equivalents are presented retroactively to reflect the reverse split.
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55
Shares of Common
Stock
Pre-Funded
Warrants to Purchase Shares of Common Stock
Warrants to Purchase Shares of Common
Stock
Prospectus
Sole Book-Running Manager
A.G.P.
, 2020
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1
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance
and Distribution
The following table sets forth all costs
and expenses, other than underwriting discounts and commissions, expected to be incurred by us in connection with the sale of the
common stock being registered. All amounts shown are estimates except for the SEC registration fee and the FINRA filing fee.
Amount Paid
or to be Paid
SEC registration fee
$
4,770
FINRA filing fee
$
*
Printing and engraving expenses
$
*
Legal fees and expenses
$
*
Accounting fees and expenses
$
*
Non-accountable expenses
$
*
Transfer agent and registrar fees and expenses
$
*
Miscellaneous fees and expenses
$
*
Total
$
*
*
To
be filed by amendment.
Item 14. Indemnification of Directors and Officers
Sections 17-16-851
through -856 of the Wyoming Statutes (the "Applicable Statutes") provide that directors and officers of Wyoming corporations
may, under certain circumstances, be indemnified against expenses (including attorneys' fees) and other liabilities actually
and reasonably incurred by them as a result of any suit brought against them in their capacity as a director or officer, if they
acted in good faith and in a manner they reasonably believed to be in or not opposed to the best interests of the corporation,
and, with respect to any criminal action or proceeding, if they had no reasonable cause to believe their conduct was unlawful.
The Applicable Statutes also provide that directors and officers may also be indemnified against expenses (including attorneys'
fees) incurred by them in connection with a derivative suit if they acted in good faith and in a manner they reasonably believed
to be in or not opposed to the best interests of the corporation, except that no indemnification may be made without court approval
if such person was adjudged liable to the corporation.
Further, Article V
of our articles of incorporation, as amended, also provides as follows regarding our indemnification of our directors, officers,
employees and agents:
"[t]o the fullest extent
permitted by the Wyoming Business Corporation Act or any other applicable law as now in effect or as it may hereafter be amended,
no person who is or was a director of the Corporation shall be personally liable to the Corporation or its shareholders for monetary
damages for breach of fiduciary duty as a director, except for liability for (A) the amount of financial benefit received by a
director to which he or she is not entitled; (B) an intentional infliction of harm on the Corporation or the Shareholders; (C)
a violation of Section 17-16-833 of the Wyoming Business Corporation Act; or (D) an intentional violation of criminal law. If the
Wyoming Business Corporation Act is amended after the effective date of this Amendment to authorize corporate action further eliminating
or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited
to the fullest extent permitted by the Wyoming Business Corporation Act, as so amended.
The Corporation shall indemnity
to the fullest extent permitted by the Wyoming Business Corporation Act, as the same may be amended and supplemented from time
to time, any and all persons whom it shall have power to indemnify under the Wyoming Business Corporation Act. The indemnification
provided for herein shall not be exclusive of any other rights to which those seeking indemnification may be entitled as a matter
of law under any Bylaw, agreement, vote of shareholders or disinterested directors of the Corporation, or otherwise, both as to
action in such indemnified person's official capacity and as to action in another capacity while serving as a director, officer,
employee, or agent of the Corporation, and shall continue as to a person who has ceased to be a director, officer, employee, or
agent of the Corporation, and shall inure to the benefit of the heirs, executors and administrators of such person.
Any repeal or modification of
this Article V or amendment to the Wyoming Business Corporation Act shall not adversely affect any right or protection of a director,
officer, agent, or other person existing at the time of or increase the liability of any director, officer, agent, or other person
of the Corporation with respect to any acts or omissions of such director, officer, or agent occurring prior to, such repeal, modification,
or amendment.
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2
The Corporation shall have the
power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation
or is or was serving at the request of the Corporation as a director, officer, employee or agent to another corporation, partnership,
joint venture, trust or other enterprise, against any liability asserted against such person and incurred by such person in any
such capacity or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against
liability under the provisions of this Article V."
Further, Article XIV
of our Bylaws also provides as follows regarding our indemnification of our directors, officers, employees and agents:
"The corporation shall
indemnify any person acting on its behalf in accord with the law of Wyoming. The indemnification provided hereby shall not be deemed
exclusive of any other right to which anyone seeking indemnification thereunder may be entitled under any bylaw, agreement, or
otherwise, both as to action in his official capacity and as to action in another capacity while holding such office. The corporation
may purchase and maintain insurance on the behalf of any Director, officer, agent, employee or former Director or officer or other
person, against any liability asserted against them and incurred by him."
