UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended March 31,September 30, 2023
OR
☐ | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period fromto. |
Commission File Number: 000-29913
THE MARYGOLD COMPANIES, INC.
(Exact name of registrant as specified in its charter)
Nevada | 90-1133909 | |
(Stateorotherjurisdictionof | (I.R.S.Employer | |
incorporationororganization) | IdentificationNo.) |
120 Calle Iglesia
Unit B
San Clemente, CA92672
949-429-5370949-429-5370
Fax: 888.312.0124
(Address and telephone number of registrant'sregistrant’s principal
executive offices and principal place of business)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class of Security | Trading Symbol | Name of Exchange on Which Registered | ||
Common Stock, par value $0.001 per share |
| MGLD | NYSE, American LLC |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large“large accelerated filer," "” ”accelerated filer,"” "smaller“smaller reporting company,"” and "emerging“emerging growth company"company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ | |
Non-accelerated filer | ☒ | Smaller reporting company | ☒ | |
Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No
The registrant’s common stock began trading on the NYSE American exchange on March 10, 2022. The registrant had shares of Common Stock, $0.001 par value, and 49,360 shares of Series B Convertible, Voting, Preferred Stock outstanding on May 12,November 10, 2023. Series B Preferred stock is convertible to 20 shares of Common Stock for each share of Series B Preferred stock. Each share of Series B Preferred stock votes as 20 shares of Common Stock.
THE MARYGOLD COMPANIES, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE THREE AND NINE MONTH PERIODSPERIOD ENDED MARCH 31,SEPTEMBER 30, 2023
| 2 |
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws, which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “would,” “shall,” “might,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans, or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:
| the outcome of the class action litigation; | |
| recent resolutions with the Securities and Exchange Commission (the “SEC”) and the Commodity Futures Trading Commission (the “CFTC”) against United States Oil Fund, L.P., United States Commodity Funds, LLC, a subsidiary of our subsidiary, USCF Investments, Inc. | |
| our future financial performance, including our revenue, cost of revenue, gross profit, gross margin, operating expenses, ability to generate positive cash flow, and ability to achieve and maintain profitability; | |
| the sufficiency of our cash and cash equivalents to meet our working capital, capital expenditure, and liquidity needs; | |
| our operating | |
| the evolution of technologies affecting our operating | |
| our operating | |
| our operating | |
| our operating | |
| the attraction and retention of key personnel; | |
| our ability to effectively manage our growth and future expenses; | |
| worldwide economic conditions, including aftereffects from the economic disruption imposed by the COVID-19 pandemic, the conflict in Israel, and the conflict in the Ukraine, and their impact on spending; | |
| our operating |
We caution you that the foregoing list does not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.
You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, operating results, and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors described in the section titled “Risk Factors” in our Annual Report on Form 10-K for the year ended June 30, 2022,2023, this Quarterly Report on Form 10-Q or our registration statements filed with the U.S. Securities and Exchange Commission. Moreover, we and our subsidiaries operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events, and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements.
The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We and our subsidiaries may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make.
THE MARYGOLD COMPANIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| September 30, 2023 | June 30, 2023 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | 6,987,062 | $ | 8,161,167 | ||||
| Accounts receivable, net | 851,570 | 1,352,210 | ||||||
| Accounts receivable - related parties | 1,669,886 | 1,673,895 | ||||||
| Accounts receivable, net | ||||||||
| Inventories | 2,194,827 | 2,254,139 | ||||||
| Prepaid income tax and tax receivable | 1,350,165 | 991,797 | ||||||
| Investments, at fair value | 13,261,783 | 11,480,981 | ||||||
| Other current assets | 973,562 | 904,153 | ||||||
| Total current assets | 27,288,855 | 26,818,342 | ||||||
| Restricted cash | 413,454 | 425,043 | ||||||
| Property, plant and equipment, net | 1,209,739 | 1,255,302 | ||||||
| Operating lease right-of-use asset | 701,248 | 821,021 | ||||||
| Goodwill | 2,307,202 | 2,307,202 | ||||||
| Intangible assets, net | 2,220,755 | 2,329,970 | ||||||
| Deferred tax assets, net - United States | 771,287 | 771,287 | ||||||
| Other assets | 552,660 | 552,660 | ||||||
| Total assets | $ | 35,465,200 | $ | 35,280,827 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable and accrued expenses | $ | 3,491,543 | $ | 2,711,931 | ||||
| Expense waivers – related parties | 107,213 | 58,685 | ||||||
| Operating lease liabilities, current portion | 361,013 | 457,309 | ||||||
| Purchase consideration payable | 604,990 | 604,990 | ||||||
| Loans - property and equipment, current portion | 346,282 | 358,802 | ||||||
| Total current liabilities | 4,911,041 | 4,191,717 | ||||||
| LONG-TERM LIABILITIES | ||||||||
| Loans - property and equipment, net of current portion | 82,543 | 88,516 | ||||||
| Operating lease liabilities, net of current portion | 352,347 | 380,535 | ||||||
| Deferred tax liabilities, net - foreign | 242,289 | 242,289 | ||||||
| Total long-term liabilities | 677,179 | 711,340 | ||||||
| Total liabilities | 5,588,220 | 4,903,057 | ||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Preferred stock, $ par value; shares authorized Series B: shares issued and outstanding at September 30, 2023 and at June 30, 2023 | 49 | 49 | ||||||
| Common stock, $ par value; shares authorized; shares issued and outstanding at June 30, 2023 and at June 30, 2023 | 39,384 | 39,384 | ||||||
| Additional paid-in capital | 12,490,352 | 12,396,722 | ||||||
| Accumulated other comprehensive loss | (239,079 | ) | (144,840 | ) | ||||
| Retained earnings | 17,586,274 | 18,086,455 | ||||||
| Total stockholders’ equity | 29,876,980 | 30,377,770 | ||||||
| Total liabilities and stockholders’ equity | $ | 35,465,200 | $ | 35,280,827 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
March 31, 2023 | June 30, 2022 (1) | |||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash and cash equivalents | $ | 9,858,277 | $ | 12,915,620 | ||||
Accounts receivable, net | 1,089,286 | 959,350 | ||||||
Accounts receivable - related parties | 1,745,159 | 2,230,874 | ||||||
Inventories | 2,386,259 | 2,200,742 | ||||||
Prepaid income tax and tax receivable | 1,034,746 | 1,166,318 | ||||||
Investments, at fair value | 8,703,490 | 5,065,931 | ||||||
Other current assets | 1,138,291 | 699,547 | ||||||
Total current assets | 25,955,508 | 25,238,382 | ||||||
Restricted cash | 417,467 | 1,013,279 | ||||||
Property, plant and equipment, net | 1,288,421 | 1,391,894 | ||||||
Operating lease right-of-use asset | 1,040,356 | 1,357,686 | ||||||
Goodwill | 2,307,202 | 2,307,202 | ||||||
Intangible assets, net | 2,420,029 | 2,708,896 | ||||||
Deferred tax assets, net - United States | 753,078 | 753,078 | ||||||
Other assets, long - term | 552,660 | 540,160 | ||||||
Total assets | $ | 34,734,721 | $ | 35,310,577 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts payable and accrued expenses | $ | 2,414,628 | $ | 2,805,790 | ||||
Expense waivers – related parties | 28,970 | 70,199 | ||||||
Operating lease liabilities, current portion | 578,030 | 660,957 | ||||||
Purchase consideration payable | 604,990 | 1,237,207 | ||||||
Loans - property and equipment, current portion | 33,307 | 33,496 | ||||||
Total current liabilities | 3,659,925 | 4,807,649 | ||||||
LONG-TERM LIABILITIES | ||||||||
Loans - property and equipment, net of current portion | 417,694 | 459,178 | ||||||
Operating lease liabilities, net of current portion | 488,424 | 743,923 | ||||||
Deferred tax liabilities, net-foreign | 260,553 | 260,553 | ||||||
Total long-term liabilities | 1,166,671 | 1,463,654 | ||||||
