The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes, and other financial information included in this Form 10-K.



Our Management's Discussion and Analysis contains not only statements that are
historical facts, but also statements that are forward-looking. Forward-looking
statements are, by their very nature risky, and are subject to uncertainties
that could cause actual results or events to differ materially from those
expressed or implied by the forward-looking statements in this Form 10-K. These
risks and uncertainties include international, national, and local general
economic and market conditions; our ability to sustain, manage, or forecast
growth; our ability to successfully make and integrate acquisitions; new product
development and introduction; existing government regulations and changes in, or
the failure to comply with, government regulations; adverse publicity;
competition; the loss of significant customers or suppliers; fluctuations and
difficulty in forecasting operating results; change in business strategy or
development plans; business disruptions; the ability to attract and retain
qualified personnel; the ability to protect technology; the risk of foreign
currency exchange rate; and other risks that might be detailed from time to time
in our filings with the SEC. We do not undertake any obligation to update
forward-looking statements to reflect events or circumstances occurring after
the date of this Form 10-K.
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Although the forward-looking statements in this Form 10-K reflect the good faith
judgment of our management, such statements can only be based on facts and
factors currently known by them. You are urged to carefully review and consider
the various disclosures made by us in this Form 10-K as we attempt to advise
interested parties of the risks and factors that may affect our business,
financial condition, and results of operations and prospects. For a more
detailed discussion of the inclusion of forward-looking statements in this Form
10-K, please refer to the discussion, above, entitled "Cautionary Statement
Regarding Forward-Looking Statements and Information."

Overview



Our current business, and the primary source of our revenues to date, has been
providing human resources, employment compliance, employment related insurance,
payroll, and operational employment services solutions for our business clients
using a comprehensive HRIS platform under a human capital fee-based business
model. We have developed a comprehensive HRIS platform designed to provide
real-time, agile business intelligence information for our clients as well as an
employment marketplace designed to match client opportunities with a large
workforce under a digital umbrella. Our market focus is to use this traditional
approach, coupled with developed technology, to address underserved markets
containing predominately lower wage employees with high turnover, beginning with
light industrial, services, and food and hospitality markets. We provide human
resources, employment compliance, insurance-related, payroll, and operational
employment services solutions for our clients and shift work or gig
opportunities for WSEs (or shifters). As consideration for providing these
services, we receive administrative or processing fees, typically as a
percentage of a client's gross payroll, process and file payroll taxes and
payroll tax returns, provide workers' compensation insurance, and provide
employee benefits. We have built a substantial business on a recurring revenue
model since our inception in 2015. For Fiscal 2022, we processed approximately
$81.8 million of payroll billings, our primary operating metric. Despite the
impact of the COVID-19 pandemic and the worldwide economic crisis, by the end of
Fiscal 2022 our billings had recovered to pre-pandemic levels, reaching over
3,000 WSEs on a recurring basis and annual billings; increased by $2.3 million
or 2.9% above Fiscal 2021 gross payroll billings.

For the current fiscal year we have incurred approximately $44 million in
operating losses, which were driven primarily by substantial investments in our
technology platform, our SPAC sponsorships and our ShiftPixy Labs growth
initiative, as well as by necessary upgrades to our back-office operations to
facilitate servicing a large WSE base under a traditional staffing model. Also,
a significant factor this Fiscal 2022 was the impairments charges on our notes
receivable from Vensure and the ROU asset impairment on two of our leases.

For most of Fiscal 2022, our primary focus was on clients in the restaurant and
hospitality industries, (market segments typically characterized by high
employee turnover and low pay rates), and healthcare industries typically
employing specialized personnel that command higher pay rates. We believe that
these industries are better served by our HRIS platform and related mobile
application, which provide payroll and human resources tracking for our clients
and which we believe result in lower operating costs, improved customer
experience and revenue growth acceleration. California continued to be our
largest market during Fiscal 2022, accounting for approximately 52.10% of our
gross billings during the year. Washington and New Mexico represented our other
significant markets during Fiscal 2022, representing approximately 13.30%% and
8.10%, of our total revenues, respectively. (Our other locations did not
contribute revenue to a material degree.) All of our clients enter into CSAs
with us or one of our wholly owned subsidiaries.

Our business focus during Fiscal 2022 was to complete our HRIS platform and to
expand that platform to position the Company for rapid billings growth as well
as to expand our product offerings to increase our monetization of our payroll
billings. Now we feel that our HRIS platform is at completion stage and our IT
development cost has started to stabilize with a reduction of $1.23 million in
cost year over year, we are focused in the maintenance and minor functionality
improvements to keep our technology at a top level of excellence in
functionality. To that end, we identified and began to execute on various growth
strategies described above, and expect that our execution of these strategies,
if successful, will yield significant customer growth driven by widespread
adoption of our technology offerings, which we believe represents a substantial
value proposition to our clients as a valuable source of agile human capital
business intelligence.

Significant Developments in 2022

Transformative Sales Growth Strategy



In second half of Fiscal 2022, ShiftPixy activated an agile business development
plan for rapid organic growth starting in the first quarter of Fiscal 2023,
focused on building scalable long-term revenue creation with a goal to become
the market leader in U.S. contingent labor through increasingly diverse service
offerings. By helping Fortune 1000 companies rethink human
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This new and compelling go-to-market strategy is prepared to leverage the
recently expanded staffing platform on the ShiftPixy Human Resources Information
System ("HRIS") that offers clients an industry-leading digital and mobile
technology to handle the duties and demands of human capital management at
significant scale. An enhanced value proposition will offer clients automation,
acceleration, liberation, and some indemnification, which we believe will drive
growth and deliver value to stakeholders while also increasing our market share.
Successful execution of this sales growth plan will leave ShiftPixy
strategically positioned for secular growth in the $123 billion temporary and
contract employment staffing market in the U.S.

