Form 10-Q Summary
Registrant and period: The filing is for Concierge Technologies, Inc. (the company identified in the request as Marygold Companies, Inc.), for the three months ended September 30, 2019. The company operates investment fund management, food products, security systems, and beauty products businesses through subsidiaries in the United States, New Zealand, and Canada. The statements are unaudited and prepared under U.S. GAAP.
Financial Position and Results
| Metric | Q1 FY2020 | Q1 FY2019 | Change |
|---|---|---|---|
| Revenue | $6.03 million | $7.18 million | Down 16% |
| Gross profit | $4.26 million | $5.34 million | Down 20% |
| Gross margin | 70.6% | 74.4% | Down approximately 380 bps |
| Operating income | $60.9 thousand | $568.7 thousand | Down 89% |
| Net income | $54.9 thousand | $286.0 thousand | Down 81% |
| Comprehensive income | $88.8 thousand | $274.4 thousand | Down 68% |
| Operating cash flow | $668.3 thousand | $138.6 thousand | Increase of $529.7 thousand |
Fund management revenue declined 28% to $3.04 million, primarily because average assets under management declined to approximately $2.1 billion from approximately $3.0 billion. Other operating-unit revenue increased slightly to approximately $2.99 million.
At September 30, 2019, cash and cash equivalents were $6.90 million, restricted cash was $12.5 thousand, and short-term investments were $3.78 million. Total current assets were $15.09 million versus current liabilities of $3.13 million, producing working capital of approximately $11.97 million. Total assets were $22.28 million and total liabilities were $4.96 million.
Total debt, including related-party notes and property and equipment loans, was approximately $1.0 million. Related-party notes totaled $603.5 thousand, including a $3.5 thousand note that was past due. Operating lease liabilities totaled approximately $1.04 million following adoption of the new lease standard.
Material Changes Versus the Prior Comparable Period
- Revenue fell $1.15 million, primarily from lower investment fund management fees.
- Operating expenses decreased 12% to $4.20 million, including lower fund operations and marketing costs, partly offset by higher salaries and compensation.
- Operating income declined by approximately $508 thousand, and net income declined by approximately $231 thousand.
- Food products revenue increased to $1.25 million from $1.19 million; security systems revenue declined to $773 thousand from $859 thousand; beauty products revenue increased to $964 thousand from $902 thousand.
- Investing cash outflows were $664.1 thousand, primarily for property and equipment, including the purchase of the Saskatoon land and building. Financing cash inflows were $306.1 thousand, primarily from related property financing.
- The company adopted ASC 842 effective July 1, 2019, recognizing operating lease right-of-use assets and lease liabilities without a reported income statement or cash flow impact for the quarter.
- Common shares outstanding increased to 37,412,519 from 37,237,519, reflecting shares issued for investment banking services. The engagement also provides for an additional 175,000 shares if an up-listing to a national exchange occurs; no liability was accrued for that contingent issuance.
Outlook, Commentary, Risks, and Unusual Items
Management expects all four operating subsidiaries to remain profitable during the coming fiscal year and believes existing capital is sufficient for anticipated operating needs, debt service, and stated business objectives. Its plans include expanding Original Sprout, growing Brigadier and Gourmet Foods, developing new fund products, pursuing acquisitions, and investing in FinTech opportunities. No quantified revenue, earnings, or cash-flow guidance was provided.
- Wainwright's results are highly dependent on assets under management, commodity-market performance, fund demand, and related fee revenue.
- Revenue and receivables are concentrated among major customers and funds. Fund management revenue is related-party revenue, and approximately 52% of Brigadier revenue came from its largest customer during the quarter.
- Gourmet Foods depends on large grocery and convenience-store customers, while Original Sprout depends on a single packaging company for production of its products.
- The company operates across multiple currencies and reported a $33.9 thousand foreign-currency translation gain during the quarter.
- USCF has expense-waiver obligations of approximately $213 thousand at September 30, 2019, although it is not required to continue those payments into subsequent periods.
- Unrecognized tax benefits were approximately $0.3 million. No legal proceedings were pending, and no goodwill, intangible-asset, or inventory impairment was recorded.
- Management identified no material changes in internal control over financial reporting and concluded that disclosure controls were effective as of September 30, 2019.
Important Facts for Investors to Verify
- Confirm the issuer identity and corporate name, because the filing names Concierge Technologies, Inc., while the request identifies Marygold Companies, Inc.
- Monitor assets under management and the performance of USO, USCI, and UNG, which drove the quarter's revenue decline.
- Assess the sustainability of profitability given the sharp reduction in operating margin to approximately 1.0% from approximately 7.9%.
- Review customer and related-party concentration, including fund-management receivables of approximately $988.8 thousand.
- Reconcile cash resources with approximately $1.0 million of debt, $1.04 million of lease liabilities, and the past-due related-party note.
- Evaluate the planned acquisitions, FinTech investments, and potential additional 175,000-share issuance because no quantified funding plan or return expectations were provided.