Total liabilities | 4,826,596 | 6,271,303 | ||||||
STOCKHOLDERS' EQUITY | ||||||||
Preferred stock, $0.001 par value; 50,000,000 shares authorized | ||||||||
Series B: 49,360 shares issued and outstanding at March 31, 2023 and at June 30, 2022 | 49 | 49 | ||||||
Common stock, $0.001 par value; 900,000,000 shares authorized; 39,383,459 shares issued and outstanding at March 31, 2023 and at June 30, 2022 | 39,384 | 39,384 | ||||||
Additional paid-in capital | 12,359,500 | 12,313,205 | ||||||
Accumulated other comprehensive loss | (244,490 | ) | (234,790 | ) | ||||
Retained earnings | 17,753,682 | 16,921,426 | ||||||
Total stockholders' equity | 29,908,125 | 29,039,274 | ||||||
Total liabilities and stockholders' equity | $ | 34,734,721 | $ | 35,310,577 | ||||
| 4 |
(1) Derived from audited financial statementsTHE MARYGOLD COMPANIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF (LOSS) INCOME
(UNAUDITED)
| Three Months Ended September 30, 2023 | Three Months Ended September 30, 2022 | |||||||
| Net revenue | ||||||||
| Fund management – related party | $ | 5,049,550 | $ | 5,419,435 | ||||
| Food products | 1,730,527 | 1,937,426 | ||||||
| Security systems | 553,719 | 628,892 | ||||||
| Beauty products | 774,626 | 804,078 | ||||||
| Financial services | 127,092 | 133,457 | ||||||
| Net revenue | 8,235,514 | 8,923,288 | ||||||
| Cost of revenue | 2,037,188 | 2,023,664 | ||||||
| Gross profit | 6,198,326 | 6,899,624 | ||||||
| Operating expense | ||||||||
| Salaries and compensation | 2,589,949 | 2,368,368 | ||||||
| General and administrative expense | 2,248,540 | 1,686,658 | ||||||
| Fund operations | 1,270,128 | 1,140,588 | ||||||
| Marketing and advertising | 972,011 | 777,710 | ||||||
| Depreciation and amortization | 153,977 | 149,208 | ||||||
| Total operating expenses | 7,234,605 | 6,122,532 | ||||||
| (Loss) income from operations | (1,036,279 | ) | 777,092 | |||||
| Other income (expense): | ||||||||
| Interest and dividend income | 193,043 | 52,569 | ||||||
| Interest expense | (3,559 | ) | (7,794 | ) | ||||
| Other income (expense), net | 43,993 | (98,369 | ) | |||||
| Total other income (expense), net | 233,477 | (53,594 | ) | |||||
| (Loss) income before income taxes | (802,802 | ) | 723,498 | |||||
| Benefit (Provision) of income taxes | 302,621 | (226,330 | ) | |||||
| Net (loss) income | $ | (500,181 | ) | $ | 497,168 | |||
| Weighted average shares of common stock | ||||||||
| Basic | 40,397,375 | 40,370,659 | ||||||
| Diluted | 40,397,375 | 40,399,873 | ||||||
| Net (loss) income per common share | ||||||||
| Basic | $ | (0.01 | ) | $ | 0.01 | |||
| Diluted | $ | (0.01 | ) | $ | 0.01 | |||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
THE MARYGOLD COMPANIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(UNAUDITED)
| Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Nine Months Ended March 31, 2023 | Nine Months Ended March 31, 2022 | |||||||||||||
Net revenue | ||||||||||||||||
Fund management - related party | $ | 5,022,398 | $ | 5,868,558 | $ | 15,708,004 | 17,226,969 | |||||||||
Food products | 1,824,789 | 1,667,345 | 5,701,714 | 6,131,791 | ||||||||||||
Security systems | 576,248 | 555,006 | 1,870,986 | 1,888,362 | ||||||||||||
Beauty products | 745,468 | 702,779 | 2,334,009 | 2,716,702 | ||||||||||||
Financial services | 129,868 | - | 387,811 | - | ||||||||||||
Net revenue | 8,298,771 | 8,793,688 | 26,002,524 | 27,963,824 | ||||||||||||
Cost of revenue | 2,194,762 | 2,065,422 | 6,449,457 | 7,132,249 | ||||||||||||
Gross profit | 6,104,009 | 6,728,266 | 19,553,067 | 20,831,575 | ||||||||||||
Operating expense | ||||||||||||||||
Salaries and compensation | 2,354,903 | 1,969,998 | 7,530,000 | 6,677,378 | ||||||||||||
General and administrative expense | 1,750,148 | 1,651,057 | 5,268,952 | 4,973,337 | ||||||||||||
Fund operations | 1,080,834 | 1,171,282 | 3,333,666 | 3,375,135 | ||||||||||||
Marketing and advertising | 612,333 | 755,403 | 1,936,504 | 2,160,180 | ||||||||||||
Depreciation and amortization | 139,656 | 136,909 | 436,685 | 424,727 | ||||||||||||
Legal settlement | - | - | - | 2,500,000 | ||||||||||||
Total operating expenses | 5,937,874 | 5,684,649 | 18,505,807 | 20,110,757 | ||||||||||||
Income from operations | 166,135 | 1,043,617 | 1,047,260 | 720,818 | ||||||||||||
Other income (expense): | ||||||||||||||||
Interest and dividend income | 58,690 | 5,546 | 173,875 | 19,030 | ||||||||||||
Interest expense | (4,887 | ) | (9,856 | ) | (16,315 | ) | (30,142 | ) | ||||||||
Other income (expense) | (96,390 | ) | 251,767 | (67,644 | ) | 46,398 | ||||||||||
Total other income (expense), net | (42,587 | ) | 247,457 | 89,916 | 35,286 | |||||||||||
Income before income taxes | 123,548 | 1,291,074 | 1,137,176 | 756,104 | ||||||||||||
Benefit (provision) of income taxes | 29,746 | (420,940 | ) | (304,920 | ) | (743,628 | ) | |||||||||
Net income | $ | 153,294 | $ | 870,134 | $ | 832,256 | $ | 12,476 | ||||||||
Weighted average shares of common stock | ||||||||||||||||
Basic | 40,370,659 | 38,831,576 | 40,370,659 | 38,561,536 | ||||||||||||
Diluted | 40,438,348 | 38,831,576 | 40,401,952 | 38,561,536 | ||||||||||||
Net income per common share | ||||||||||||||||
Basic | $ | 0.00 | $ | 0.02 | $ | 0.02 | $ | 0.00 | ||||||||
Diluted | $ | 0.00 | $ | 0.02 | $ | 0.02 | $ | 0.00 | ||||||||
| Three Months Ended September 30, 2023 | Three Months Ended September 30, 2022 | |||||||
| Net (loss) income | $ | (500,181 | ) | $ | 497,168 | |||
| Other comprehensive (loss) income: | ||||||||
| Foreign currency translation (loss) | (94,239 | ) | (313,759 | ) | ||||
| Comprehensive (loss) income | $ | (594,420 | ) | $ | 183,409 | |||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
THE MARYGOLD COMPANIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)STOCKHOLDERS’ EQUITY
(UNAUDITED)FOR THE THREE MONTH PERIODS ENDED SEPTEMBER 30, 2023 AND SEPTEMBER 30, 2022
Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Nine Months Ended March 31, 2023 | Nine Months Ended March 31, 2022 | |||||||||||||
Net income | $ | 153,294 | $ | 870,134 | $ | 832,256 | $ | 12,476 | ||||||||
Other comprehensive (loss) income: | ||||||||||||||||
Foreign currency translation (loss) gain | (29,890 | ) | 79,394 | (9,700 | ) | (21,216 | ) | |||||||||
Comprehensive income (loss) | $ | 123,404 | $ | 949,528 | $ | 822,556 | $ | (8,740 | ) | |||||||
(UNAUDITED)
| Number of Shares | Amount | Number of Shares | Par Value | Paid - in Capital | Comprehensive (Loss) | Retained Earnings | Stockholders’ Equity | |||||||||||||||||||||||||
| Period Ending September 30, 2023 | Preferred Stock (Series B) | Common Stock | Additional | Accumulated Other | Total | |||||||||||||||||||||||||||
| Number of Shares | Amount | Number of Shares | Par Value | Paid – in Capital | Comprehensive (Loss) | Retained Earnings | Stockholders’ Equity | |||||||||||||||||||||||||
| Balance at July 1, 2023 | 49,360 | $ | 49 | 39,383,459 | $ | 39,384 | $ | 12,396,722 | $ | (144,840 | ) | $ | 18,086,455 | $ | 30,377,770 | |||||||||||||||||
| Loss on currency translation | - | - | - | - | - | (94,239 | ) | - | (94,239 | ) | ||||||||||||||||||||||
| Stock-based compensation | - | - | - | - | 93,630 | - | - | 93,630 | ||||||||||||||||||||||||
| Net (loss) | - | - | - | - | - | - | (500,181 | ) | (500,181 | ) | ||||||||||||||||||||||
| Balance at September 30, 2023 | 49,360 | $ | 49 | 39,383,459 | $ | 39,384 | $ | 12,490,352 | $ | (239,079 | ) | $ | 17,586,274 | $ | 29,876,980 | |||||||||||||||||
| Period Ending September 30, 2022 | Preferred Stock (Series B) | Common Stock | Additional | Accumulated Other | Total | |||||||||||||||||||||||||||
| Number of Shares | Amount | Number of Shares | Par Value | Paid – in Capital | Comprehensive (Loss) | Retained Earnings | Stockholders’ Equity | |||||||||||||||||||||||||
| Balance at July 1, 2022 | 49,360 | $ | 49 | 39,383,459 | $ | 39,384 | $ | 12,313,205 | $ | (234,790 | ) | $ | 16,921,426 | $ | 29,039,274 | |||||||||||||||||
| Loss on currency translation | - | - | - | - | - | (313,759 | ) | - | (313,759 | ) | ||||||||||||||||||||||
| Stock-based compensation | - | - | - | - | 6,700 | - | - | 6,700 | ||||||||||||||||||||||||
| Net income | - | - | - | - | - | - | 497,168 | 497,168 | ||||||||||||||||||||||||
| Net income (loss) | - | - | - | - | - | - | 497,168 | 497,168 | ||||||||||||||||||||||||