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

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

ShiftPixy Labs



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

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

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

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

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

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

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

Software Development



We believe that our HRIS platform and the related mobile functionality that we
are developing will be key differentiators and drivers of our low-cost customer
acquisition strategy. As such, we have invested heavily in our HRIS platform
over the past five years.

The heart of ShiftPixy's employment services solutions is a technology platform,
including a smartphone application, through which our WSEs will be able to find
available shifts at our clients' locations, solving a problem of finding
available shifts for both the shifters looking for additional shifts when they
want to work and businesses looking to fill open shifts.

A key element of our software development involves using our blockchain ledger
to process and record our critical Peer-to-Peer ("P2P") connections. While not
necessarily a new development, we note that we intend to use blockchain
technology to keep our data secure. Any data considered to be a human capital
validation point or part of the hiring and onboarding process will be utilized
and recorded in our blockchain ledger. For example, we expect the employee I-9
verification process-one of the most stringent, rigorous, and penalty-laden
compliance procedures - to be positively impacted by blockchain utilization of
biometric authentication and automatic verification of I-9 data, removing human
error in the process of screening for fraudulent information. Verification of
that data on the blockchain will allow both employers and auditing agencies to
confidently validate additional criteria such as employment dates, and
candidates' backgrounds (i.e. education, references, certifications, etc.), and
share the verification status directly on multiple distributed sources within
the blockchain, further underscoring the reliability and accuracy of candidates'
information and corporate compliance.

Future implementation of blockchain technology within the ShiftPixy Ecosystem is
anticipated to include extended applications for payroll and real-time payments,
and utilization of smart contracts for employment contracts, which will
facilitate recording of credible, trackable, and irreversible transactions
without third parties. For purposes of clarification, we note that ShiftPixy has
never, does not now and will never use its blockchain technology in any form of
cryptocurrency or crypto-currency related application.

Our smartphone application is one of the software components of what we call the
mobile platform, and together with the ShiftPixy "Command Hub" and the client
portal, is being developed, tested and released in stages. We have released and
are currently using the multilingual onboarding feature of our software, which
enables us to capture all application process related data regarding our
assigned WSEs and to introduce WSEs to and integrate them into the ShiftPixy
Ecosystem. This multilingual feature will allow us to move faster into outside
markets and will reduce the time and cost to bring new WSEs onto our HRIS
platform.

Our smartphone onboarding functionality streamlines the typical burdensome pile
of new employee paperwork into a seamless user-friendly workflow that is fully
compliant with governmental requirements. By leveraging artificial intelligence
capabilities, new hires are guided by a conversation with a "Pixy" chatbot that
asks the necessary questions and generates the required employment documents in
a highly personal and engaging way. Following completion of the questions,
applicable onboarding paperwork is prepopulated with the data and prepared for
the employee's signature to be affixed digitally via the app as well.
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We believe that our technology and approach to human capital management provides
our clients' management with a unique real-time business intelligence window
into their human capital needs. In addition to standard management reporting,
our technology provides real-time tools for management to quickly assess and
plan their human capital staffing requirements.

Prior to March 2019, we primarily used turnkey contract software development
firms to build the software code, mobile application, and license integrations
required to build the functional solution, with our internal personnel
maintaining principally an oversight role. Beginning in March 2019, we hired and
assembled an internal development team for cost-cutting and for better feature
and implementation control. Our development team was fully in place by August
2019 and focused on delivering a version of our mobile application and software
solution using a combination of third-party licensed software and internally
developed software.

We began building our internal software development team and transitioned away
from our former software development vendor to expedite our technology
deployment. We launched version 2.0 of our mobile application and enhanced user
features, including onboarding, scheduling and driver management, during the
fourth quarter of Calendar 2019.

We continued our software development internally primarily by focusing on
feature enhancements such as delivery, scheduling, and onboarding functionality
improvement, as well as better integration and more seamless process flow
improvements. We believe that this has resulted in an improved user experience,
reduced internal staff time required for onboarding, and increased trials of our
future revenue generation features such as delivery and scheduling. Our software
development team has continued to focus on intermediation functionality and
integration work designed to prepare our HRIS platform to scale and support our
growth initiatives described above.

