Business Context and Reporting Period
The filing is a Form 10-Q for Concierge Technologies, Inc. (the registrant identified in the filing; the request metadata references Marygold Companies, Inc.) for the quarter and six-month period ended December 31, 2012. The company operated primarily through Wireless Village, a majority-owned subsidiary focused on mobile video surveillance hardware, and Planet Halo, a wholly owned product research and development subsidiary. The financial statements are unaudited and prepared under U.S. GAAP.
Key Financial Metrics
| Metric | Three months ended December 31, 2012 | Three months ended December 31, 2011 | Six months ended December 31, 2012 | Six months ended December 31, 2011 |
|---|---|---|---|---|
| Net revenue | $410,741 | $456,729 | $1,035,318 | $731,360 |
| Gross profit | $183,686 | $190,851 | $452,574 | $297,869 |
| Gross margin | 44.7% | 41.8% | 43.7% | 40.7% |
| General and administrative expense | $309,832 | $193,235 | $573,753 | $309,576 |
| Net loss attributable to the company | $(73,040) | $(28,362) | $(109,456) | $(15,663) |
| Net loss per share, basic and diluted | $(0.00) | $(0.00) | $(0.00) | $(0.00) |
Six-month hardware sales increased 41% to $1,028,946 from $729,332. Service revenue was immaterial at $180 for the six-month period. The company reported net cash used in operating activities of $138,216 for the six months, compared with $11,303 in the prior-year period.
At December 31, 2012, cash and cash equivalents were $29,788, compared with $114,433 at June 30, 2012. Accounts receivable declined to $148,900 from $264,309, while inventory increased to $201,982 from $37,442. Total assets were $411,009.
Total liabilities were $721,438, including $643,938 of current liabilities. Related-party debt consisted of $150,000 in current notes payable and $77,500 in long-term notes payable. Stockholders' deficit was $310,429, including an accumulated deficit of $4,778,321.
Material Changes Versus the Prior Comparable Period
- Six-month revenue rose 42% to $1.04 million, driven by increased mobile surveillance hardware sales; however, second-quarter revenue declined 10% because of customer-order timing and trade-show activity.
- Six-month gross profit increased 52% to $452,574, and gross margin improved to approximately 43.7% from 40.7%.
- General and administrative expense increased 85% for the six months, contributing to a substantially larger net loss of $109,456 versus $15,663.
- Operating cash use increased to $138,216 from $11,303, primarily reflecting the $164,540 increase in inventory, partially offset by collections of accounts receivable.
- Cash declined by $84,646 during the six months. Financing provided $57,500 through related-party loans, while investing activities used $3,931.
- A $100,000 principal balance and $12,000 of accrued interest under a convertible debenture were converted into 560,000 Series B preferred shares. Beneficial conversion feature expense declined to $9,439 from $25,172.
- A related-party account payable of $75,450 was forgiven and recorded as additional paid-in capital.
Guidance, Outlook, Risks, Contingencies, and Unusual Items
Management expected losses to be curtailed during the fiscal year through increased product sales and stated that it expected to continue paying obligations and begin reducing accrued liabilities. The filing provides no quantitative revenue, earnings, or cash-flow guidance.
The company expressly disclosed substantial doubt-related conditions associated with its accumulated deficit, recurring losses, limited liquidity, and reliance on increased profitability, financing, and successful future operations. Management stated that its plans were expected to support operations for the next 12 months, but the financial statements contain no adjustments that would be required if the company could not continue as a going concern.
- Key operating risks include maintaining vendor and supplier relationships, timely payment of obligations, managing Wireless Village, funding product research and development, and competing for customers.
- The company had no bank account in its own name and relied on an administrative account maintained by a related consulting company.
- Accounts payable and accrued expenses totaled $484,292, including a $135,000 accrued judgment, $98,607 of accrued interest, and a $53,152 tax reserve.
- A trademark infringement dispute involving the “3rd Eye” name remained under negotiation. The company removed the name from websites and was transitioning Wireless Village to the “Janus Cam” name; management expected little or no significant financial impact.
- Management reported that senior executives and directors were providing services without cash compensation for the near term, with no assurance that this arrangement would continue.
- After the reporting period, on January 31, 2013, Wireless Village became wholly owned after minority shareholders exchanged their interests for 10 million Series B preferred shares. Planet Halo was transferred to a former minority shareholder in exchange for the return of 1,214,736 Series B preferred shares and forgiveness of $66,307 of intercompany debt.
- On January 1, 2013, $122,000 of related-party principal and $82,700 of accrued interest were consolidated into a two-year, $204,700 convertible debenture, convertible into common stock at $0.02 per share.
Important Facts for Investors to Verify
- Confirm the registrant identity and corporate-name continuity, because the filing names Concierge Technologies, Inc., while the request metadata identifies Marygold Companies, Inc.
- Assess the going-concern disclosure against only $29,788 of cash, $643,938 of current liabilities, and continued operating losses.
- Verify whether revenue growth can continue despite the second-quarter decline and the company’s dependence on hardware sales and customer-order timing.
- Review inventory growth, accounts-receivable collectability, and the $25,926 allowance for doubtful accounts.
- Evaluate related-party financing, past-due or demand obligations, convertible debt, and potential equity dilution from preferred-stock conversions.
- Monitor the trademark dispute, the rebranding to Janus Cam, and any related legal or operational costs.
- Reconcile the post-period ownership changes involving Wireless Village and Planet Halo with the company’s future consolidated financial statements.