| Balance at September 30, 2022 | 49,360 | $ | 49 | 39,383,459 | $ | 39,384 | $ | 12,319,905 | $ | (548,549 | ) | $ | 17,418,594 | $ | 29,229,383 | |||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
THE MARYGOLD COMPANIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITYCASH FLOWS
FOR THE THREE AND NINE MONTH PERIODS ENDED MARCH 31, 2023 AND MARCH 31, 2022
| 2023 | 2022 | |||||||
| For the Three Months Ended | ||||||||
| September 30, | ||||||||
| 2023 | 2022 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net (loss) income | $ | (500,181 | ) | 497,168 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 153,977 | 149,208 | ||||||
| Bad debt expense | 213 | - | ||||||
| Stock-based compensation | 93,630 | 6,700 | ||||||
| Net realized and unrealized (gains) losses on investments | (269,381 | ) | 111,855 | |||||
| Operating lease right-of-use asset - non-cash lease cost | 128,403 | 231,070 | ||||||
| Decrease (increase) in current assets: | ||||||||
| Accounts receivable | 478,096 | (179,083 | ) | |||||
| Accounts receivable - related party | 4,009 | 565,296 | ||||||
| Prepaid income taxes and tax receivable | (359,021 | ) | 61,872 | |||||
| Inventories | 34,198 | (194,695 | ) | |||||
| Other current assets | (70,130 | ) | (34,814 | ) | ||||
| (Decrease) increase in operating liabilities: | ||||||||
| Accounts payable and accrued expenses | 668,487 | (149,343 | ) | |||||
| Operating lease liabilities | (118,480 | ) | (233,992 | ) | ||||
| Expense waivers - related party | 48,528 | 70,448 | ||||||
| Purchase consideration payable | - | (22,493 | ) | |||||
| Net cash provided by operating activities | 292,348 | 879,197 | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of property, plant and equipment | (25,189 | ) | (9,418 | ) | ||||
| Proceeds from sale of investments | 7,829,645 | - | ||||||
| Purchase of investments | (9,341,066 | ) | (257,624 | ) | ||||
| Net cash (used in) investing activities | (1,536,610 | ) | (267,042 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Repayment of property and equipment loans | (3,656 | ) | (3,476 | ) | ||||
| Net cash (used in) by financing activities | (3,656 | ) | (3,476 | ) | ||||
| Effect of exchange rate change on cash and cash equivalents | 62,224 | (237,331 | ) | |||||
| NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | (1,185,694 | ) | 371,348 | |||||
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING BALANCE | 8,586,210 | 13,928,899 | ||||||
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH, ENDING BALANCE | $ | 7,400,516 | 14,300,247 | |||||
| Cash and cash equivalents | 6,987,062 | 13,370,714 | ||||||
| Restricted cash | 413,454 | 929,533 | ||||||
| Total cash, cash equivalents and restricted cash shown in statement of cash flows | $ | 7,400,516 | 14,300,247 | |||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | ||||||||
| Cash paid during the period for: | ||||||||
| Interest paid | $ | 4,727 | 4,018 | |||||
| Income taxes paid, net | $ | 86,978 | 70,557 | |||||
(UNAUDITED)
Period Ending March 31, 2023 | Preferred Stock (Series B) | Common Stock | ||||||||||||||||||||||||||||||
| Number of Shares | Amount | Number of Shares | Par Value | Additional Paid - in Capital | Accumulated Other Comprehensive (Loss) Income | Retained Earnings | Total Stockholders' Equity | |||||||||||||||||||||||||
Balance at July 1, 2022 | 49,360 | $ | 49 | 39,383,459 | $ | 39,384 | $ | 12,313,205 | $ | (234,790 | ) | $ | 16,921,426 | $ | 29,039,274 | |||||||||||||||||
Loss on currency translation | - | - | - | - | - | (313,759 | ) | - | (313,759 | ) | ||||||||||||||||||||||
Stock-based compensation | - | - | - | - | 6,700 | - | - | 6,700 | ||||||||||||||||||||||||
Net income | - | - | - | - | - | - | 497,168 | 497,168 | ||||||||||||||||||||||||
Balance at September 30, 2022 | 49,360 | $ | 49 | 39,383,459 | $ | 39,384 | $ | 12,319,905 | $ | (548,549 | ) | $ | 17,418,594 | $ | 29,229,383 | |||||||||||||||||
Gain on currency translation | - | - | - | - | - | 333,949 | - | 333,949 | ||||||||||||||||||||||||
Stock-based compensation | - | - | - | - | 9,704 | - | - | 9,704 | ||||||||||||||||||||||||
Net income | - | - | - | - | - | - | 181,794 | 181,794 | ||||||||||||||||||||||||
Balance at December 31, 2022 | 49,360 | $ | 49 | 39,383,459 | $ | 39,384 | $ | 12,329,609 | $ | (214,600 | ) | $ | 17,600,388 | $ | 29,754,830 | |||||||||||||||||
Loss on currency translation | - | - | - | - | - | (29,890 | ) | - | (29,890 | ) | ||||||||||||||||||||||
Stock-based compensation | - | - | - | - | 29,891 | - | - | 29,891 | ||||||||||||||||||||||||
Net income | - | - | - | - | - | - | 153,294 | 153,294 | ||||||||||||||||||||||||
Balance at March 31, 2023 | 49,360 | $ | 49 | 39,383,459 | $ | 39,384 | $ | 12,359,500 | $ | (244,490 | ) | $ | 17,753,682 | $ | 29,908,125 | |||||||||||||||||
Period Ending March 31, 2022 | Preferred Stock (Series B) | Common Stock | ||||||||||||||||||||||||||||||
Number of Shares | Amount | Number of Shares | Par Value | Additional Paid - in Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings | Total Stockholders' Equity | |||||||||||||||||||||||||
Balance at July 1, 2021 | 49,360 | $ | 49 | 37,485,959 | $ | 37,486 | $ | 9,330,843 | $ | 142,581 | $ | 15,775,705 | $ | 25,286,664 | ||||||||||||||||||
Loss on currency translation | - | - | - | - | - | (86,168 | ) | - | (86,168 | ) | ||||||||||||||||||||||
Net loss | - | - | - | - | - | - | (1,880,993 | ) | (1,880,993 | ) | ||||||||||||||||||||||
Balance at September 30, 2021 | 49,360 | $ | 49 | 37,485,959 | $ | 37,486 | $ | 9,330,843 | $ | 56,413 | $ | 13,894,712 | $ | 23,319,503 | ||||||||||||||||||
Loss on currency translation | - | - | - | - | - | (14,442 | ) | - | (14,442 | ) | ||||||||||||||||||||||
Net income | - | - | - | - | - | - | 1,023,335 | 1,023,335 | ||||||||||||||||||||||||
Balance at December 31, 2021 | 49,360 | $ | 49 | 37,485,959 | $ | 37,486 | $ | 9,330,843 | $ | 41,971 | $ | 14,918,047 | $ | 24,328,396 | ||||||||||||||||||
Gain on currency translation | - | - | - | - | - | 79,394 | - | 79,394 | ||||||||||||||||||||||||
Issuance of common stock in public offering, net of issuance costs of $545,090 | - | - | 1,897,500 | 1,897 | 2,982,363 | - | - | 2,984,260 | ||||||||||||||||||||||||
Net income | - | - | - | - | - | - | 870,134 | 870,134 | ||||||||||||||||||||||||
Balance at March 31, 2022 | 49,360 | $ | 49 | 39,383,459 | $ | 39,383 | $ | 12,313,206 | $ | 121,365 | $ | 15,788,181 | $ | 28,262,184 | ||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
THE MARYGOLD COMPANIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Month Period Ended | ||||||||
March 31, | ||||||||
2023 | 2022 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net income | $ | 832,256 | $ | 12,476 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 436,685 | 424,727 | ||||||
Bad debt expense | 1,378 | 3,175 | ||||||
Impairment of inventory value | 2,698 | 3,478 | ||||||
Stock-based compensation | 46,295 | - | ||||||
Unrealized loss (gain) on investments | 76,604 | (116,148 | ) | |||||
Loss on disposal of equipment | - | 37,189 | ||||||
Operating lease right-of-use asset - non-cash lease cost | 432,089 | 494,375 | ||||||
Decrease (increase) in current assets: | ||||||||
Accounts receivable, net | (143,455 | ) | 57,416 | |||||
Accounts receivable - related party | 485,715 | (308,514 | ) | |||||
Prepaid income taxes and tax receivable | 130,860 | 43,440 | ||||||
Inventories | (187,849 | ) | (341,966 | ) | ||||
Other current assets | (437,582 | ) | (551,815 | ) | ||||
(Decrease) increase in current liabilities: | ||||||||
Accounts payable, accrued expenses and legal settlement | (382,048 | ) | (979,332 | ) | ||||
Operating lease liabilities | (433,306 | ) | (500,857 | ) | ||||
Expense waivers - related party | (41,229 | ) | (51,891 | ) | ||||
Net cash provided by (used in) operating activities | 819,111 | (1,774,247 | ) | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Purchase of property, plant and equipment | (73,982 | ) | (5,224 | ) | ||||
Purchase consideration payable | (616,180 | ) | - | |||||
Proceeds from sale of investments | 4,276,765 | 506,492 | ||||||
Purchase of investments | (7,983,971 | ) | (1,501,980 | ) | ||||
Net cash (used in) investing activities | (4,397,368 | ) | (1,000,712 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Repayment of property and equipment loans | (10,737 | ) | (11,159 | ) | ||||
Principal payments of finance lease liability | (5,573 | ) | (4,167 | ) | ||||
Payment of issuance cost of common stock | - | (545,090 | ) | |||||