From inception of the project in Fiscal 2017 through August 31, 2022, we spent
approximately $34.2 million, consisting of outsourced research and development,
IT related expenses, development contractors and employee costs, as well as
marketing spending consisting of advertising, trade shows, and personnel
costs. The following table shows the technology and marketing spending for each
fiscal year ended August 31:

Development spending (in $ millions)                          2022        2021        2020       2019
Contract development and licenses                           $  1.0      $  3.8      $  2.3      $ 2.2
Internal personnel costs                                       3.0         3.0         1.9        1.1
Total Development spending                                  $  4.1      $  6.8      $  4.2      $ 3.3

Marketing spending
Advertising and Outside Marketing                           $  2.5      $  2.1      $  0.6      $ 1.2
Internal personnel costs                                       0.7         0.5         0.4        0.4
Subtotal, Marketing costs                                   $  3.3      $

2.6 $ 1.0 $ 1.6 Total, HRIS platform and mobile application spending $ 7.3 $ 9.4 $ 5.2 $ 4.9



Cumulative Investment                                       $ 34.2      $ 30.1      $ 20.7      $
Portion of investment capitalized as fixed assets           $    -      $    -      $  3.7      $
Portion of investment expensed                              $ 34.2      $

30.1 $ 17.0 $




We capitalized no development spending into fixed assets for Fiscal 2022, since
the development activities related to our software, as defined by GAAP, was
completed during Fiscal 2020. For our Fiscal 2019 and our fiscal year ended
August 31, 2018 ("Fiscal 2018"), we capitalized $0.9 million and $2.8 million,
respectively, of contract development spending into fixed assets.

Offices Update



In August 2020, we signed a lease to relocate our corporate headquarters to
Miami, Florida, and largely completed the relocation for our administrative,
marketing and East Coast sales and customer support staffs to Miami by the end
of Calendar 2020. We currently maintain offices in California primarily for use
by our research and development team and our West Coast sales and customer
support, and plan to continue to maintain these offices for the foreseeable
future.
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Effective October 1, 2020, we entered into a non-cancelable 64-month lease for
23,500 square feet of light industrial space located in Miami, Florida, to house
kitchen facilities, video production facilities, and certain marketing and
technical functions, including those associated with ShiftPixy Labs. The lease
contains escalation clauses relating to increases in real property taxes as well
as certain maintenance costs.

Effective June 7, 2021, we entered into a sublease agreement with Verifone, Inc.
to sublease premises consisting of approximately 8,000 square feet of office
space located in Miami, Florida, that we are currently using primarily for our
operations workforce. The lease has a term of three years expiring on May 31,
2024. The base rent is paid monthly and escalates annually pursuant to a
schedule set forth in the sublease.

Effective June 21, 2021, we entered into a 77 - month lease agreement, with an
anticipated possession date of March 1, 2022, for premises consisting of
approximately 13,418 square feet of office space located in Sunrise, Florida. We
anticipate using this space primarily to house our operations personnel and
other elements of our corporate workforce. The base rent is paid monthly and
escalates annually pursuant to a schedule set forth in the lease.

Effective May 2, 2022, the Company entered into a non-cancelable 60-month
operating lease commencing on July 1, 2022, for office space in Irvine,
California, which the Company anticipates using primarily to house its IT,
operations personnel, and other elements of its workforce. The base rent is paid
monthly and escalates annually according to a schedule outlined in the lease.
The monthly rent expense under this lease is approximately $24,000. As an
incentive, the landlord provided a rent abatement of 50% of the monthly rent for
the first four months, with a right of recapture in the event of default.

On August 31, 2022, the Company decided to formally abandon the leases for its
offices in the Courvoisier Center, including a sublease on the second floor with
Verifone. The determination was based on its inability to utilize the premises
as they were under extensive construction by the landlord resulting in a
significant negative impact on the Company's ability to conduct business and the
health and well-being of the Company's employees and guests. The Company
formally notified the landlord of its intention to vacate the premises and have
not been legally released from our primary obligations under the lease. The
Company received a formal suit complain from the landlord, and the matter is in
litigation. The Company intends to vigorously defend the lawsuit and
counterclaim for relocation costs.

Financing Activities



During Fiscal 2022, we closed a $12 million private placement offering in
September 2021, and executed two Warrants Exercise Agreements ("The
Agreements'). The Agreements generated aggregate proceeds of $5.9 million in
January 2022 and $1.3 million in July 19, 2022. Furthermore, closed a $5 million
private placement offering in September 2022, shortly after our fiscal year-end.
As of August 31, 2022, and August 31, 2020, we had no convertible debt
outstanding that carry anti-dilutive provisions, except as otherwise noted
below.

September 2021 Private Placement



In September 2021, the Company entered into a $12 million private placement
transaction, inclusive of $0.9 million of placement agent fees and costs, with a
large institutional investor pursuant to which the Company sold to the investor
an aggregate of (i) 28,500 shares of Common Stock, together with warrants (the
"September 2021 Common Warrants") to purchase up to 28,500 shares of Common
Stock, with each September 2021 Common Warrant exercisable for one share of
Common Stock at a price per share of $159.50, and (ii) 46,735 prefunded warrants
(the "September 2021 Prefunded Warrants"), together with the September 2021
Common Warrants to purchase up to 75,235 shares of Common Stock, with each
September 2021 Prefunded Warrant exercisable for one share of Common Stock at a
price per share of $0.010. Each share of Common Stock and accompanying September
2021 Common Warrant were sold together at a combined offering price of $159.50
and each September 2021 Prefunded Warrant and accompanying September 2021 Common
Warrant were sold together at a combined offering price of $159.49.

