Marygold Companies, Inc. — Form 10-Q Summary
Filing identity: The supplied filing is for Concierge Technologies, Inc., not Marygold Companies, Inc. Investors should verify the issuer and any subsequent name or corporate changes. The report covers the quarter and nine-month periods ended March 31, 2012, within the fiscal year ending June 30, 2012. Financial statements are unaudited.
Business Context and Reporting Period
The company operated through Planet Halo, Inc. and majority-owned Wireless Village, Inc., doing business as 3rd Eye Cam. It had discontinued its wireless Internet subscription operations and was focusing on the sale and distribution of mobile video-surveillance systems, cameras, DVRs and related hardware.
Key Financial Metrics
| Metric | Three months ended March 31, 2012 | Three months ended March 31, 2011 | Nine months ended March 31, 2012 | Nine months ended March 31, 2011 |
|---|---|---|---|---|
| Net revenue | $635,131 | $158,196 | $1,366,491 | $467,383 |
| Gross profit | $294,537 | $75,084 | $592,406 | $231,204 |
| Gross margin | 46.4% | 47.5% | 43.4% | 49.5% |
| Operating expenses | $168,724 | $113,777 | $478,300 | $198,897 |
| Income before non-controlling interest and taxes | $102,390 | $(57,336) | $87,273 | $(160,809) |
| Net income attributable to the company | $39,347 | $(43,228) | $24,484 | $(192,622) |
| Basic and diluted earnings per share | $0.00 | $(0.00) | $0.00 | $(0.00) |
Cash flow: For the nine months ended March 31, 2012, operating activities provided $23,129, compared with $127,574 used in the prior-year period. Investing activities used $5,104 for equipment, while financing activities used $20,000 for repayments to related parties. Cash decreased by $1,975 to $51,729 from $53,704 at June 30, 2011.
Liquidity and balance sheet: At March 31, 2012, current assets were $237,012 and current liabilities were $657,034, implying a current ratio of approximately 0.36. Total assets were $243,274, compared with total liabilities of $750,768. The company reported a total deficit of $507,494 and an accumulated deficit of $4,719,868.
Debt and obligations: Current liabilities included $150,000 of related-party notes payable, $78,036 of related-party accounts payable, $25,000 of customer advances and $403,998 of accounts payable and accrued expenses. Long-term liabilities included $20,000 of related-party notes payable and a $73,734 related-party convertible debenture, net. Wireless Village also owed $20,000 under inventory financing secured by inventory.
Material Changes Versus the Prior Comparable Period
- Nine-month revenue increased 192% to $1.37 million, principally because hardware sales increased to $1,319,272 from $449,398.
- The company shifted from discontinued wireless subscription and support activities toward higher-volume, lower-margin camera hardware sales. Gross margin declined to 43.4% from 49.5% for the nine-month comparison.
- The company generated nine-month net income attributable to Concierge of $24,484, compared with a $192,622 loss in the prior-year period.
- Accounts receivable increased to $131,937 from $41,688 at June 30, 2011, while inventory declined to $35,624 from $140,233.
- Total liabilities declined to $750,768 from $850,686, primarily due to lower accounts payable and accrued expenses and reduced related-party notes payable.
- Non-controlling interest increased to $170,920 from $108,931, reflecting the minority ownership in Wireless Village.
Outlook, Risks, Contingencies and Unusual Items
Management stated that increased product sales were expected to curtail losses during the fiscal year and that operations could fund expenses if 3rd Eye Cam continued to grow as projected. No formal quantitative revenue or earnings guidance was provided.
The filing contains a going-concern discussion. Management identified risks including the ability to pay vendors timely, maintain supplier relationships, manage minority shareholder interests in Wireless Village, fund product research and development, compete for customers, increase profitability and obtain financing. Management believed its actions would allow operations to continue for the next 12 months, but additional financing might still be required.
Unusual items included $87,369 of other income in the nine-month period, including a $38,381 reversal of accrued interest and a $39,972 reduction in the estimated California sales-tax liability. Beneficial conversion feature expense was $37,620, and debt issuance cost amortization was $7,524.
The company continued to carry a $135,000 accrued judgment related to Brookside Investments, although the filing states that the judgment expired by operation of law on May 7, 2012 because it was not renewed. The company also had related-party transactions and no bank account in its own name; an account maintained by an executive's consulting company was used for administrative purposes.
Management concluded that disclosure controls and procedures were effective and reported no material changes in internal control over financial reporting during the period.
Important Facts for Investors to Verify
- Confirm whether this filing belongs to Marygold Companies, Inc. or its predecessor, Concierge Technologies, Inc., and reconcile the corporate name and ticker history.
- Assess the sustainability and collectability of the substantial increase in camera hardware revenue and accounts receivable.
- Review the going-concern disclosure, negative working capital, accumulated deficit and dependence on related-party financing.
- Verify the terms, maturity dates, conversion rights and potential dilution associated with the related-party convertible debenture and preferred stock.
- Confirm the status and accounting treatment of the expired $135,000 Brookside judgment and the remaining tax, accrued-interest and vendor liabilities.
- Evaluate whether the reported profit and positive operating cash flow are recurring, given the unusual interest and sales-tax adjustments.