Proceeds from issuance of common stock, net of underwriter discounts | - | 3,529,350 | ||||||
Net cash (used in) provided by financing activities | (16,310 | ) | 2,968,934 | |||||
Effect of exchange rate change on cash and cash equivalents | (58,588 | ) | (86,305 | ) | ||||
NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | (3,653,155 | ) | 107,670 | |||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING BALANCE | 13,928,899 | 16,086,944 | ||||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, ENDING BALANCE | $ | 10,275,744 | $ | 16,194,614 | ||||
Cash and cash equivalents | 9,858,277 | 15,181,335 | ||||||
Restricted cash | 417,467 | 1,013,279 | ||||||
Total cash, cash equivalents and restricted cash shown in statement of cash flows | $ | 10,275,744 | $ | 16,194,614 | ||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | ||||||||
Cash paid during the period for: | ||||||||
Interest paid | $ | 11,687 | $ | 12,264 | ||||
Income taxes paid, net | $ | 195,439 | $ | 833,901 | ||||
NON CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
Fair value of warrants of common stock issued to underwriters | $ | - | $ | 132,000 | ||||
Acquistion of operating right-of-use assets through operating lease liability | $ | 103,609 | $ | 995,805 | ||||
Acquisition of equipment through finance lease liability | $ | - | $ | 150,625 | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
THE MARYGOLD COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIALS STATEMENTS
(UNAUDITED)
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NOTE 1.ORGANIZATION AND DESCRIPTION OF BUSINESS
The Marygold Companies, Inc., (the “Company” or "The“The Marygold Companies"Companies”), a Nevada corporation, operates through its wholly ownedwholly-owned subsidiaries who are engaged in varied business activities. The operations of the Company’s wholly ownedwholly-owned subsidiaries are more particularly described herein but are summarized as follows:
● | USCF Investments, Inc. (“USCF Investments”), a U.S. based company, is the sole member of two investment services limited liability company subsidiaries that manages, operates or is an investment advisor to exchange traded funds organized as limited partnerships or investment trusts that issue shares that trade on the NYSE Arca stock exchange. | |
● | Gourmet Foods, Ltd., a New Zealand based company, manufactures and distributes New Zealand meat pies on a commercial scale and its wholly-owned New Zealand subsidiary company, Printstock Products Limited, prints specialty wrappers for the food industry in New Zealand and Australia. (collectively | |
● | Brigadier Security Systems | |
● | Kahnalytics, Inc. dba/Original Sprout (“Original Sprout”), a U.S. based company, is engaged in the wholesale distribution of hair and skin care products under the brand name Original Sprout on a global scale. | |
● | Marygold & Co., a newly formed U.S. based company, together with its wholly-owned limited liability company, Marygold & Co. Advisory Services, LLC, (collectively | |
● | Marygold & Co. (UK) Limited, a newly formed U.K. limited company, together with its newly acquired UK subsidiary, Tiger Financial and Asset Management, Ltd. (collectively “Marygold UK”) is an asset manager and registered investment advisor in the UK. Operations are included in these condensed consolidated financial statements beginning on the acquisition date of June 20, 2022. |
The Marygold Companies manages its operating businesses on a decentralized basis. There are no centralized or integrated operational functions such as marketing, sales, legal or other professional services and there is little involvement by The Marygold Companies’ management in the day-to-day business affairs of its operating subsidiary businesses apart from oversight. The Marygold Companies’ corporate management is responsible for capital allocation decisions, investment activities and selection and retention of the Chief Executive to head each of the operating subsidiaries. The Marygold Companies’ corporate management is also responsible for corporate governance practices, monitoring regulatory affairs, including those of its operating businesses and involvement in governance-related issues of its subsidiaries as needed.
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NOTE 2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Accounting Principles
The Company has prepared the accompanying unaudited financial statements on a consolidated basis. In the opinion of management, the accompanying unaudited condensed consolidated balance sheets, related statements of income and comprehensive income, (loss), and cash flows include all adjustments, consisting only of normal recurring items, necessary for their fair presentation, prepared on an accrual basis, in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The information included in this Form 10-Q10-Q should be read in conjunction with information included in the Company’s Annual Report on Form 10-K10-K for year ended June 30, 2022 2023 and filed with the U.S. Securities and Exchange Commission on September 28, 2022.25, 2023.
Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements, which are referred to herein as the “Financial Statements”, include the accounts of The Marygold Companies and its wholly-owned subsidiaries, USCF Investments, Gourmet Foods, Brigadier, Original Sprout, Marygold and Marygold UK are presented on a consolidated basis.
All inter-company transactions and accounts have been eliminated in consolidation.
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Use of Estimates
The preparation of the Financial Statements are in conformity with U.S. GAAP which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Financial Statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include all cash and highly liquid debt instruments with original maturities of three months or less on the date of purchase. The Company maintains its cash and cash equivalents in financial institutions in the United States, United Kingdom, Canada, and New Zealand. Accounts in the United States are insured by the Federal Deposit Insurance Corporation up to $250,000 per depositor, accounts in Canada are insured by the Canada Deposit Insurance Corporation up to CD$100,000 per depositor and accounts in the United Kingdom are insured by the Financial Services Compensation Scheme up to £85,000.85,000. Accounts in New Zealand are uninsured. The Company has, at times, held deposits in excess of insured amounts, but the Company does not expect any losses in such accounts.
Accounts Receivable, net and Accounts Receivable -– Related Parties
Accounts receivable, net consist of receivables related to the Brigadier, Gourmet Foods and Original Sprout businesses. Management regularly reviews the composition of accounts receivable and analyzes customer credit worthiness, customer concentrations, current economic trends, and changes in customer payment patterns, and reasonable and supportable forecasts about the future to determine whether or not an account should be deemed uncollectible. Reserves, if any, are recorded on a specific identification basis. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. As of March 31,September 30, 2023 and June 30, 2022, 2023, the Company had $384$213 and $4,350,$1,427, respectively, reserved for as doubtful accounts.allowance for credit losses.
Accounts receivable -– related parties consist of fund asset management fees receivable related to the USCF Investments business. Management fees receivable generally consist of one month of management fees which are collected in the month after they are earned. As of March 31,September 30, 2023 and June 30, 2022, 2023, there is no allowance for doubtful accountscredit losses as all amounts are deemed collectible.
Major Customers and Suppliers – Concentration of Credit Risk
The Marygold Companies, as a holding company, operates through its wholly ownedwholly-owned subsidiaries and has no concentration of risk either from customers or suppliers as a stand-alone entity. Marygold, as a newly formed development stage entity, had no revenues and no significant transactionsnot commenced operations for the three and nine monthsyear ended March 31, 2023 and 2022.June 30, 2023. Any transactions that did occur were includedcombined with those of the Company.The Marygold Companies for periods prior to June 30, 2023.