Item 15. Recent Sales of Unregistered
Securities
In the three years preceding the filing
of this registration statement, the Registrant has issued the following securities that were not registered under the Securities
Act:
·
On September 18, 2017 we issued 625 shares of common stock to a non-employee director in connection
with services rendered.
·
On September 28, 2017 we issued 329 shares of common stock to a non-employee director in connection
with services rendered.
·
On September 28, 2017 we issued 329 shares of common stock to a non-employee director in connection
with services rendered.
·
On February 26, 2018 we issued 625 shares of common stock to a non-employee director in connection
with services rendered.
·
On June 4, 2018, we completed an offer and sale to certain accredited investors in a private placement
of (i) the June 2018 Notes, convertible into 250,000 shares of our common stock and (ii) warrants to purchase an aggregate of 30,526
shares of our common stock.
·
On August 9, 2018 we issued 615 shares of common stock to a non-employee director in connection
with services rendered.
·
On September 28, 2018 we issued a total of 329 shares of common stock to a non-employee director
in connection with services rendered.
·
On September 28, 2018 we issued a total of 329 shares of common stock to a non-employee director
in connection with services rendered.
·
On December 20, 2018, we issued the December 2018 Notes, convertible into 17,778 shares of our
common stock, to certain holders of the June 2018 Notes pursuant to the terms of that certain Limited Settlement Agreement and
Mutual Release, dated December 20, 2018.
·
On March 12, 2019, we completed an offer and sale to certain accredited investors in a private
placement of (i) the March 2019 Notes, convertible into 389,345 shares of our common stock and (ii) warrants to purchase up to
an aggregate of 74,390 shares of our common stock.
·
On April 16, 2019 we issued we issued 407 shares of common stock to a non-employee director in
connection with services rendered.
·
On April 16, 2019 we issued we issued 407 shares of common stock to a non-employee director in
connection with services rendered.
·
On May 15, 2019 we issued 1,202 shares of common stock to a non-employee director in connection
with services rendered.
·
On August 19, 2019 we issued 1,995 shares of common stock to a non-employee director in connection
with services rendered.
·
On December 5, 2019 we issued 21,750 shares of common stock to CVI Investments, Inc. ("CVI")
pursuant to that certain Exchange Agreement dated December 5, 2019.
·
On January 8, 2020 we issued 27,178 shares of common stock to Alpha Capital Anstalt ("Alpha")
pursuant to conversions of the June 2018 Notes held by Alpha.
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3
·
On
                                         January 9, 2020 we issued 24,049 shares of common stock to CVI pursuant to conversions
                                         of the December 2018 Notes and March 2019 Notes held by CVI.
·
On
                                         January 14, 2020 we issued 12,915 shares of common stock to Osher Capital Partners LLC
                                         ("Osher") pursuant to the conversion of March 2019 Notes held by Osher.
·
On
                                         January 17, 2020 we issued 18,033 shares of common stock to Alpha pursuant to the conversion
                                         of December 2018 Notes held by Alpha.
·
On
                                         January 17, 2020 we issued 20,000 shares of common stock to MEF I, LP ("MEF")
                                         pursuant to the conversion of June 2018 Notes held by MEF.
·
On
                                         January 22, 2020 we issued 83,543 shares of common stock to Dominion Capital, LLC pursuant
                                         to that certain Settlement Agreement and Mutual Release, dated January 22, 2020.
·
On
                                         March 23, 2020 we issued (i) 66,123 shares of common stock, (ii) warrants to purchase
                                         130,360 common stock, (iii) an amended and restated senior convertible note convertible
                                         into 78,582 shares of common stock and (iv) a senior convertible note convertible into
                                         15,717 shares of our common stock to Alpha pursuant to that certain Amendment and Exchange
                                         Agreement with Alpha, dated March 23, 2020.
·
On
                                         March 23, 2020 we issued (i) 16,531 shares of common stock, (ii) warrants to purchase
                                         32,590 shares of common stock, (iii) an amended and restated senior convertible note
                                         convertible into 11,687 shares of common stock and (iv) a senior convertible note convertible
                                         into 2,338 shares of our common stock to Osher Capital Partners LLC ("Osher")
                                         pursuant to that certain Amendment and Exchange Agreement with Osher, dated March 23,
                                         2020.
·
On
                                         March 24, 2020 we issued (i) warrants to purchase 260,719 shares of common stock and
                                         (ii) a senior convertible note convertible into 198,756 shares of our common stock to
                                         CVI pursuant to that certain Exchange Agreement with CVI, dated March 24, 2020.
