Business Context and Reporting Period
This Form 10-Q covers the three- and six-month periods ended December 31, 2013, filed February 14, 2014. The filing identifies the registrant as Concierge Technologies, Inc.; the request metadata identifies Marygold Companies, Inc., so the corporate-name relationship should be verified.
The company’s principal operating business was Janus Cam, operated through wholly owned Wireless Village, which sold mobile video surveillance and “drive cam” systems. Planet Halo was disposed of on January 31, 2013 and is presented as discontinued operations in the prior-year comparative results.
Financial Performance and Position
| Metric | Three months ended December 31, 2013 | Three months ended December 31, 2012 |
|---|---|---|
| Net revenue | $513,751 | $407,889 |
| Gross profit | $216,957 | $180,834 |
| Gross margin | 42.2% | 44.3% |
| Operating loss | $(74,874) | $(128,886) |
| Net loss attributable to the company | $(74,863) | $(73,040) |
| Metric | Six months ended December 31, 2013 | Six months ended December 31, 2012 |
|---|---|---|
| Net revenue | $1,075,650 | $1,029,126 |
| Gross profit | $427,298 | $446,383 |
| Gross margin | 39.7% | 43.4% |
| Operating loss | $(173,080) | $(83,781) |
| Net loss attributable to the company | $(127,404) | $(109,456) |
| Net loss per common share | $(0.00) | $(0.00) |
- Six-month other income was $53,148 versus $6,191, including a $44,649 reduction in a previously calculated California sales-tax liability and a $1,100 reduction in accrued expenses.
- Six-month cash used in operating activities was $97,111, compared with $138,216 in the prior-year period. Investing cash use was $1,931, and financing provided $60,000.
- Cash and cash equivalents were $402 at December 31, 2013, down from $39,444 at June 30, 2013.
- At December 31, 2013, total assets were $477,126, current liabilities were $770,210, total liabilities were $974,910, and stockholders’ deficit was $497,784.
- Accounts receivable, net, was $166,682, including a $25,186 allowance for doubtful accounts; inventory was $272,484.
- Accounts payable and accrued expenses totaled $672,093, including a $135,000 accrued judgment and $25,902 of accrued interest.
- Debt included $38,000 of related-party notes, a $50,000 short-term note, and a $204,700 related-party convertible debenture. The $50,000 note bears 10% interest, is secured by inventory, and was scheduled to mature February 19, 2014. The convertible debenture bears 4.944% interest and is due January 1, 2015.
Material Changes and Management Commentary
- Six-month revenue increased 4.5%, but gross profit declined approximately 4.3% and management reported a roughly three-percentage-point decrease in gross margin. Discontinued product was sold at discounts during the transition to next-generation products.
- Second-quarter revenue increased approximately 26% year over year, while the operating loss narrowed from $128,886 to $74,874. The filing contains a typographical inconsistency in its MD&A when describing the comparison period for this increase.
- Six-month operating expenses increased to $600,378 from $530,164, attributed to additional staff, insurance and medical coverage, product development, and increased office space.
- The company completed the buyout of Janus Cam minority holders on January 31, 2013. Accordingly, no loss was allocated to non-controlling interests in 2013, compared with $57,209 for the second quarter and $31,375 for the six-month 2012 period.
- Management expects stabilized inventory levels to restore historical gross margins and believes its actions will permit continued operations for the next 12 months. The company may need additional short-term borrowing to purchase next-generation inventory.
- The financial statements include a going-concern warning. Continued operations depend on increased profitability, financing availability, timely payments to vendors and suppliers, and successful competition for customers.
- One customer represented $90,600 of sales and accounts receivable during the three- and six-month periods ended December 31, 2013, creating customer-concentration exposure.
- The company carried an accrued $135,000 judgment related to Brookside Investments, although management stated the judgment had expired and was no longer enforceable absent a new court action.
- A $10,000 affiliate note originally due January 25, 2014 was extended to February 25, 2014. The filing’s Item 5 refers to the maturity of the $50,000 note as February 19, 2013, while the financial-statement note states February 19, 2014; the correct date should be verified.
Investor Verification Items
- Verify the registrant’s current legal name and its relationship to Marygold Companies, Inc.
- Assess the going-concern risk given only $402 of cash, a $497,784 stockholders’ deficit, $770,210 of current liabilities, and continuing operating losses.
- Confirm the maturity, collateral, interest, and repayment status of the $50,000 short-term note and related-party borrowings.
- Evaluate whether inventory normalization actually restored gross margins and whether additional financing was required after the reporting date.
- Review the collectability and concentration of the $166,682 accounts receivable balance, including the $90,600 attributable to one customer.
- Confirm the status and potential enforceability of the $135,000 Brookside-related accrued judgment and other accrued liabilities.
- Reconcile the filing’s inconsistent maturity-date and comparative-period references.