Marygold Companies, Inc. (formerly Concierge Technologies, Inc.) — Form 10-Q Summary
Business Context and Reporting Period
The filing is for the three months ended September 30, 2017, filed November 14, 2017. The registrant was then named Concierge Technologies, Inc. and operated through subsidiaries in U.S. investment fund management, New Zealand food manufacturing, Canadian security monitoring, and U.S. data-streaming services. Comparative 2016 amounts were adjusted to reflect the Wainwright acquisition as a common-control transaction from July 1, 2015.
Key Financial Metrics
| Metric | Q1 FY2018 | Q1 FY2017 | Change |
|---|---|---|---|
| Revenue | $7.264 million | $8.463 million | Down 14% |
| Gross profit | $5.993 million | $7.192 million | Down 17% |
| Gross margin | 82.5% | 85.0% | Down 2.5 percentage points |
| Operating income | $1.389 million | $2.380 million | Down 42% |
| Net income | $871,704 | $1.301 million | Down 33% |
| Comprehensive income | $870,312 | $1.291 million | Down 33% |
| Cash flow from operations | $655,088 | $2.372 million | Down 72% |
- Investment fund management generated $5.158 million of revenue, down 19%, reflecting average assets under management of $3.9 billion versus $4.8 billion.
- Food products revenue increased to $1.294 million from $1.206 million; security monitoring revenue declined to $789,192 from $825,065; and data-streaming revenue declined to $22,855 from $64,527.
- Total operating expenses were $4.603 million versus $4.812 million. Marketing expense increased to $841,975 from $770,366, partly offsetting lower general and administrative and fund-operation costs.
- Cash and cash equivalents were $7.329 million at September 30, 2017, compared with $6.730 million at June 30, 2017. Total current assets were $15.597 million and total assets were $20.293 million.
- Total liabilities were $4.211 million, including $603,500 of related-party notes, $265,086 of equipment-loan principal, $648,117 of related-party expense waivers, and $258,601 of deferred tax liabilities.
- Investing cash outflows were $260,269, principally for $237,924 of equipment purchases. Financing activities provided $171,236, including $178,604 of equipment-loan proceeds.
- Basic weighted-average common shares were 886.8 million; diluted shares were 1.149 billion, including 262.2 million shares issuable upon conversion of Series B preferred stock. Reported basic and diluted earnings per share rounded to $0.00.
Material Changes Versus the Prior Comparable Period
- Revenue and operating income declined primarily because of lower Wainwright assets under management and related management fees.
- Net income decreased despite a lower income-tax provision of $496,767 versus $1.071 million.
- Operating cash generation fell substantially, driven in part by inventory growth of $331,430 and lower earnings.
- Brigadier’s gross margin improved to approximately 58% from 54%, while Gourmet Foods generated approximately $7,000 of net income versus a $25,000 net loss.
- Capital expenditures increased to $237,924 from $40,357, largely for Canadian security-monitoring vehicles and equipment.
Guidance, Outlook, Risks, Contingencies, and Unusual Items
- No formal financial guidance was provided. Management expected moderate growth at Brigadier, improved efficiency and market-share gains at Gourmet Foods, continued development of new fund products at Wainwright, and a transition of Kahnalytics into a more profitable business.
- On October 18, 2017, Kahnalytics agreed, subject to closing conditions, to acquire The Original Sprout’s assets for approximately $3.6 million in cash funded by an interest-free intercompany loan. The filing does not establish that the transaction had closed by the filing date.
- Two Wainwright funds, TOFR and MENU, were liquidated on October 20, 2017 because of low assets and limited growth. Related expense-limitation agreements expired October 31, 2017 with no significant additional reimbursement obligations expected.
- The Board approved a potential one-for-thirty reverse stock split to occur at its discretion before December 31, 2017.
- Series B preferred stock carries 20 votes and is convertible into 20 common shares per preferred share, subject to conditions and available authorized shares, creating substantial potential dilution and voting concentration.
- Revenue and receivables are concentrated. Wainwright revenue is primarily derived from affiliated funds; one Brigadier customer represented 49% of Brigadier revenue. Major grocery and convenience-store customers also represented substantial portions of Gourmet Foods revenue.
- Approximately $6.7 million of cash deposits were uninsured at September 30, 2017 across U.S., Canadian, and New Zealand accounts. Management reported no historical losses and did not expect losses.
- The company had approximately $0.2 million of unrecognized tax benefits. Operating lease commitments totaled at least $403,460 across Gourmet Foods, Brigadier, and Wainwright based on disclosed schedules. Management stated that pending legal proceedings were not expected to be material.
Facts Investors Should Verify
- Whether The Original Sprout acquisition closed, its final purchase price, funding terms, and contribution to subsequent results.
- The impact of the TOFR and MENU liquidations on Wainwright revenue, assets under management, and expense-waiver obligations.
- The status and terms of the approved one-for-thirty reverse stock split and the potential effect of Series B preferred-stock conversion on ownership and voting control.
- The sustainability of cash flow, given the sharp decline in operating cash generation and the planned acquisition funding.
- Customer and related-party concentration, including Wainwright’s dependence on affiliated funds and Brigadier’s dependence on its principal monitoring customer.
- The company’s historical name, subsequent rebranding to Marygold Companies, and any changes in subsidiaries, strategy, or reporting segments after this 2017 filing.