·
On
                                         June 4, 2020, Scott W. Absher, our Chief Executive Officer, exercised 12,500,000 Preferred
                                         Options to purchase 12,500,000 shares of our preferred stock for $1,250. Immediately
                                         following the exercise of the Preferred Options described above, Mr. Absher elected to
                                         convert the 12,500,000 shares of preferred stock into 12,500,000 shares of our common
                                         stock, which are subject to a 24-month lock-up period during which such shares may not
                                         be traded.
·
On July 20, 2020, certain holders of our Preferred Options exercised 209,030 Preferred Optinos to purchase 209,030 shares of our preferred stock for $209.03.  Immediately following the exercise of the Preferred Options described above, such holders elected to convert the 209,030 shares of preferred stock into 209,030 shares of our common stock, which are subject to a six-month lock-up period during which such shares may not be traded.
Item 16. Exhibits and Financial
Statement Schedules
(a)
Exhibits
The following
documents are filed as exhibits to this registration statement.
Exhibit No.
Description
1.1*
Form of Underwriting Agreement.
3.1
Articles of Incorporation of ShiftPixy, Inc. (incorporated by reference from Exhibit 2.1 to our Offering Circular, filed with the SEC on Form 1-A on May 31, 2016).
3.2
Amendment to Articles of Incorporation of ShiftPixy, Inc., dated September 28, 2016 (incorporated by reference from Exhibit 2.6 to our Form 1-A/A, filed with the SEC on October 18, 2016).
3.3
Amendment to Articles of Incorporation of ShiftPixy, Inc.,
    dated January 7, 2020 (incorporated by reference from Exhibit 3 to our current Report on Form 8-K, filed with the SEC on January
    23, 2020).
3.4
Amended and Restated Articles of Incorporation of ShiftPixy,
    Inc., dated March 20. 2020 (incorporated by reference from Exhibit 3.1 to our Current Report on Form 8-K, filed with the SEC
    on March 26, 2020).
3.5
Bylaws of ShiftPixy, Inc., as amended through February 16,
    2018 (incorporated by reference from Exhibit 3.2 to our 8-K, filed with the SEC on February 22, 2018).
3.6
Articles of Incorporation of Shift Human Capital Management Inc. (incorporated by reference from Exhibit 2.4 to our Form 1-A/A, filed with the SEC on August 16, 2016).
3.7
Bylaws of Shift Human Capital Management Inc. (incorporated by reference from Exhibit 2.5 to our Form 1-A/A, filed with the SEC on August 16, 2016)
.
4.1
Amended Principal Shareholder Option (incorporated by reference as Exhibit 3.5 to our 1-A/A, filed with the SEC on October 18, 2016).
4.2*
Form of Pre-Funded Warrant.
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4
4.3*
Form of Underwriter Warrant.
4.4*
Form of Common Stock Purchase Warrant.
5.1*
Opinion of Bailey, Stock, Harmon, Cottam, Lopez LLP.
10.1†
2017 Stock Option and Share Issuance Plan (incorporated by
    reference as Exhibit 3.8 to our 1-A POS, filed with the SEC on April 4, 2017).
10.2
Form of 8% Senior Secured Convertible Note Due September
    4, 2019, dated June 4, 2018 (incorporated by reference from Exhibit 4.1 to our Current Report on Form 8-K, filed with the
    SEC on June 8, 2018).
10.3
Form of Security Agreement, dated June 4, 2018 (incorporated
    by reference from Exhibit 4.2 to our Current Report on Form 8-K, filed with the SEC on June 8, 2018).
10.4
Form of Common Stock Purchase Warrant, dated June 4, 2018
    (incorporated by reference from Exhibit 4.3 to our Current Report on Form 8-K, filed with the SEC on June 8, 2018).
10.5
Form of Securities Purchase Agreement, dated June 4, 2018
    (incorporated by reference from Exhibit 10.1 to our Current Report on Form 8-K, filed with the SEC on June 8, 2018).
10.6
Form of Registration Rights Agreement, dated June 4, 2018
    (incorporated by reference from Exhibit 10.2 to our Current Report on Form 8-K, filed with the SEC on June 8, 2018).
10.7†
First Amendment to Director Agreement, by and
    between Shift Pixy, Inc. and Kenneth W. Weaver Agreement, dated August 1, 2017 (incorporated by reference from Exhibit 10.7
    to our Annual Report on form 10-K/A, Amendment No. 2, filed with the SEC on October 18, 2018).
10.8
Form of Limited Settlement Agreement and Mutual Release,
    dated December 20, 2018 (incorporated by reference from Exhibit 10.1 to our Current Report on Form 8-K, filed with the SEC
    on December 21, 2018).
