Form 10-K Summary
Registrant: Concierge Technologies, Inc. (now identified in the request as Marygold Companies, Inc.)
Reporting period: Fiscal year ended June 30, 2015, with comparative fiscal year 2014 information. The request metadata references “2014 Q4,” but the source is an annual Form 10-K for fiscal 2015, filed October 9, 2015.
Business Context
The company operated through Kahnalytics, Inc., which sold and supported vehicle cameras and related equipment for insurance-industry applications. On May 7, 2015, the company divested Wireless Village, doing business as Janus Cam, its former principal operating subsidiary, in exchange for cancellation of 68 million common shares and forgiveness of $344,052 of intercompany debt.
Kahnalytics became the company’s only operating subsidiary and revenue source after the divestiture. The company had no full-time employees and relied on independent sales personnel, contractors, consultants and commissioned agents. One customer generated 100% of fiscal 2015 net sales.
Key Financial Metrics
| Metric | FY 2015 | FY 2014 |
|---|---|---|
| Net revenue | $223,565 | $0 |
| Cost of revenue | $188,325 | $0 |
| Gross profit | $35,240 | $0 |
| Gross margin | Approximately 16% | Not meaningful |
| Loss from continuing operations | $204,216 | $176,332 |
| Income from discontinued operations and gain on disposal | $218,407 | $(143,488) |
| Net income (loss) | $14,191 | $(319,820) |
| Cash used in operating activities | $(484,567) | $(200,931) |
| Cash used in investing activities | $(353,100) | $(10,783) |
| Cash provided by financing activities | $2,792,000 | $188,000 |
| Cash and cash equivalents at year-end | $1,970,062 | $15,730 |
At June 30, 2015, total assets were $2.33 million, total liabilities were $286,501 and stockholders’ equity was $2.05 million. Current assets included $1.97 million of cash, $95,417 of accounts receivable and $85,849 of inventory. Current liabilities included $269,501 of accounts payable and accrued expenses, including a $135,000 accrued judgment.
Debt was substantially reduced during the year. Convertible debentures and the related-party convertible debenture were paid, converted or otherwise settled, leaving $8,500 of notes payable and $8,500 of related-party notes payable at June 30, 2015. Interest expense increased to $77,611 from $14,728.
Cash increased primarily from $1.16 million raised through common stock issuance and $1.84 million raised through Series B preferred stock issuance. The company also paid $353,100 to the divested subsidiary as part of the disposal transaction and recorded a $182,931 deposit toward the Gourmet Foods acquisition.
Material Changes Versus the Prior Comparable Period
- Revenue began in fiscal 2015, totaling $223,565, but remained highly concentrated in one customer and produced only approximately 16% gross margins.
- Continuing-operations losses increased by $27,884, largely due to financing, transaction and interest costs.
- Net income improved from a $319,820 loss to $14,191 of income, primarily because of $108,807 of income from discontinued operations and a $109,600 gain on the disposal of Janus Cam.
- Janus Cam generated $1.78 million of discontinued-operation sales through May 7, 2015, compared with $2.27 million for fiscal 2014. Its gross margin declined to 37% from 42%.
- Common shares outstanding increased to approximately 679.5 million from 240.3 million. Series B preferred shares increased to approximately 37.5 million from 9.5 million; each Series B share carries 20 votes and is convertible into 20 common shares.
- The January 2015 financing of $3 million transferred control to Nicholas Gerber and Scott Schoenberger, who acquired common and Series B preferred shares representing approximately 70% of voting control.
- Cash and equity improved materially, but the accumulated deficit increased to $6.35 million from $4.89 million.
Guidance, Outlook, Risks and Unusual Items
Management planned to expand Kahnalytics through software development, new products and recurring-revenue offerings, broaden its customer base, reduce operating costs and pursue additional acquisitions. The company expected the acquisition of Gourmet Foods, Ltd., a New Zealand bakery business, to provide significant revenue. The acquisition closed on August 11, 2015 for an agreed purchase price of NZ$2,511,050, subject to post-closing adjustments.
The independent auditor stated that cumulative losses and other factors raised substantial doubt about the company’s ability to continue as a going concern. Management’s plans relied on the $3 million equity financing, debt and expense management, the Janus Cam divestiture and anticipated revenues from Gourmet Foods. The financial statements contain no adjustments that might result from the outcome of the going-concern uncertainty.
- Customer concentration: one customer represented 100% of fiscal 2015 net sales and $95,417 of year-end receivables.
- Supplier concentration: one supplier represented 74% of fiscal 2015 purchases.
- Liquidity risk: continuing operations used $484,567 of cash during fiscal 2015, while the company had an accumulated deficit of $6.35 million.
- Market risk: the common stock traded on the OTC Markets Pink exchange and was subject to penny-stock regulations, with limited liquidity and resale restrictions.
- Uninsured cash: approximately $1.72 million of the June 30, 2015 cash balance exceeded FDIC insurance limits.
- Legal contingency: the company continued to accrue a $135,000 judgment that management stated had lapsed and was no longer enforceable without further legal action.
- Related-party and control risks: the principal financing investors became directors and executive officers and held substantial voting power.
- The company reported no full-time employees, no research and development spending, no lease obligations and no material off-balance-sheet arrangements.
Most Important Facts to Verify
- Confirm the company’s current legal name and whether this Concierge Technologies filing is the appropriate historical filing for Marygold Companies, Inc.
- Reconcile the request’s “2014 Q4” period with the filing’s actual fiscal year ended June 30, 2015.
- Assess whether post-filing Gourmet Foods results and post-acquisition adjustments support management’s expected revenue replacement.
- Evaluate recurring operating cash burn and whether the reported cash balance was sufficient after the acquisition and other commitments.
- Review customer and supplier concentration, particularly the single-customer dependence underlying all fiscal 2015 continuing-operations revenue.
- Examine the effect of preferred-stock conversion rights and potential dilution, including the 20-to-1 Series B conversion ratio.
- Review the going-concern disclosure, accumulated deficit, and management’s financing assumptions.