The September 2021 Prefunded Warrants are immediately exercisable, at a nominal
exercise price of $0.010, and may be exercised at any time until all of the
September 2021 Prefunded Warrants are exercised in full. The September 2021
Common Warrants have an exercise price of $159.50 per share, are immediately
exercisable, and will expire five years from the date that the registration
statement covering the resale of the shares underlying the September 2021 Common
Warrants is declared effective (which has not yet occurred). The private
placement generated gross proceeds of approximately $12.0 million, prior to
deducting $0.9 million of costs consisting of placement agent commissions and
offering expenses payable by the Company. In addition to the seven percent (7%)
of the aggregate gross proceeds cash fee, the Company issued to the placement
agent warrants to purchase $3,762 shares of our common stock issuable upon
exercise of the September 2021 Prefunded Warrants sold in the offering (the
"September Placement Agent Warrants"). The September Placement Agent Warrants
are exercisable for a period commencing on March 3, 2022 (six months after
issuance) and expire four years from the effective date (which
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January 2022 Warrant Exercise Agreement



On May 17, 2021, we issued warrants to purchase up to an aggregate of 49,485
shares of our common stock, par value $0.0001 with an exercise price of $242.50
(the "Existing Warrants"). The Existing Warrants were immediately exercisable
and expire on June 15, 2026. On January 26, 2022, we entered into a Warrant
Exercise Agreement ("the Exercise Agreement") with the holder of the Existing
Warrants (the "Exercising Holder"). Pursuant to the Exercise Agreement, the
Exercise Holder and the Company agreed that, subject to any applicable
beneficial ownership limitations, the Exercising Holder would cash exercise up
to 49,485 of its Existing Warrants (the "Investor Warrants") into shares of our
common stock (the "Exercised Shares"). To induce the Exercising Holder to
exercise the Investor Warrants, the Exercise Agreement (i) amended the Investor
Warrants to reduce their exercise price per share to $120.00 and (ii) provided
for the issuance of a new warrant to purchase up to an aggregate of
approximately 98,969 shares of our common stock (the "January 2022 Common
Warrant"), with such January 2022 Common Warrant being issued on the basis of
two January 2022 Common Warrant shares for each share of the Existing Warrant
that was exercised for cash. The January 2022 Common Warrant is exercisable
commencing on July 28, 2022, terminates on July 28, 2027, and has an exercise
price per share of $155.00. The Exercise Agreement generated aggregate proceeds
to the Company of approximately $5.9 million, prior to the deduction of $461,000
of costs consisting of placement agent commissions and offering expenses payable
by the Company. As a result of the warrant modification, which reduced the
exercise price of the Existing Warrants, as well as the issuance of the January
2022 Common Warrants, the Company recorded approximately (i) $639,000 for the
increased fair value of the modified warrants; and (ii) $12,590,000 as the fair
value of the January 2022 Common Warrants on the date of issuance. We recorded
approximately $5,477,000 as issuance costs that offset the $5.5 million of
additional paid-in capital the Company received for the cash exercise of the
Existing Warrants at the reduced exercise price, while the remaining $7,731,000
was recorded as a deemed dividend on the Consolidated Statements of Operations,
resulting in a reduction of income available to common shareholders in our basic
earnings per share calculation.

July 19, 2022 Warrant Exercise Agreement



On July 18, 2022, the Company entered into a warrant exercise agreement (the
"Exercise Agreement") with the holder of the September 2021 Warrants and January
2022 Warrants (the "Exercising Holder"). Pursuant to the Exercise Agreement, the
Exercising Holder and the Company agreed that the Exercising Holder would
exercise for cash 50,000 of its September 2021 Warrants (the "Investor
Warrants"). In order to induce the Exercising Holder to exercise the Investor
Warrants, the Exercise Agreement (i) amends the September 2021 Warrants and
January 2022 Warrants to (a) reduce the exercise price per share of the
September 2021 Warrants and January 2022 Warrants to $26.00, (b) extends the
expiration date of the September 2021 Warrants to May 3, 2029, and (c) extends
the expiration date of the January 2022 Warrants to July 28, 2029 and (ii)
provides for the issuance by the Company to the Exercising Holder of new
warrants to purchase up to 348,408 shares of common stock (the "New Warrants")
(equal to 200% of the sum of the September 2021 Warrants and January 2022
Warrants). The New Warrants are exercisable for a period of seven years
commencing upon issuance and have an exercise price per share of $26.00. On July
25, 2022, the Company entered into an amendment with the holder of the Company's
warrants to purchase 348,408 shares of common stock, issued July 19, 2022.
Pursuant to the amendment, the warrants were amended to be exercisable
commencing January 19, 2023 (six months from the date of issuance) and will
terminate January 19, 2030.

As a result of the warrant modification, which reduced the exercise price of the
Existing Warrants, as well as the issuance of the July 2022 Common Warrants, the
Company recorded approximately (i) $488,700 and $599,700 for the increased fair
value of the September 2021 and January 2022 modified warrants, respectively;
and (ii) $8,084,000 as the fair value of the July 2022 Common Warrants on the
date of issuance. We recorded approximately $100,000 on paid cost and $1,200,000
as issuance costs that offset the $130,000 of additional paid-in capital the
Company received for the cash exercise of the Existing Warrants at the reduced
exercise price, while the remaining $7,972,500 was recorded as a deemed dividend
on the Consolidated Statements of Operations, resulting in a reduction of income
available to common shareholders in our basic earnings per share calculation.

September 20, 2022 Private Placement Offering (subsequent to year-end)



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

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


Performance Highlights

All figures below represent the continuing operations of the Company after segregating the operations of the assets sold to Vensure pursuant to the Vensure Asset Sale.



Fiscal 2022 vs. Fiscal 2021

•Served approximately 70 clients and employed an average of 3,000 WSEs, resulting in an increase in our administrative fees of approximately $0.2 million or 13.3% above Fiscal 2021.