10.9
Form of 8% Senior Secured Convertible Note Due December 31,
    2019, dated December 20, 2018 (incorporated by reference from Exhibit 4.1 to our Current Report on Form 8-K, filed with the
    SEC on December 24, 2018).
10.10
Form of Senior Convertible Note (incorporated by reference
    from Exhibit 4.1 to our Current Report on Form 8-K, filed with the SEC on March 12, 2019).
10.11
Form of Warrant to Purchase Common Stock (incorporated by
    reference from Exhibit 4.2 to our Current Report on Form 8-K, filed with the SEC on March 12, 2019).
10.12
Form of Securities Purchase Agreement, dated March 11, 2019
    (incorporated by reference from Exhibit 10.1 to our Current Report on Form 8-K, filed with the SEC on March 12, 2019).
10.13
Form of Registration Rights Agreement (incorporated by reference
    from Exhibit 10.2 to our Current Report on Form 8-K, filed with the SEC on March 12, 2019).
10.14
Form of Amendment Agreement (incorporated by reference from
    Exhibit 10.3 to our Current Report on Form 8-K, filed with the SEC on March 12, 2019).
10.15
Form of Amended and Restated 8% Senior Secured Convertible
    Note, dated June 4, 2018 (incorporated by reference from Exhibit 10.4 to our Current Report on Form 8-K, filed with the SEC
    on March 12, 2019).
10.16
Form of Amended and Restated 8% Senior Secured Convertible
    Note Due December 31, 2019, dated December 20, 2018 (incorporated by reference from Exhibit 10.5 to our Current Report on
    Form 8-K, filed with the SEC on March 12, 2019).
10.17†
Offer Letter to Domonic Carney, dated July 16, 2019 (incorporated
    by reference from Exhibit 10.1 to our Current Report on Form 8-K, filed with the SEC on August 1, 2019).
10.18
Form of Amended and Restated 8% Senior Secured Convertible
    Note, dated June 4, 2018 (incorporated by reference from Exhibit 4.1 to our Current Report on Form 8-K, filed with the SEC
    on December 6, 2019).
10.19
Senior Secured Convertible Note, dated March 12, 2019 (incorporated
    by reference from Exhibit 4.2 to our Current Report on Form 8-K, filed with the SEC on December 6, 2019).
10.20
Form of Exchange Agreement, dated December 5, 2019 (incorporated
    by reference from Exhibit 10.1 to our Current Report on Form 8-K, filed with the SEC on December 6, 2019).
10.21
Asset Purchase Agreement, dated January 3, 2020, by and between
    ShiftPixy, Inc. and Shiftable HR Acquisition, LLC, dated January 3, 2020 (incorporated by reference from Exhibit 10.1 to our
    Current Report on Form 8-K, filed with the SEC on January 7, 2020).
10.22
Settlement Agreement and Mutual Release, dated January 22,
    2020, by and between ShiftPixy, Inc. and Dominion Capital LLC (incorporated by reference from Exhibit 10.1 to our Current
    Report on Form 8-K, filed with the SEC on January 23, 2020).
10.23
Settlement Agreement, dated January 16, 2020, by and between
    ShiftPixy, Inc. and MEF I, LP (incorporated by reference from Exhibit 10.23 to our registration statement on Form S-1, filed
    with the SEC on March 30, 2020).
10.24
Amendment and Exchange Agreement, dated March 23, 2020, by
    and between ShiftPixy, Inc. and Alpha Capital Anstalt (incorporated by reference from Exhibit 10.1 to our Current Report on
    Form 8-K, filed with the SEC on March 24, 2020).
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5
10.25
Amendment and Exchange Agreement, dated March 23, 2020, by
    and between ShiftPixy, Inc. and Osher Capital Partners LLC (incorporated by reference from Exhibit 10.2 to our Current Report
    on Form 8-K, filed with the SEC on March 24, 2020).
10.26
Exchange Agreement, dated March 24, 2020, by and between ShiftPixy, Inc.
    and CVI Investments, Inc. (incorporated by reference from Exhibit 10.1 to our Current Report on Form 8-K, filed with the SEC
    on March 25, 2020).
10.27
Form of Amended and Restated Note issued to Alpha Capital Anstalt and Osher Capital Partners
    on March 23, 2020 (incorporated by reference from Exhibit 4.1 to our Current Report on Form 8-K, filed with the SEC on March
    23, 2020).
10.28
Form of Exchange Note issued to Alpha Capital Anstalt and Osher Capital Partners on March
    23, 2020 (incorporated by reference from Exhibit 4.2 to our Current Report on Form 8-K, filed with the SEC on March 23, 2020).