For our
Our subsidiary USCF Investments relies on the concentration of risk and the relative reliance on major customers are found withinrevenues generated through the various funds it managesmanages. The concentration of fund management revenue for the three months ended September 30, 2023 and the associated three2022, and nine month revenuesrelated receivables as of March 31,September 30, 2023 compared with those at March 31, 2022 along with the accounts receivable – related parties as of March 31, 2023 and June 30, 2022 2023 were as depicted below.follows:
SCHEDULE OF CONCENTRATION RISK
For the Three Months Ended | For the Three Months Ended | For the Three Months Ended | For the Three Months Ended | |||||||||||||||||||||||||||||
March 31, 2023 | March 31, 2022 | September 30, 2023 | September 30, 2022 | |||||||||||||||||||||||||||||
Revenue | Revenue | Revenue | Revenue | |||||||||||||||||||||||||||||
Fund | ||||||||||||||||||||||||||||||||
USO | $ | 1,875,162 | 37 | % | $ | 3,186,393 | 54 | % | $ | 1,684,103 | 33 | % | $ | 2,564,245 | 47 | % | ||||||||||||||||
BNO | 439,503 | 9 | % | 498,603 | 8 | % | ||||||||||||||||||||||||||
UNG | 1,307,149 | 26 | % | 534,048 | 9 | % | 1,688,916 | 34 | % | 807,940 | 15 | % | ||||||||||||||||||||
USCI | 457,636 | 9 | % | 565,816 | 10 | % | 367,142 | 7 | % | 597,385 | 11 | % | ||||||||||||||||||||
All Others | 942,948 | 19 | % | 1,083,698 | 19 | % | 1,309,389 | 26 | % | 1,449,865 | 27 | % | ||||||||||||||||||||
Total | $ | 5,022,398 | 100 | % | $ | 5,868,558 | 100 | % | $ | 5,049,550 | 100 | % | $ | 5,419,435 | 100 | % | ||||||||||||||||
For the Nine Months Ended | For the Nine Months Ended | |||||||||||||||
March 31, 2023 | March 31, 2022 | |||||||||||||||
Revenue | ||||||||||||||||
Fund | ||||||||||||||||
USO | $ | 6,900,591 | 44 | % | $ | 9,304,211 | 54 | % | ||||||||
BNO | 1,333,558 | 9 | % | 1,489,400 | 9 | % | ||||||||||
UNG | 2,864,969 | 18 | % | 1,648,194 | 9 | % | ||||||||||
USCI | 1,598,978 | 10 | % | 1,537,179 | 9 | % | ||||||||||
All Others | 3,009,908 | 19 | % | 3,247,985 | 19 | % | ||||||||||
Total | $ | 15,708,004 | 100 | % | $ | 17,226,969 | 100 | % | ||||||||
| As of September 30, 2023 | As of June 30, 2023 | |||||||||||||||
| Accounts Receivable | Accounts Receivable | |||||||||||||||
| Fund | ||||||||||||||||
| USO | $ | 544,764 | 33 | % | $ | 596,039 | 36 | % | ||||||||
| UNG | 565,460 | 34 | % | 554,011 | 33 | % | ||||||||||
| All Others | 559,662 | 33 | % | 523,845 | 31 | % | ||||||||||
| Total | $ | 1,669,886 | 100 | % | $ | 1,673,895 | 100 | % | ||||||||
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As of March 31, 2023 | As of June 30, 2022 | |||||||||||||||
Accounts Receivable | Accounts Receivable | |||||||||||||||
Fund | ||||||||||||||||
USO | $ | 594,541 | 34 | % | $ | 1,101,495 | 49 | % | ||||||||
BNO | 154,245 | 9 | % | 192,208 | 9 | % | ||||||||||
UNG | 538,225 | 31 | % | 249,638 | 11 | % | ||||||||||
USCI | 142,120 | 8 | % | 270,796 | 12 | % | ||||||||||
All Others | 316,028 | 18 | % | 416,737 | 19 | % | ||||||||||
Total | $ | 1,745,159 | 100 | % | $ | 2,230,874 | 100 | % | ||||||||
The Marygold Companies, through Gourmet Foods and its wholly owned subsidiary, Printstock Products Limited, has two major customer groups comprising gross revenues: 1)1) baking, and 2)2) printing. For the purpose of segment reporting (Note 16)16), both revenue streams are considered part of the same "food industry"“food industry” segment as they are evaluated as one segment by the Company's chief operating decision maker.Company’s Chief Operating Decision Maker.
Baking:Within the baking sector there are three major customer groups; 1)1) grocery, 2)2) gasoline convenience stores, and 3)3) independent retailers. The grocery industry is dominated by several large chain operations, which are customers of Gourmet Foods, and there are no long-term guarantees that these major customers will continue to purchase products from Gourmet Foods, however, many of the existing relationships have been in place for sufficient time to give management reasonable confidence in their continuing business. For the three month period ended March 31, 2023, Gourmet Foods’ largest customer in the grocery industry, who operates through a number of independently branded stores, accounted for approximately 11% of baking sales revenues as compared to 22% for the three months ended March 31, 2022. For the nine months ended March 31, 2023, the largest customer accounted for approximately 13% of baking sales revenues as compared to 23% for the nine months ended March 31, 2022. This customer accounted for 21% of baking accounts receivable at March 31, 2023, as compared to 25% of baking accounts receivable as of June 30, 2022. A different customer, insignificant in baking sales percentage, did account for approximately 26% of baking accounts receivable as of June 30, 2022. No other grocery customer accounted for a significant percentage of sales as of the three or nine months ended March 31, 2023.
In the gasoline convenience store market customer group, Gourmet Foods supplies twomajor channels. The largest is a marketing consortium of gasoline dealers operating under the same brand who, for the three and nine month periods ended March 31, 2023 accounted for approximately 62% and 57%, respectively, of baking sales revenues as compared to 49% and 49% for the three and nine month periods ended March 31, 2022, respectively. No single member of the consortium is responsible for a significant portion of Gourmet Foods’ accounts receivable, however as a group they accounted for 40% of baking accounts receivable as of March 31, 2023 as compared to 21% as of June 30, 2022. A second consortiumconsortiums of gasoline convenience stores accounted for 11% and 10% of baking sales revenues for the three and nine months ended March 31, 2023, respectively. who operate under various name brands.
The group also accounted for 22% and 23% of baking accounts receivable as of March 31, 2023 and June 30, 2022, respectively. This group was not a significant contributor to baking sales for the three and nine month periods ended March 31, 2022.
The third major customer group is independent retailers and cafes, which collectively accounted for the balance of baking sales revenue, however revenue. Although some customers contributed significant revenues to Gourmet Foods, no single customer in this group wascontributed a significant contributoramount of baking sales revenues to the consolidated Company for the three month and nine month periods ended March 31,ending September 30, 2023 or March 31, 2022, nor a significant contributor to bakingand 2022. One customer did account for 10% of the Company’s consolidated accounts receivable as of March 31,September 30, 2023 and was insignificant as of June 30, 2022.2023.
Printing:The printing sector of Gourmet Foods'Foods’ gross revenues is comprised of many customers, some large and some small, with oneno single customer accounting for 52% and 50%a significant portion of the printing sector revenues for the three and nine months ended March 31, 2023, respectively, as compared to 39% and 38% for the three and nine months ended March 31, 2022, respectively. This sameCompany’s consolidated revenues. One customer accounted for 51% and 39%17% of the printing sectorCompany’s consolidated accounts receivable as of March 31,September 30, 2023 and as compared to 12% as of June 30, 2022, respectively. A second2023. One other customer accounted for 21%11% of printingthe Company’s consolidated accounts receivable as of March 31,June 30, 2023, andhowever was insignificant as of JuneSeptember 30, 2022.2023.
Consolidated: With respect to Gourmet Foods’ consolidated risk, the largest three customers accounted for 38%, 21% and 7% of Gourmet Foods' consolidated gross revenues for the three months ended March 31, 2023 compared to 36%, 16% and 12% for the three months ended March 31, 2022. For the nine month period ended March 31, 2023, these three customers accounted for 36%, 21% and 8% of consolidated gross revenues as compared to 31%, 15% and 14% for the nine month period ended March 31, 2022. These customers accounted for 16%, 31% and 9% of the consolidated accounts receivable of Gourmet Foods as of March 31, 2023 as compared to 7%, 26% and 8%, respectively, as of June 30, 2022.
Gourmet Foods, including Printstock, is not dependent upon any one major supplier as many alternative sources are available in the local marketplace should the need arise. However, the unavailability of, or increase in price in, any of the ingredients on which Gourmet Foods relies to produce its products could harm its operating results for such period.