•Processed over $81.8 million in gross billings from continuing operations,
representing an increase of $2.31 million or 2.9% from Fiscal 2021. Our Fiscal
2022 continuing operations mix remained consistent with Fiscal 2021, primarily
consisting of food and restaurant workers for QSRs. For further information,
please refer to the section entitled "Non-GAAP Financial Measures", below.

Our financial performance for Fiscal 2022, compared to Fiscal 2021, included the following significant items:



Revenues increased approximately $12.6 million or 53.7%, from $23.42 million in
Fiscal 2021 to $36.0 million in Fiscal 2022. The increase is due to the
combination of $2.3 million or 2.9% increase in gross billings from
$79.0 million in Fiscal 2021 to $81.8 million in Fiscal 2022, and the impact of
transitioning a significant amount of our existing clients to a staffing revenue
recognition model during Fiscal 2022. Recurring WSE counts as of the end of
Fiscal 2022 averaged approximately 3,000, which is consistent with a recovery to
our pre-pandemic WSE levels. Gross Billings per WSE remained consistent year
over year with an average of $27,095 in Fiscal 2022 vs $26,345 in Fiscal 2021.

Revenue associated with administrative fees increased by $0.2 million or 13.3%,
and tax revenues by 0.4 million or 5.2% both of which are consistent with our
billed wages increase of 2.9% during Fiscal 2022. Revenue associated with
workers' compensation premiums decreased by $0.2 million, or 11.4%, due to the
migration of our WSEs to a guaranteed cost program during Fiscal 2021 and a
change in our client mix that resulted in lower billed workers' compensation
rates per wage dollar.

Impact of change in CSAs on prospective revenue recognition and cost of revenues
During Fiscal 2021, as part of our annual review process, we modified certain
terms and conditions of our standard CSA applicable to a portion of our existing
client base, which resulted in us recognizing revenue generated by these clients
pursuant to a staffing model on a prospective basis. The staffing revenue
recognition model provides for all gross billings, including employee payroll
paid, to be recorded as revenue, and for cost of revenues to be recorded to
include the employee payroll paid. Accordingly, for Fiscal 2022 and 2021, all
such revenue increases as a result of this change also yielded a corresponding
increase in cost of revenues, and therefore had no impact on our gross margins.
For further information, please refer to the section entitled "Non-GAAP
Financial Measures", below.

For Fiscal 2022, gross billings from staffing and HCM services totaled
approximately $29.6 million and $52.2 million, representing 35.99% and 64.01% of
our gross billings, respectively. For Fiscal 2021, gross billings from staffing
and HCM services totaled approximately $15.2 million and $63.8 million,
representing 19% and 81% of our gross billings, respectively.

Gross Profit increased approximately $1.5 million, compared year over year to
Fiscal 2021, mainly driven by the $1.2 million or 62.90% decrease in workers'
compensation premium costs from our guaranteed cost program and a decrease in
actuarial cost for our legacy workers' compensation insurance programs as they
are in the phasing out stage, offset by a slight increase in gross profit
associated with administrative fees and taxes.

Operating expenses increased by $17.4 million or 62.7%, from $27.7 million in
Fiscal 2021 to $45.0 million in Fiscal 2022. The increase in mainly driven by
$2.5 million or 22.3% increase in payroll, the cost associated with the SPAC's
initiative, which mainly had an increase effect of $3.6 million or 87.6% in the
professional fees and $4.6 million or 56.1% in the operating
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expenses due to consolidation. Furthermore, a significant impact from
non-recurring expenses in Fical 2022 includes the $4.0 million impairment of the
notes receivable from the Vensure sale and the $3.9 million ROU asset impairment
for the two leases abandoned during the year.

Operating loss increased by $15.9 million or 58.1%, mainly driven by the increase in operating expenses as described above.



Other income (expense) increased by $0.2 million in Fiscal 2022 due to the
$0.3 million increase in interest and dividends received from the Trust Account.
net by the $0.5 million increase in expensed offering cost from the SPACs S-1
abandonment.

Loss from discontinued operations represents the reassessment of the workers'
compensation claims reserve associated with our former clients that we
transferred to Vensure as part of the Vensure Asset Sale. Loss from discontinued
operations decreased by $1.9 million or 76.5% in Fiscal 2022.

Net Loss increased by $29.8 million or $61.08 per share, to $59.7 million or $149.75 per share in Fiscal 2022, from $29.9 million or $88.67 per share in Fiscal 2021.


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Results of Operations

Fiscal 2022 Compared to Fiscal 2021

The following table summarizes our consolidated results of operations:



                                                                             For the year ended
                                                                      August 31,             August 31,
                                                                         2022                   2021
Revenues (See Note 2)                                              $  36,002,000          $  23,420,000
Cost of revenue                                                       34,227,000             23,098,000
Gross profit                                                           1,775,000                322,000

Operating expenses:
Salaries, wages, and payroll taxes                                    13,575,000             11,100,000
Commissions                                                               89,000                176,000
Professional fees                                                      7,673,000              4,089,000
Research and Software development                                      2,529,000              3,755,000
Depreciation and amortization                                            509,000                357,000
Impaired asset expense                                                 4,004,000                      -
ROU asset impairment                                                   3,851,000                      -
General and administrative                                            12,788,000              8,190,000
Total operating expenses                                              45,018,000             27,667,000

