SEC Filing Summary
Filing and period: The source is a Form 10-Q for Concierge Technologies, Inc., not Marygold Companies, Inc. It covers the fiscal quarter and nine months ended March 31, 2019, corresponding to fiscal Q3 2019. The filing was signed May 15, 2019. The requested “2018 Q3” period does not match the filing period.
Business Context
The company operates four principal businesses through subsidiaries: U.S. investment fund management, U.S. beauty and personal-care products under Original Sprout, New Zealand food products, and Canadian security-alarm systems. Operations are decentralized across the United States, New Zealand, and Canada.
Key Financial Metrics
| Metric | Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | Nine Months Ended March 31, 2019 | Nine Months Ended March 31, 2018 |
|---|---|---|---|---|
| Revenue | $6.25 million | $6.79 million | $20.13 million | $21.39 million |
| Gross profit | $4.61 million | $5.34 million | $14.90 million | $17.22 million |
| Gross margin | 73.8% | 78.7% | 74.0% | 80.5% |
| Operating income | $162 thousand | $222 thousand | $787 thousand | $2.22 million |
| Operating margin | 2.6% | 3.3% | 3.9% | 10.4% |
| Net income | $75.9 thousand | $0.8 thousand | $424.6 thousand | $850.4 thousand |
| Net margin | 1.2% | 0.0% | 2.1% | 4.0% |
Revenue was led by related-party fund management fees of $3.57 million for the quarter and $11.73 million for the nine-month period. Other quarterly revenue included food products of $1.11 million, security-alarm monitoring of $0.82 million, and beauty products and other revenue of $0.75 million.
For the nine months, net cash provided by operating activities was $342.7 thousand, compared with $2.35 million in the prior-year period. Investing activities provided $965.5 thousand, primarily from net investment sales, while financing activities used $104.3 thousand for equipment-loan repayments. Cash increased to $8.73 million from $7.52 million at June 30, 2018.
At March 31, 2019, current assets were $15.88 million and current liabilities were $3.53 million. The company reported working capital of approximately $12.3 million. Total debt was approximately $0.7 million, consisting primarily of $603.5 thousand of related-party notes and equipment loans. Total stockholders’ equity was $17.39 million.
Material Changes Versus Prior Comparable Period
- Nine-month revenue declined 5.9%, primarily because fund-management revenue fell 18% as average assets under management declined 21% to approximately $2.8 billion.
- Nine-month operating income fell approximately 65% to $786.7 thousand, and net income declined approximately 50% to $424.6 thousand.
- Quarterly revenue declined 7.9%, but quarterly net income increased to $75.9 thousand from $0.8 thousand, helped by lower other expenses and lower operating expenses.
- Gross margins declined, partly because ASC 606 adoption reclassified certain selling and support costs from operating expenses to cost of revenue; management stated the reclassification had no effect on operating income.
- Beauty-products revenue increased substantially for the nine-month period, to $2.55 million from $0.77 million, reflecting the Original Sprout acquisition and operations beginning late in the prior-year period.
- On February 7, 2019, 383,919 Series B preferred shares were converted into 7,678,380 common shares. Common shares outstanding increased to 37.24 million, while Series B preferred shares declined to 53,032.
- The company paid approximately $1.16 million in January 2019 toward the Original Sprout purchase price; the purchase consideration payable was eliminated at March 31, 2019.
Guidance, Outlook, Risks and Unusual Items
No formal numerical financial guidance was provided. Management plans to invest resources in Original Sprout, pursue moderate growth at Brigadier, improve Gourmet Foods’ efficiency and market reach, develop new fund products, and continue its strategy of acquiring profitable, mature companies.
- Fund-management results depend heavily on assets under management, fund flows, product performance, and investment-industry regulation.
- Revenue is concentrated. One Brigadier customer represented 46% of consolidated quarterly revenue and 52% of nine-month revenue. Major customer concentrations also exist within Gourmet Foods and Original Sprout.
- Wainwright’s revenue is earned from related parties, and related-party accounts receivable totaled $1.21 million at March 31, 2019. Expense-waiver obligations to related parties totaled approximately $462 thousand.
- The company had a $3,500 related-party note that was past due, although management stated the company was not required to make interest payments on its notes until maturity.
- Unrecognized tax benefits were approximately $0.3 million. Tax years remain open for examination in the United States, Canada, and New Zealand.
- Future minimum lease commitments totaled approximately $1.31 million. The company also had vehicle loans, lease-related security arrangements, and restricted cash of approximately $13.6 thousand.
- The filing states that no material litigation was pending and that disclosure controls were effective. The company is a smaller reporting company and did not provide the full risk-factor or market-risk disclosures required of larger issuers.
- The balance-sheet presentation contains an apparent inconsistency: total assets are shown as $27.80 million, while total liabilities and stockholders’ equity are shown as $21.80 million. Investors should verify the filed financial statements or XBRL data for the correct total.
Important Facts to Verify
- Confirm the issuer and reporting period, because the supplied metadata references Marygold Companies and 2018 Q3 while the filing identifies Concierge Technologies and March 31, 2019.
- Verify the apparent $6.0 million balance-sheet total discrepancy.
- Assess the sustainability of fund-management revenue following the decline in assets under management.
- Review customer and related-party concentration, including Wainwright’s dependence on affiliated funds.
- Confirm the terms and status of the past-due $3,500 related-party note and the $603.5 thousand of related-party notes overall.
- Evaluate Original Sprout’s post-acquisition growth, profitability, customer concentration, and remaining intangible-asset amortization.
- Review tax contingencies, lease commitments, restricted cash, and the company’s ability to fund acquisitions while maintaining liquidity.