The Marygold Companies, through Brigadier, is partially dependent upon its contractual relationship with the alarm monitoring company who provides monitoring services to Brigadier’s customers. In the event this contract is terminated, Brigadier would be compelled to find an alternate source of alarm monitoring, or establish such a facility itself. Management believes that the contractual relationship is sustainable, and has been for many years, with alternate solutions available should the need arise. Sales to the largest customer, which includes contracts and recurring monthly support fees, totaled 48%This monitoring company accounted for 12% of the total Brigadier revenues for the three and nine month periods ended March 31, 2023, as compared to 57% and 51% for the three and nine month periods ended March 31, 2022, respectively. The same customer accounted for approximately 28% of Brigadier'sCompany’s consolidated accounts receivable as of March 31,September 30, 2023 as compared to 31% as of and 11% at June 30, 2022. 2023. Asecond customer accounted for 11%12% of Brigadier revenues for the three months ended March 31, 2023 but was insignificant for the nine month period ended March 31, 2023. This customer accounted for approximately 16% of Brigadier'sCompany’s consolidated accounts receivable as of March 31,June 30, 2023 and nilwas insignificant as of JuneSeptember 30, 2022. 2023.
Brigadier purchases alarm panels, digital and analog cameras, mounting hardware and accessory items needed to complete security installations from a variety of sources. The manufacture of electronic items such as those sought by Brigadier has expanded to a global scale thus providing Brigadier with a broad choice of suppliers. Brigadier bases its vendor selection on several criteria including: price, availability, shipping costs, quality, suitability for purpose and the technical support of the manufacturer. Brigadier is not reliant on any one supplier.
The Marygold Companies, through Original Sprout, sells its products through 3 channels to market: 1)1) direct sales to end users via online shopping carts, 2)2) sales through international wholesale distributors who, in turn, sell to other retailers or wholesalers, and 3)3) to retailersretail stores selling to end users either from the shelf or online.
Original Sprout, has thousands of customers and, from time No single customer contributed significant sales revenues to time, certain customers (typically wholesalers and retailers) become significant contributors to revenues during specific reporting periods, but may not be significant during other periods. Original Sprout had two significant customers for the three month period ended March 31, 2023 who accounted for 13% and 11% of gross revenues. No other customers accounted for a significant percentage of salesCompany’s consolidated revenues for the three or nine months ended March 31,September 30, 2023 and 2022.Five different customers, none of whom No single customer contributed a significant sales levels, accounted for a total of 81% of Original Sprout'samount to the Company’s consolidated accounts receivable with a range from 12% to 20% each as of March 31,September 30, 2023 compared to 6 customers accounting for 87% of accounts receivable ranging from 11% to 19%or as of June 30, 2022. Due to Original Sprout's policy of shipping only after payment is received for most customers, the number of customers afforded limited credit is very small and is typically comprised of the same buyers at any reporting period.2023.
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The Marygold Companies, through Original Sprout, is dependent upon its relationships with product packaging companies who, at the direction of Original Sprout, produce the products in accordance with proprietary formulas, packages them in appropriate containers, and delivers the finished goods to Original Sprout for distribution to its customers. All of Original Sprout’s products are currently produced by third-partySprout strives to maintain at least two packaging companies althoughat all times, thus if these relationshipsone relationship were to fail there arethe other similar packaging companies availablewould be able to Original Sprout at competitive pricing.continue to supply services. Because of the nature of the Original Sprout product ingredients, some of the ingredients may, at times, be difficult to source in timely fashion or at the expected price point. To safeguard against this possibility, Original Sprout endeavors to maintain at least a 90-day90-day supply of all products in stock. Estimating and maintaining a reserve stock account is not a guarantee that a shortage of ingredient supplies will not affect production such that Original Sprout will not exhaust its reserves or be unable to fulfill customer orders.
The Marygold Companies, through Marygold & Co. (UK)UK and its wholly owned subsidiary, Tiger Financial and Asset Management (“Tiger”), had no significant customer or vendor concentrationsidentifies its concentration of risk as the reliance on a relatively small number of clients to continue their relationship with Tiger as their investment advisor. Tiger acts as an investment advisor and financial planner to its clients and has two principal revenue streams which comprise ongoing fees for providing investment advice, and commissions for the intermediation of insurance-based products. Tiger does not provide investment management services directly, rather the clients’ assets are referred to third party investment managers, primarily discretionary investment managers, and Tiger receives fees for the ongoing advice and financial planning services which are charged as a percentage of the assets under management. Should the relationship with the current investment manager come to an end, management is confident that a similar arrangement can be easily made with alternative investment managers. Tiger advises approximately 50 families/clients who collectively account for approximately $40 million in assets under management as of or for the threeSeptember 30, 2023 and nine month periods ended March 31, 2023 and June 30, 2022.2023. No single client accounted for a significant portion of the Company’s consolidated revenues. Marygold UK does not recognize any credit risk for accounts receivable. Marygold UK is seeking to further diversify its client base through ongoing outreach initiatives and, in the long term, add to its revenue streams through the development of the Marygold fintech app.
Inventories
Inventories
Inventories, consisting primarily of:of; (i) food products, printing supplies, and packaging in New Zealand;Zealand, (ii) hair and skin care finished products and components in the U.S.; and,, (iii) security system hardware in Canada, and (iv) printed debit cards and wearables at Marygold are valued at the lower of cost or net realizable value. Inventories in Canada and New Zealand are maintained on the first-in, first-outfirst-in, first-out method, while inventory in the U.S.U.S is maintained using the average cost method. Inventories include product cost, inbound freight and warehousing costs where applicable. Management compares the cost of inventories with the net realizable value and an allowance is made for writing down the inventories to their net realizable value, if lower. An assessment is made at the end of each fiscal quarter to determine what slow-moving inventory items, if any, should be deemed obsolete and written down to their estimated net realizable value. For the three months ended March 31,September 30, 2023 and 2022, the expense for slow-moving or obsolete inventory was $2,405$0 and $0,$0, respectively. For the nine months ended March 31, 2023 and 2022, the expense for slow-moving or obsolete inventory was $2,698 and $3,478, respectively.
Property, Plant and Equipment
Property, plant and equipment are stated at cost, net of accumulated depreciation. Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals and leasehold improvements are capitalized. Office furniture and equipment include office fixtures, computers, printers and other office equipment plus software and applicable packaging designs. Leasehold improvements, which are included in plant and equipment, are depreciated over the shorter of the useful life of the improvement and the length of the lease. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation is computed using the straight-line method over the estimated useful life of the asset (see Note 5 to the Condensed Consolidated Financial Statements).
SCHEDULE OF PROPERTY PLANT AND EQUIPMENT ESTIMATED USEFUL LIFE
Category | Estimated Useful Life (in years) | |||
Building | 39 | |||
Plant and equipment: | 5 to 10 | |||
Furniture and office equipment | 3 to 5 | |||
| Vehicles | 3 to 5 | |||
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Intangible Assets
Intangible assets consist of brand names, domain names, recipes, non-compete agreements and customer lists along with the internal useinternally developed software in process for the business applications of Marygold to bewhich launched in the coming fiscal year.latter part of June 2023, and the U.K. regulatory certification acquired by Marygold UK in the Tiger purchase transaction. Intangible assets with finite lives are amortized over the estimated useful life and are evaluated for impairment at least on an annual basis and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The Company assesses recoverability by determining whether the carrying value of such assets will be recovered through the discounted expected future cash flows. If the future discounted cash flows are less than the carrying amount of these assets,When it is determined that an indefinite intangible asset is impaired, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets. There was no impairment recorded for the ninethree month period ended March 31,September 30, 2023 or the fiscal year ended June 30, 2022.2023.
Goodwill
Goodwill represents the excess of the aggregate purchase price over the fair value of the net assets acquired in a business combination transaction. Goodwill is tested for impairment on an annual basis during the fourth quarter of the Company'sCompany’s fiscal year, or more frequently if events or changes in circumstances indicate that the carrying amount of goodwill may be impaired. The Company first performs a qualitative test to determine if goodwill is impaired at a reporting unit. In performing this test, the Company evaluates macroeconomic factors, industry and market considerations, cost factors such as the increase in the cost of materials or labor or other costs, overall financial performance, changes in key personnel or customers or strategy, and other entity-specific events or trends that could indicate impairment, among other items. If the results of this test indicate that it is more likely than not that the fair value of the reporting is below its carrying value, a quantitative test is then performed to determine the amount of the impairment. When impaired, the carrying value of goodwill is written down to fair value. There was no impairment recorded for the ninethree month period ended March 31,September 30, 2023 or the fiscal year ended June 30, 2022.2023.