Operating Loss                                                       (43,243,000)           (27,345,000)

Other (expense) income:
Interest expense                                                          (1,000)                (5,000)
Other income                                                             316,000                 25,000
Expensed SPAC offering costs                                            (515,000)                     -
Total other expense                                                     (200,000)                20,000
Loss from continuing operations before income taxes                  (43,443,000)           (27,325,000)

Income tax expense                                                       (38,000)                42,000
Loss from continuing operations                                      (43,405,000)           (27,367,000)

Loss from discontinued operations, net of tax                           (590,000)            (2,509,000)

Net loss attributable to ShiftPixy, Inc shareholders               $

(43,995,000) $ (29,876,000)

Deemed dividend from change in fair value from warrants modification

                                                         (15,703,000)                     -
Net loss attributable to common stockholders                       $

(59,698,000) $ (29,876,000)



Net Loss per share, Basic and diluted
Continuing operations                                              $     (148.28)         $      (81.23)
Discontinued operations                                            $       (1.47)         $       (7.44)
Net Loss per common share - Basic and diluted                      $

(149.76) $ (88.67)



Weighted average common stock outstanding - Basic and diluted            402,591                337,225

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.


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                                                         2022          2021
Net Revenues (in millions)                            $  36.0       $  23.4

Increase (Decrease), year over year (in millions) $ 14.8 $ 14.8 Percentage Increase (Decrease), year over year

           53.7  %      171.0

%



Cost of Revenues (in millions)                        $ (34.2)      $

(23.1)

Increase (Decrease), year over year (in millions) $ (11.1) $ (15.4) Percentage Increase (Decrease), year over year

           48.2  %      200.6

%



Gross Profit (in millions)                            $   1.8       $   0.3
Increase (Decrease), year over year (in millions)     $   1.5       $  (0.6)
Percentage Increase (Decrease), year over year          451.2  %      (66.4) %
Gross Profit Percentage of Revenues                       4.9  %        1.4  %


Fiscal 2022

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

Net Revenue increased approximately 53.7% to $36.0 million, from $23.4 million
in Fiscal 2021. The revenue increase was due to a 2.9% increase in gross
billings to $81.3 million from $79.0 million, combined with the effect of the
transition some of our existing clients to a staffing revenue recognition model
during Fiscal 2021 and Fiscal 2022, as described above. Recurring WSE counts as
of the end of Fiscal 2022 averaged approximately 3,000, which is consistent with
recovery to our pre-pandemic WSE levels. Our gross billings from staffing and
HCM services totaled approximately $29.6 million and $52.2 million, representing
35.99% and 64.01% of our gross billings, respectively.

Revenue associated with administrative fees increased by $0.2 million or 13.3%,
which is consistent with our billed wages increase of 2.9% as well as the
$0.4 million or 5.2% increase in our revenues associated with taxes during
Fiscal 2022. Revenue associated with workers' compensation decreased by
$0.2 million, or 11.4%, due to the decrease in the premium costs from our
guaranteed workers' compensation cost program during Fiscal 2022, which allowed
us to pass the benefit down to our clients resulting in a lower billed workers'
compensation rate per wage dollar.

Cost of Revenues includes our costs associated with employer taxes, workers'
compensation insurance premiums, and the gross wages paid by our staffing
clients. Cost of revenues increased by $11.1 million, or 48.2%, to $34.2 million
in Fiscal 2022 from $23.1 million in Fiscal 2021. The change in cost of revenues
was due primarily to the conversion of certain existing clients to a staffing
revenue recognition model during Fiscal 2021 and Fiscal 2022, as described
above.

Gross Profit increased approximately 451.2%, or $1.5 million in Fiscal 2022,
compared to Fiscal 2021, primarily due to the migration of our clients to a
guaranteed cost program workers' compensation program during Fiscal 2021 and
further reductions in premiums in Fiscal 2022 and the $2.3 million or 2.9%
increase in gross billings.


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

                                                Year ended August 31,
                                         2022              2021          % Change
Salaries, wages and payroll taxes   $ 13,575,000      $ 11,100,000         22.3  %
Commissions                               89,000           176,000        (49.4) %
Professional fees                      7,673,000         4,089,000         87.6  %
Software development                   2,529,000         3,755,000        (32.6) %
Depreciation and amortization            509,000           357,000         42.6  %
Asset impairment expense               4,004,000                 -        100.0  %
General and administrative            12,788,000         8,190,000         56.1  %
Total operating expenses            $ 41,167,000      $ 27,667,000         48.8  %


Operating expenses increased $17.4 million or 62.7% to $45.0 million in Fiscal
2022 from $27.7 million in Fiscal 2021. The components of operating expenses
changed as follows:

Salaries, wages and payroll taxes increased by approximately $2.5 million, or
22.3% in Fiscal 2022 compared to Fiscal 2021, from $11.1 million in Fiscal 2021
to $13.6 million in Fiscal 2022. This increase resulted primarily from hiring
additional employees in the executive, operations, and software development
ranks of our business to support our various growth initiatives from Fiscal
2021, including our SPAC sponsorships and ShiftPixy Labs. These costs consisted
of gross salaries including salary increases provided to key management
executives in Fiscal 2022, as disclosed in our 8K, benefits, and payroll taxes
associated with our executive management team and corporate employees. Our
corporate employee as of August 31, 2022, were approximately 61.

