Business Context and Reporting Period
This filing is a Form 10-K for Concierge Technologies, Inc., the predecessor company to Marygold Companies, Inc., covering the fiscal year ended June 30, 2020, with comparative fiscal-year data for June 30, 2019. It is not a 2019 fourth-quarter filing. The company operated through Wainwright/USCF investment services, Gourmet Foods in New Zealand, Brigadier security systems in Canada, Original Sprout beauty products, and newly formed Marygold & Co., a fintech venture in development.
The company uses a decentralized holding-company structure and had approximately 92 full-time employees. Wainwright operated 10 exchange-traded products and funds with approximately $6.0 billion of assets under management at June 30, 2020.
Key Financial Metrics
| Metric | FY2020 | FY2019 | Change |
|---|---|---|---|
| Revenue | $26.749 million | $26.949 million | Down 1% |
| Gross profit | $20.266 million | $20.012 million | Up 1% |
| Gross margin | 75.8% | 74.3% | Up approximately 150 basis points |
| Operating income | $1.916 million | $0.756 million | Up 153% |
| Income before taxes | $2.336 million | $0.609 million | Up 284% |
| Net income | $1.773 million | $0.262 million | Up approximately 577% |
| Comprehensive income | $1.804 million | $0.217 million | Improved |
| Basic diluted EPS | $0.05 | $0.01 | Improved |
| Cash flow from operations | $1.661 million | $0.876 million | Up $0.786 million |
Revenue composition was $15.459 million from fund management, $4.746 million from food products, $2.660 million from security systems, and $3.884 million from beauty products and other activities.
Cash and cash equivalents were $9.813 million at June 30, 2020, compared with $6.482 million a year earlier. Total current assets were $17.599 million and reported working capital was approximately $14 million. Investments declined to $1.821 million from $3.757 million.
Total liabilities were $5.274 million versus $4.060 million in the prior year. Related-party notes payable totaled $603,500, including a $3,500 note that was past due, and property and equipment loans totaled approximately $373,041. Operating lease liabilities totaled $770,457 following adoption of ASC 842. Stockholders’ equity was $19.150 million.
Material Changes Versus the Prior Comparable Period
- Wainwright revenue increased 3% to $15.459 million. Average assets under management increased to approximately $3.0 billion from $2.7 billion, while Wainwright operating expenses declined 9% to $12.769 million.
- Financial-services income before taxes increased to $2.869 million from $0.778 million, primarily due to higher assets under management and lower variable expenses.
- Gourmet Foods revenue was essentially flat at $4.746 million, but net income improved to approximately $0.326 million from a $0.013 million loss. Results included approximately $0.1 million of New Zealand government wage subsidies.
- Brigadier revenue fell 25% to $2.660 million, reflecting COVID-19-related lockdowns and lower installation activity. Net income declined to approximately $0.294 million from $0.404 million, partly offset by approximately $0.1 million of Canadian wage subsidies.
- Original Sprout revenue increased 7% to $3.884 million, but net income declined to approximately $0.216 million from $0.407 million because general, administrative and selling expenses increased.
- Operating expenses declined 5% to $18.350 million. Fund operations and marketing expenses decreased, while salaries and compensation increased to $7.523 million from $6.944 million.
- Cash increased by $3.331 million during the year. Operating activities provided $1.661 million, investing activities provided $1.301 million, and financing activities provided $0.289 million.
- The company issued 175,000 common shares valued at $152,250 for investment-banking services. No stock options or warrants were outstanding.
Guidance, Outlook, Risks and Unusual Items
Management expected Wainwright, Gourmet Foods, Brigadier and Original Sprout to remain profitable in the following fiscal year. Its stated priorities included expanding each operating unit, growing Original Sprout beyond its boutique customer base, expanding Brigadier’s product offerings, improving Gourmet Foods’ efficiency and market share, developing new Wainwright fund products, pursuing acquisitions, and launching a Marygold fintech mobile application during the next fiscal year.
Marygold was still in development at June 30, 2020. Approximately $0.5 million had been invested in fintech development, including $217,990 of capitalized internally developed software. Marygold had approximately $747,000 of future commitments to primary service vendors.
COVID-19 had a nominal consolidated impact because the most significant effects occurred late in the fiscal year, but management stated that future effects were uncertain. The filing identifies risks from economic and market conditions, commodity-price volatility, concentration in major funds and customers, regulatory compliance, cybersecurity, foreign-currency movements, key-person dependence, acquisition execution, and the holding-company structure’s reliance on subsidiary distributions.
USCF and related parties faced multiple stockholder lawsuits concerning disclosures and actions involving the United States Oil Fund during the 2020 oil-market disruption. USCF, USO and executives also received SEC and CFTC Wells Notices concerning disclosures and investment constraints. The company had not accrued liabilities for these legal matters and stated that potential losses could not be reasonably estimated.
Subsequent to year-end, Gourmet Foods acquired Printstock Products Ltd. in New Zealand for an expected purchase price of approximately NZ$1.9 million, or approximately US$1.2 million, to support vertical integration of food packaging. The purchase-price allocation and pro forma information had not been completed as of the filing date.
The independent auditor, BPM LLP, issued an unqualified opinion on the consolidated financial statements. Management concluded that disclosure controls and internal control over financial reporting were effective as of June 30, 2020; the filing did not include an external auditor attestation because the company was not required to provide one.
Most Important Facts for Investors to Verify
- Confirm the applicable company name and period: the supplied filing is Concierge Technologies’ FY2020 Form 10-K, not a Marygold Companies 2019 Q4 report.
- Review the audited financial statements and notes for the composition, collectibility and related-party nature of the $2.611 million fund-management receivable.
- Assess exposure to Wainwright’s concentration in USO, USCI and UNG; those three funds accounted for approximately 86% of Wainwright revenue in FY2020.
- Monitor the SEC and CFTC Wells Notices and related litigation for potential penalties, settlements, insurance coverage and financial impact.
- Evaluate liquidity after considering $1.0 million of indebtedness, $0.770 million of lease liabilities, the past-due related-party note, Marygold vendor commitments and the Printstock acquisition funding.
- Consider customer concentration: Brigadier’s largest customer represented 49% of its revenue, while a gasoline-dealer consortium represented approximately 45% of Gourmet Foods revenue.
- Verify the timing, cost, funding and commercial launch of Marygold’s fintech application and the recoverability of its capitalized software costs.
- Account for control and dilution considerations: 37.413 million common shares and 53,032 Series B preferred shares were outstanding at June 30, 2020; each preferred share was convertible into 20 common shares and carried equivalent voting power.