Impairment of Long-Lived Assets
The Company tests long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value. There was no impairment recorded for the ninethree month period ended March 31,September 30, 2023 or the fiscal year ended June 30, 2022.2023.
Investments and Fair Value of Financial Instruments
Equity securities included in short-term investments are classified as available-for-sale securities and debt securities are classified as trading securities. The Company measures the investments at fair value at period end with any changes in fair value reflected as unrealized gains or (losses) which is included as part of other (expense) income in the consolidated statements of income. The Company values its investments in accordance with Accounting Standards Codification ("ASC"(“ASC”) 820 – Fair Value Measurements and Disclosures (“ASC 820”). ASC 820 defines fair value, establishes a framework for measuring fair value in U.S. GAAP, and expands disclosures about fair value measurement. The changes to past practice resulting from the application of ASC 820 relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurement. ASC 820 establishes a fair value hierarchy that distinguishes between: (1)(1) market participant assumptions developed based on market data obtained from sources independent of the Company (observable inputs) and (2)(2) The Company’s own assumptions about market participant assumptions developed based on the best information available under the circumstances (unobservable inputs). The three levels defined by the ASC 820 hierarchy are as follows:
Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.
Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 assets include the following: quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market-corroborated inputs).
Level 3 – Unobservable pricing input at the measurement date for the asset or liability. Unobservable inputs shall be used to measure fair value to the extent that observable inputs are not available.
In some instances, the inputs used to measure fair value might fall within different levels of the fair value hierarchy. The level in the fair value hierarchy within which the fair value measurement in its entirety falls shall be determined based on the lowest input level that is significant to the fair value measurement in its entirety.
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Warrants to Purchase Common Stock
The Company from time to time will issue warrant instruments to purchase common stock and accounts for warrant instruments as either equity-classified or liability-classified instruments based on an assessment of the specific terms of the warrants and applicable authoritative guidance in ASC 480, Distinguishing Liabilities from Equity ("(“ASC 480"480”) and ASC 815, Derivatives and Hedging ("(“ASC 815"815”). Generally, warrants issued in connection with debt and equity financings are presented as a component of equity unless the warrants include a conditional obligation to issue a variable number of shares among other conditions, or it is possible that the Company may need to settle the warrants in cash, in which instance the warrants would be accounted for as non-current liabilities in the accompanying balance sheets. As of March 31,September 30, 2023 and June 30, 2022 2023 all outstanding warrants are classified as equity instrumentsinstruments.
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Stock-Based Compensation
Stock-based compensation expense is measured based on grant date at fair value using the Black-Scholes option pricing model for stock options and the grant date closing stock price for restricted stock awards. The Company recognizes stock-based compensation expense related to stock options and restricted stock awards on a straight-line basis over the requisite service period of the awards, which is generally the vesting term of four to five years. The Company accounts for forfeitures as they occur. Stock-based compensation consists entirely of vesting related to restricted stock awards and stock options for the three and nine month periods ended March 31, 2023, and as such awards were granted during the nine months ended March 31, 2023. (see Note 12- Stock-based Compensation)
Revenue Recognition
Revenue consists of fees earned through management of investment funds in the United States fees earned in through the management of customer investmentsand in the United Kingdom saleprimarily based on assets under management (“AUM”), sales of gourmet meat pies and printing of food wrappers in New Zealand, sales of security alarm system installation and maintenance services in Canada, and sales of hair and skin care products internationally. Revenue is accounted for net of sales taxes, sales returns, and trade discounts. The performance obligation is satisfied when the product has been shipped and title, risk of loss and rewards of ownership have been transferred. For most of the Company’s product sales or services, thesethe revenue recognition criteria described below are met at the time the product is shipped, the subscription period commences, or the management fees earned each month.services are provided. For our Brigadier subsidiary in Canada, the Company operates under contract with an alarm monitoring company that pays a percentage of its recurring monitoring fee to Brigadier in exchange for continued customer service and support functions with respect to each customer maintained under contract by the monitoring company. The Company has no costs of contracts which require capitalization. The Company’s only contract assets are accounts receivable, net, and accounts receivable – related parties. The Company has no contract liabilities other than deposits received periodically which are insignificant to the consolidated financial statements.
The Company generates revenue, in part, through contractual monthly recurring fees received for providing ongoing customer support services to monitoring company clientele. The five-stepfive-step process governing contract revenue reporting includes:
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1. Identifying the contract(s) with customers
2. Identifying the performance obligations in the contract
3. Determining the transaction price
4. Allocating the transaction price to the performance obligations in the contract
5. Recognizing revenue when or as the performance obligation is satisfied
Transactions involve security systems that are sold outright to the customer where the Company'sCompany’s performance obligations include customer support services and the sale and installation of the security systems. For such arrangements, the Company allocates a portion of the transaction price to each performance obligation based on a relative stand-alone selling price. Revenue associated with the sale and installation of security systems is recognized once installation is complete, and is reflected as security system revenue in the Condensed Consolidated Statements of Income. Revenue associated with customer support services is recognized as those services are provided, and is included as a component of security system revenue in the Condensed Consolidated Statements of Income, which for the three and nine months ended March 31,September 30, 2023 and 2022, were approximately $77,878$73,422 and $247,720,$82,960, or approximately 13% of the total security system revenues as compared to $171,79813% and $318,394 for the three and nine months ended March 31, 2022, 13%, respectively, or 31% and 17% of the total security system revenues. These revenues for the three and nine months ended March 31,September 30, 2023 accountand 2022 accounted for approximately 1%1% of total consolidated revenues as compared to 1% and 2% for the three and nine months ended March 31, 2022, respectively. revenues. None of the other subsidiaries of the Company generate revenues from long-term contracts.
Because the Company has no contract with the end user, and the monthly payments for customer support services are made to the Company by the monitoring company who has a contract with the end user, and end user customers are subject to cancellation through no control of the Company, Company; therefore, no deferred revenues or contingent liability reserves have been established with respect to these contracts. The services are deemed delivered as the obligation is acknowledged on a monthly basis.
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Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. A valuation allowance is provided for deferred tax assets if it is more likely than not that these items will either expire before the Company is able to realize their benefits or if future deductibility is uncertain.
When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-notmore-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Applicable interest and penalties associated with unrecognized tax benefits are classified as additional income taxes in the statements of income.
Advertising Costs
The Company expenses the cost of advertising as incurred. Marketing and advertising costs for the three months ended March 31,September 30, 2023 and March 31,September 30, 2022 were $0.6$1.0 million and $0.8$0.8 million, respectively. Marketing and advertising costs for the nine months ended March 31, 2023 and March 31, 2022 were $1.9 million and $2.2 million, respectively.
Other Comprehensive Income (Loss)
Foreign Currency Translation
We record foreign currency translation adjustments and transaction gains and losses in accordance with ASC 830, Foreign Currency Matters. The accounts of Gourmet Foods use the New Zealand dollar as the functional currency. The accounts of Brigadier Security System use the Canadian dollar as the functional currency, and the accounts of Marygold UK use the Great Britain pound as the functional currency. Assets and liabilities are translated at the exchange rate on the balance sheet date, and operating results are translated at the weighted average exchange rate throughout the period. Foreign currency transaction gains and (losses) can also occur if a transaction is settled in a currency other than the entity'sentity’s functional currency. Accumulated currency translation gains and (losses) are classified as an item of accumulated other comprehensive income (loss) in the stockholders’ equity section of the consolidated balance sheet.
Segment Reporting
The Company defines operating segments as components for which separate financial information is available that is evaluated regularly by the chief operating decision makerChief Operating Decision Maker in deciding how to allocate resources and in assessing performances. The Company allocates its resources and assesses the performance of its sales activities based on these segments (Refer to Note 16 of the Condensed Consolidated Financial Statements).
Business Combinations
We allocate the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired users, acquired trade names from a market participant perspective, useful lives and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, which is one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed. For the ninethree months ended March 31,September 30, 2023 and year ended June 30, 2022 2023 a determination was made that no adjustments were necessary.
Recent Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Board Update (“ASU”) 2016-13,2016-13, Financial Instruments – Credit Losses (Topic 326)326): Measurement of Credit Losses on Financial Instruments, and also issued subsequent amendments to the initial guidance: ASU 2018-19,2018-19, ASU 2019-04,2019-04, ASU 2019-05,2019-05, ASU 2019-10,2019-10, and ASU 2019-11,2019-11, which replace the existing incurred loss impairment model with an expected credit loss model and require a financial asset measured at amortized cost to be presented at the net amount expected to be collected. The new guidance will be effective for annual reporting periods beginning after December 15, 2022 (as(as amended by ASU 2019-10)2019-10), including interim periods within that annual period. The Company anticipates the adoption ofadopted the standard will lead to changes induring the quarter ending September 30, 2023 with the additional disclosures as well as insignificantand no changes related to the period of recognition of losses on its receivables.