Commissions consist of commissions payments made to third party brokers and inside sales personnel and remained consistent year over year.



Professional fees consists of legal fees, accounting costs, board fees, and
consulting fees. Professional fees increased by $3.6 million, or 87.6% in Fiscal
2022 compared to Fiscal 2021, from $4.1 million in Fiscal 2021 to $7.7 million
in Fiscal 2022. The increase is primarily attributable to the professional fees
incurred with the activities related to the completion of the initial businesses
combination for IHC and legal fees paid related to several of our current active
litigation.

Software development consists of costs associated with research and development
outsourced to third parties. Software development costs decreased by
$1.2 million or 32.6%, from $3.8 million in Fiscal 2021 to $2.5 million in
Fiscal 2022. The decreased costs is driven by the significant reduction in
eternal developer in Fiscal 2022 since our HRIS application is substantially
completed and is now in the maintenance and minor functionality improvements
that are driven or managed by our internal development team.

Depreciation and amortization increased by $0.2 million, or 42.6% in Fiscal 2022
compared to Fiscal 2021. Increase is due to depreciation on asset purchased in
late Fiscal 2021 and Fiscal 2022 to support our growth initiatives for the
period.

Asset impairment expense increased by $4.0 million in Fiscal 2022, due to the
non-recurring impairment of the notes receivable from the Vensure sale in Fiscal
2020.

ROU asset impairment increased by $4.0 million in Fiscal 2022, this
non-recurring impairment was the result of the Company decision to formally
abandon the leases for its offices in the Courvoisier Center. The determination
was based on its inability to utilize the premises as they were under extensive
construction by the landlord resulting in a significant negative impact on the
Company's ability to conduct business and the health and well-being of the
Company's employees and guests. As a result of the abandonment, the Company
evaluated the Right-Of-Use ("ROU") Assets for impairment as of August 31, 2022,
and recorded an impairment charge.

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 increased by $4.6 million or 56.1% in Fiscal 2022 compared to Fiscal
2021, from $8.2 million in Fiscal 2021 to $12.8 million in Fiscal 2022.

The increase is mainly driven by the $1.2 million D&O insurance for IHC,
approximately $1 million in expenses related to interest and penalties accrued
for payroll taxes and $2.9 million increase in compensation expense under the
ASC 718,
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Compensation accounting guidance, related to the preferred stocks granted to the
CEO in exchanged for the surrender of its preferred options in Fiscal 2022.
Other components of the increase include marketing expenses related to our
growth initiatives.

                                               For the Years Ended
                                  August 31, 2022               August 31, 2021
Interest expense                     (1,000)                            (5,000)
Other income                        316,000                             25,000
Expensed SPAC offering costs       (515,000)                                 -
Total other income (expense)       (200,000)                            20,000



Other income (expense) increased by $0.2 million in Fiscal 2022 due to the
$0.3 million increase in interest and dividends received from the Trust Account,
net by the $0.5 million increase in expensed offering cost from the SPACs S-1
abandonment.

Loss from discontinued operations represents the reassessment of the workers'
compensation claims reserve associated with our former clients that we
transferred to Vensure as part of the Vensure Asset Sale. Loss from discontinued
operations decreased by $1.9 million or 76.5% in Fiscal 2022.

Deemed dividends represents the difference in fair value for a warrant's price
modifications and its original exercised price as an inducement for exercise the
warrants. In Fiscal 2022 the Company entered into two warrant modifications
agreements one in January 2022 reducing the exercise price from $2.425 to $1.20
and the second one in July 19, 2022 reducing the exercise price from $1.55 to
$.26, resulting in a reduction of income available to common shareholders in our
basic earnings per share calculation. No comparable expense was recognized
during Fiscal 2021.

Net Loss increased by $29.8 million or $61.08 per share in Fiscal 2022, from
$29.9 million or $88.67 per share in Fiscal 2021 to $59.7 million or $149.75 per
share in Fiscal 2022.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity



The accompanying financial statements have been prepared in conformity with
GAAP, which contemplate continuation of the Company as a going concern. As of
August 31, 2022, the Company had cash of $0.6 million and a working capital
deficit of $31.2 million. During this period, the Company used approximately
$17.5 million of cash from its continuing operations and incurred recurring
losses, resulting in an accumulated deficit of $192.7 million as of August 31,
2022.

Historically, our principal source of financing has come through the sale of our
common stock and issuance of convertible notes. In September 2021, we raised
approximately $12 million ($11.1 million net of costs) in connection with the
sale of common stock and warrants, in January 2022, we entered into a warrant
exercise agreement that raised approximately $5.9 million ($5.4 million net of
costs), and in July 2022, we entered into a warrant exercise agreement that
raised approximately $1.3 million ($1.2 million net of costs).

