Marygold Companies, Inc. — Filing Summary
Filing identity and period: The supplied filing is a Form 10-Q filed by Concierge Technologies, Inc., not Marygold Companies, Inc. It covers the three and six months ended December 31, 2020, the second quarter of the fiscal year ending June 30, 2021. Marygold & Co. was a newly formed, development-stage subsidiary within Concierge and had not begun commercial operations.
Business Context and Reporting Period
- Concierge operated through investment fund management, New Zealand food products and printing, Canadian security systems, and U.S. beauty products subsidiaries.
- Marygold was developing a fintech business and related applications. Management estimated a commercial launch during the current fiscal year.
- The filing identifies approximately $5.2 billion of assets under management at Wainwright as of December 31, 2020.
- The financial statements are unaudited and prepared under U.S. GAAP.
Key Financial Metrics
| Metric | Three months ended December 31, 2020 | Three months ended December 31, 2019 | Six months ended December 31, 2020 | Six months ended December 31, 2019 |
|---|---|---|---|---|
| Revenue | $9.96 million | $5.80 million | $20.71 million | $11.82 million |
| Gross profit | $7.58 million | $4.07 million | $15.93 million | $8.33 million |
| Gross margin | 76.1% | 70.2% | 76.9% | 70.4% |
| Operating income (loss) | $1.74 million | $(0.10) million | $4.60 million | $(0.04) million |
| Net income (loss) | $1.35 million | $(0.07) million | $3.57 million | $(0.02) million |
| Basic EPS | $0.04 | $(0.00) | $0.10 | $(0.00) |
| Net cash provided by operating activities | Not separately provided | Not separately provided | $4.41 million | $0.06 million |
- Fund management revenue was $6.15 million for the quarter and $13.19 million for the six-month period, compared with $2.84 million and $5.88 million, respectively, in the prior-year periods.
- Cash and cash equivalents were $13.32 million at December 31, 2020, compared with $9.81 million at June 30, 2020. Including restricted cash, ending cash was $13.34 million.
- Working capital was approximately $17 million, according to management.
- Total liabilities were $6.61 million, compared with $5.27 million at June 30, 2020. The balance sheet included $603,500 of related-party notes, approximately $391,000 of property-backed debt, and $1.48 million of operating lease liabilities.
- Stockholders’ equity was $23.09 million at December 31, 2020, compared with $19.15 million at June 30, 2020.
Material Changes Versus the Prior Comparable Period
- Six-month revenue increased 75%, primarily because fund management revenue increased 124% as average assets under management rose to approximately $5.2 billion from $2.1 billion.
- Quarterly revenue increased approximately 72%, and the Company moved from a $101,000 operating loss to $1.74 million of operating income.
- Operating expenses increased 35% for the six-month period to $11.32 million, including higher compensation, marketing, general and administrative expenses, and fund-related costs.
- Printstock Products Limited was acquired on July 1, 2020. It contributed approximately $0.8 million of revenue in the quarter and $1.6 million in the six-month period. The acquisition required approximately $993,000 of cash consideration during the six months.
- Marygold startup costs were approximately $367,000 for the quarter and $671,000 for the six-month period. Approximately $217,990 of internally developed software costs had been capitalized by December 31, 2020.
- Food industry revenue increased, but six-month gross margin declined to approximately 29% from 31%, partly because of Printstock acquisition-related costs and COVID-19 effects.
- Security systems revenue declined approximately 14% for the six-month period because COVID-19 restrictions limited residential installation activity. Original Sprout revenue increased modestly, but profitability was affected by facility relocation costs.
- Net cash increased $3.51 million during the six months, principally from operating cash flow of $4.41 million, partially offset by $1.02 million of investing outflows.
Guidance, Outlook, Risks, Contingencies, and Unusual Items
- Management forecast that Wainwright, Gourmet Foods, Brigadier, and Original Sprout would each produce a profit during the coming fiscal year and stated that the Company had sufficient capital for expected corporate expenses and long-term objectives, assuming subsidiaries perform as projected.
- The Company planned to expand existing businesses, pursue acquisitions, develop new fund products, grow Original Sprout and Gourmet Foods, and launch Marygold’s fintech services.
- COVID-19 remained a significant uncertainty. Management expected deferred security installation activity to recover after the pandemic, but acknowledged that the ultimate financial impact was unknown.
- Revenue concentration is material. Wainwright’s USO fund generated 69% of fund management revenue for the six-month period. Certain customers represented significant portions of Brigadier, Gourmet Foods, Original Sprout, and Printstock revenue or receivables.
- USCF, USO, and an executive received SEC and CFTC Wells Notices concerning disclosures and actions during the 2020 oil-market disruption. The notices were preliminary and not formal findings of wrongdoing.
- USCF, USO, and related individuals were defendants in consolidated securities, derivative, and fiduciary-duty litigation related to USO disclosures and operations. The Company stated that no legal loss contingency was accrued.
- Related-party expense waivers payable increased to approximately $1.0 million from $0.4 million at June 30, 2020. USCF had no obligation to continue those waivers in future periods.
- Marygold had approximately $647,000 of future primary-vendor payment commitments, including amounts due in 2021 through 2023.
- The Company stated that there were no material changes to the risk factors disclosed in its June 30, 2020 Form 10-K.
- No dividends were paid, and management did not expect to pay dividends during the next fiscal year.
Most Important Facts for Investors to Verify
- Filing and issuer: Confirm whether the intended issuer is Concierge Technologies, Inc. or Marygold Companies, Inc.; the supplied filing predates the later Marygold Companies identity.
- Fund management concentration: Verify the sustainability of the sharp increase in Wainwright revenue and assets under management, particularly the concentration in USO and commodity-linked products.
- Regulatory and litigation exposure: Review subsequent SEC, CFTC, securities-litigation, and derivative-litigation developments and any potential financial impact.
- Marygold launch economics: Verify launch timing, additional development spending, vendor commitments, capitalization of software costs, and the financing required to commercialize the fintech business.
- Acquisition contribution: Assess Printstock’s standalone performance, integration benefits, goodwill, and whether projected cost savings and revenue growth have materialized.
- Customer and supplier concentration: Review the disclosed concentration of revenue and receivables and the dependence of Original Sprout on a single packaging supplier.
- Liquidity and obligations: Reconcile cash availability at the parent level with subsidiary cash, lease liabilities, related-party debt, expense waivers, taxes, and acquisition or development commitments.