10.29
Form of Exchange Warrant issued to Alpha Capital Anstalt and Osher Capital Partners on March
    23, 2020 (incorporated by reference from Exhibit 4.3 to our Current Report on Form 8-K, filed with the SEC on March 23, 2020).
10.30
Form of Exchange Warrant issued to CVI Capital Investments, Inc. on March 24, 2020 (incorporated
    by reference from Exhibit 4.1 to our Current Report on Form 8-K, filed with the SEC on March 24, 2020).
10.31
Form of Exchange Note issued to CVI Capital Investments, Inc. on March 24, 2020 (incorporated
    by reference from Exhibit 4.2 to our Current Report on Form 8-K, filed with the SEC on March 24, 2020).
10.32
Form of Pre-Funded Warrant (incorporated by reference as Exhibit 4.2 to Amendment No. 1
    to our Registration Statement on Form S-1, filed with the SEC on May 19, 2020).
10.33
Form of Underwriter Warrant (incorporated by reference as Exhibit 4.3 to Amendment No. 1
    to our Registration Statement on Form S-1, filed with the SEC on May 19, 2020).
10.34
Form of Common Stock Purchase Warrant (incorporated by reference as Exhibit 4.4 to Amendment
    No. 1 to our Registration Statement on Form S-1, filed with the SEC on May 19, 2020).
10.25†
Offer Letter to Scott W. Absher, dated March 23, 2016 (incorporated by reference from Exhibit
    10.27 to our registration statement on Form S-1, filed with the SEC on March 30, 2020).
21.1
List of subsidiaries of ShiftPixy, Inc. (incorporated by reference from Exhibit 21.1 to
    our registration statement on Form S-1, filed with the SEC on March 30, 2020).
23.1
Consent of Marcum, LLP, Independent Registered Public Accounting Firm.
23.2*
Consent of Bailey, Stock, Harmon, Cottam, Lopez LLP (included in Exhibit 5.1).
24.1
Power of Attorney (included on signature page to this Registration Statement).
*
To
be filed by amendment.
†
Indicates
a management contract or compensatory plan or arrangement.
(b)
Financial statement schedules
Schedules
not listed above have been omitted because the information required to be set forth therein is not applicable or is shown in the
financial statements or notes thereto.
Item
17. Undertakings
The
undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing
of the registrant's annual report pursuant to section 13(a) or section 15(d) of the Exchange Act (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to section 15(d) of the Securities Exchange Act of 1934)
that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering
thereof.
The
undersigned registrant hereby undertakes that:
1.
For purposes of determining any liability
                                         under the Securities Act, the information omitted from the form of prospectus filed as
                                         part of this registration statement in reliance upon Rule 430A and contained in a form
                                         of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under
                                         the Securities Act shall be deemed to be part of this registration statement as of the
                                         time it was declared effective.
2.
For the purpose of determining any
                                         liability under the Securities Act, each post-effective amendment that contains a form
                                         of prospectus shall be deemed to be a new registration statement relating to the securities
                                         offered therein, and the offering of such securities at that time shall be deemed to
                                         be the initial bona fide offering thereof.
Insofar
as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the
SEC such indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer, or controlling person of the Registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.
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6
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Irvine, CA on the day of July 27, 2020.
ShiftPixy,
    Inc.
By:
/s/ Scott W. Absher
Name:
Scott W. Absher
Title:
Chief Executive Officer
(Principal
    Executive Officer)
KNOW
ALL MEN BY THESE PRESENTS, that each of the undersigned directors and officers of ShiftPixy, Inc. constitutes and appoints Scott
W. Absher, his or her true and lawful attorney-in-fact and agent, with full powers of substitution and resubstitution, for him
or her and in his or her name, place and stead, in any and all capacities, to sign any or all amendments (including post-effective
amendments) to this registration statement and to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, with full power to act
alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about
the premises, as fully to all intents and purposes as he or she might or could do in person, and hereby ratifying and confirming
all that the said attorney-in-fact and agent, or his substitute or substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant
to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature
Title
Date
/s/ Scott W. Absher
Chief Executive Officer and Director
July 27, 2020
Scott W. Absher
(Principal Executive Officer)
/s/ Domonic Carney
Chief Financial Officer
July 27, 2020
Domonic Carney
(Principal Financial Officer and Principal
    Accounting Officer)
/s/ Kenneth Weaver
Director
July 27, 2020
Kenneth Weaver
/s/ Whitney White
Director
July 27, 2020
Whitney White
/s/ Christopher Sebes
Director
July 27, 2020
Christopher Sebes
/s/ Amanda Murphy
Director
July 27, 2020
Amanda Murphy
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