The following table sets forth a summary of changes in cash flows for Fiscal
2022 and Fiscal 2021:

                                                             For the year ended
                                                                 August 31,
                                                           2022               2021
Net cash used in operating activities                    (17,520,000)

(21,512,000)

Net cash provided by (used in) investing activities (117,463,000) (2,566,000) Net cash provided by financing activities

               134,402,000        20,974,000
Change in cash                                        $    (581,000)     $ (3,104,000)



The recurring losses, negative working capital and cash used in the Company's
operations are indicators of substantial doubt as to the Company's ability to
continue as a going concern for at least one year from issuance of these
financial statements. Our
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plans and expectations for the next twelve months include raising additional
capital to help fund expansion of our operations and strengthening of our sales
force strategy by focusing on staffing services as our key driver to improve our
margin and the continued support and functionality improvement of our
information technology ("IT") and HRIS platform. This expanded go-to-market
strategy will focus on building a national account portfolio managed by a
newly-formed regional team of senior sales executives singularly focused on
sustained quarterly revenue growth and gross profit margin expansion. We expect
to continue to invest in our HRIS platform, ShiftPixy Labs, and other growth
initiatives, all of which have required and will continue to require significant
cash expenditures.

The Company also expects its ShiftPixy Labs growth initiative to generate cash
flow once launched, by functioning as an incubator of food service and
restaurant concepts through collaboration and partnerships with local innovative
chefs. If successful, the Company believes that this initiative will produce
sound businesses that provide recurring revenue through direct sales, as well as
through utilization of the ShiftPixy Ecosystem, HRIS platform, and other human
capital services that the Company provides. To the extent that this business
model is successful and can be replicated in other locations, the Company
believes that it has the potential to contribute significant revenue to
ShiftPixy in the future. The Company may also take equity stakes in various
branded restaurants that it develops and operates with its partners through
ShiftPixy Labs. Such ownership interests will be held to the extent that it is
consistent with the Company's continued existence as an operating company, and
to the extent that the Company believes such ownership interests have the
potential to create significant value for its shareholders.

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

We expect to engage in additional sales of our securities during Fiscal 2023,
either through registered public offerings or private placements, the proceeds
of which we intend to use to fund our operations and growth initiatives.

The Company's management believes that its current cash position, along with its
anticipated revenue growth and proceeds from future sales of its securities,
when combined with prudent expense management, will be sufficient to alleviate
substantial doubt about its ability to continue as a going concern and to fund
its operations for at least one year from the date these financials are
available (especially when considering the absence of any funded debt
outstanding on its balance sheet). If these sources do not provide the capital
necessary to fund the Company's operations during the next twelve months, it may
need to curtail certain aspects of its operations or expansion activities,
consider the sale of additional assets, or consider other means of financing.
The Company can give no assurance that it will be successful in implementing its
business plan and obtaining financing on advantageous terms, or that any such
additional financing will be available. These consolidated financial statements
do not include any adjustments for this uncertainty.

Off-Balance Sheet Arrangements

None

Critical Accounting Policies and Estimates

See Note 2, Summary of significant accounting policies in the accompanying Consolidated Financial Statements.

Emerging Growth Reporting Requirements



We are a public reporting company under the Securities Exchange Act of 1934 (the
"Exchange Act"). We are required to publicly report on an ongoing basis as an
"emerging growth company" (as defined in the Jumpstart Our Business Startups Act
of 2012, which we refer to as 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;


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•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 stockholder 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 are permitted to remain an "emerging growth
company" for up to the fifth anniversary of the completion of our first sale of
common equity securities under an effective Securities Act registration
statement, which occurred on October 29, 2018, 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. In the event that we cease to be an Emerging
Growth Company as a result of a lapse of the five year period, but continue to
be a Smaller Reporting Company, we would continue to be subject to similar
exemptions available to Emerging Growth Companies until such time as we were no
longer a Smaller Reporting Company.


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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 intended to enhance the
reader's 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.

Our revenue recognition policy differs for our EAS and staffing clients and is
dependent on the respective CSA applicable to each client. During Fiscal 2021,
some of our EAS clients migrated to a staffing CSA. Our policy is to report
revenues as gross billings, net of related direct labor costs, for our EAS
clients, and revenues without reduction for labor costs for staffing clients.

For Fiscal 2022, our gross billings from HCM and staffing services totaled
approximately $52.2 million and 29.6 million (total of $81.3), representing
64.0% and 36.0% of our gross revenue, respectively. For Fiscal 2021, our gross
billings were approximately $79.0 million, $63.8 million from our HCM services
and $15.2 million from staffing, representing 81% and 19% and of our gross
billings for the period. (We had no revenues generated from technology services
during Fiscal 2022 or Fiscal 2021).

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

Reconciliation of GAAP to Non-GAAP Measure

Gross Billings to Net Revenues



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

                                             For the year Ended
                                                 August 31,
                                              2022             2021
Gross Billings in millions             $     81.3            $ 79.0
Less: Adjustment to Gross Billings     $     45.3            $ 55.6
Revenues, in millions                  $     36.0            $ 23.4

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



                                                   2022           2021

Administrative Fees (in millions, unaudited)           $1.8    $    1.5
Increase, year over year (in millions)               0.3            0.3
Percentage Increase, year over year                 20.0  %        20.0  %
Administrative Fee % of Gross Billings               2.3  %         2.0  %

Average WSEs by year (unaudited)                   3,000          3,000

Average Gross Billings per Average WSE $ 26,333 $ 26,372




Our billed WSEs as of the end of Fiscal 2022 averaged approximately 3,000, which
is consistent with continuous growth and recovery to our pre-pandemic levels.
The increase in administrative fees was consistent with our billings growth over
the same time period. The increase in average gross billings per WSE was due to
growth in the higher wages commanded by our
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healthcare WSEs, as well as an increase in billings to our restaurant clients as their operations recovered from the worst effects of the COVID-19 pandemic.


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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Not required.


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