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In August 2020, the FASB issued ASU No.2020-06, 2020-06, Debt –Debt with Conversion and Other Options (Subtopic 470-20)470-20) and Derivatives and Hedging –Contracts in Entity’s Own Equity (Subtopic 815-40)815-40). The amendment is meant to simplify the accounting for convertible instruments by removing certain separation models in subtopic 470-20470-20 for convertible instruments. The amendment also changed the method used to calculate diluted earnings per share ("EPS"(“EPS”) for convertible instruments and for instruments that may be settled in cash. The amendment is effective for years beginning after December 15, 2023, including interim periods for those fiscal years. Early adoption is permitted for periods beginning after December 15, 2020, including interim periods within those fiscal years. The Company anticipates the adoption of the standard will not have a material impact on its condensed consolidated financial statements and related disclosures given its current and anticipated operations.
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common shares outstanding. This calculation includes Basic net income per share is based upon the weighted average number of common shares outstanding. This calculation includes the weighted average number of Series B Convertible Preferred shares outstanding also, as they are deemed to be substantially similar to the common shares and shareholders are entitled to the same liquidation and dividend rights. PotentiallyDiluted net income per share is based on the assumption that all dilutive securities includeconvertible shares and stock options were converted or exercised. Dilution is computed by applying the Series B Convertible Preferred Shares, outstanding unvested restricted stock awards, and outstanding warrants to purchase common stock. The treasury stock method is used to compute the potentially dilutive effect of outstanding warrants, stock options, and unvested restricted stock.method. Under this method, options warrants, and unvested restricted stockwarrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. For the three and nine months ended March 31,As of September 30, 2023 the Company excluded 364,196there were common stock equivalents because their inclusion would be antidilutive. For the three and nine months ended March 31, 2022, the Company excluded 82,500 common stock equivalents because their inclusion would be antidilutive.
On August 25, 2021 the Company adopted the 2021 Omnibus Equity Incentive Plan (the "Plan") and had not issued any awards under the Plan as of June 30, 2022. which were anti-dilutive. During the nine months ending March 31, 2023 quarter ended September 30, 2022, the Company issued 277,037dilutive effect of nonvested restricted stock awards and 50,000 stock options to employees. The Company has also authorized a reverse stock split of its Common Stock by a ratio of not less than 1-for-1.5 and not more than 1-for-2.75 (the “Reverse Stock Split”) at any time prior to the one year anniversary of filing of a definitive Information Statement on Schedule 14C with the Board of Directors (the "Board") having the discretion as to whether or not the Reverse Stock Split isresults in approximately incremental shares to be effected,included in the diluted shares used in the calculation of diluted earnings per share for the three months ended September 30, 2022. The incremental diluted shares have no impact on earnings per share and withhave been omitted from the exact ratioSeptember 30, 2022 table presented below. As such, basic and diluted earnings per share were the same.
Basic and diluted net income per share reflects the effects of any Reverse Stock Split to be set within the above range as determined by the Board in its discretion.shares potentially issuable upon conversion of convertible preferred stock.
SCHEDULE OF EARNINGS PER SHARE, BASIC AND DILUTED
For the Three Months Ended March 31, 2023 | ||||||||||||
Net Income | Shares | Per Share | ||||||||||
Basic net income per share: | ||||||||||||
Net income available to common shareholders | $ | 149,545 | 39,383,459 | $ | 0.00 | |||||||
Net income available to preferred shareholders | 3,749 | 987,200 | $ | 0.00 | ||||||||
Basic net income per share | $ | 153,294 | 40,370,659 | $ | 0.00 | |||||||
Diluted net income per share: | ||||||||||||
Net income available to common shareholders, basic | $ | 149,295 | 39,383,459 | |||||||||
Impact of dilutive securities | 257 | 67,689 | ||||||||||
Net income available to common shareholders, diluted | 149,552 | 39,451,148 | $ | 0.00 | ||||||||
Net income available to preferred shareholders | 3,742 | 987,200 | $ | 0.00 | ||||||||
Diluted net income per share | $ | 153,294 | 40,438,348 | $ | 0.00 | |||||||
| For the Three Months Ended September 30, 2023 | ||||||||||||
| Net Loss | Shares | Per Share | ||||||||||
| Basic net (loss) per share: | ||||||||||||
| Net (loss) available to common shareholders | $ | (487,958 | ) | 39,410,175 | $ | ) | ||||||
| Net (loss) available to preferred shareholders | (12,223 | ) | 987,200 | $ | ) | |||||||
| Basic net (loss) per share | $ | (500,181 | ) | 40,397,375 | $ | ) | ||||||
| Diluted net (loss) per share: | ||||||||||||
| Net (loss) available to common shareholders, basic | $ | (487,958 | ) | 39,410,175 | ||||||||
| Impact of dilutive securities | - | - | ||||||||||
| Net (loss) available to common shareholders, diluted | $ | (487,958 | ) | 39,410,375 | $ | ) | ||||||
| Net (loss) available to preferred shareholders | (12,223 | ) | 987,200 | $ | ) | |||||||
| Diluted net (loss) per share | $ | (500,181 | ) | 40,397,375 | $ | ) | ||||||
For the Three Months Ended March 31, 2022 | For the Three Months Ended September 30, 2022 | |||||||||||||||||||||||
Net Income | Shares | Per Share | Net Income | Shares | Per Share | |||||||||||||||||||
Basic net income per share: | ||||||||||||||||||||||||
Net income available to common shareholders | $ | 848,013 | 37,844,376 | $ | 0.02 | $ | 485,011 | 39,383,459 | $ | |||||||||||||||
Net income available to preferred shareholders | 22,121 | 987,200 | $ | 0.02 | 12,157 | 987,200 | $ | |||||||||||||||||
Basic and diluted income per share | $ | 870,134 | 38,831,576 | $ | 0.02 | $ | 497,168 | 40,370,659 | $ | |||||||||||||||
For the Nine Months Ended March 31, 2023 | ||||||||||||
Net Income | Shares | Per Share | ||||||||||
Basic income per share: | ||||||||||||
Net income available to common shareholders | $ | 811,905 | 39,383,459 | $ | 0.02 | |||||||
Net income available to preferred shareholders | 20,351 | 987,200 | $ | 0.02 | ||||||||
Basic income per share | $ | 832,256 | 40,370,659 | $ | 0.02 | |||||||
Diluted income per share: | ||||||||||||
Net income available to common shareholders, basic | $ | 811,276 | 39,383,459 | |||||||||
Impact of dilutive securities | 644 | 31,293 | ||||||||||
Net income available to common shareholders, diluted | 811,920 | 39,414,752 | $ | 0.02 | ||||||||
Net income available to preferred shareholders | 20,336 | 987,200 | $ | 0.02 | ||||||||
Diluted income per share | $ | 832,256 | 40,401,952 | $ | 0.02 | |||||||
For the Nine Months Ended March 31, 2022 | ||||||||||||
Net Income | Shares | Per Share | ||||||||||
Basic income per share: | ||||||||||||
Net income available to common shareholders | $ | 12,157 | 37,574,336 | $ | 0.00 | |||||||
Net income available to preferred shareholders | 319 | 987,200 | $ | 0.00 | ||||||||
Basic and diluted income per share | $ | 12,476 | 38,561,536 | $ | 0.00 | |||||||
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NOTE 4.INVENTORIES
Inventories for Gourmet Foods, Brigadier and Original Sprout consisted of the following totals as of March 31,September 30, 2023 and June 30, 2022:2023:
SCHEDULE OF INVENTORY
March 31, | June 30, | September 30, | June 30, | |||||||||||||
2023 | 2022 | 2023 | 2023 | |||||||||||||
Raw materials | $ | 1,281,529 | $ | 1,273,581 | $ | 1,259,693 | $ | 1,299,564 | ||||||||
Supplies and packing materials | 177,854 | 195,207 | 146,920 | 156,050 | ||||||||||||
Finished goods | 926,876 | 731,954 | 788,214 | 798,525 | ||||||||||||
Total inventories | $ | 2,386,259 | $ | 2,200,742 | $ | 2,194,827 | $ | 2,254,139 | ||||||||
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NOTE 5.PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following as of March 31,September 30, 2023 and June 30, 2022:2023:
SCHEDULE OF PROPERTY, PLANT AND EQUIPMENT
March 31, | June 30, | September 30, | June 30, | |||||||||||||
2023 | 2022 | 2023 | 2023 | |||||||||||||
Plant and equipment | $ | 1,957,622 | $ | 1,905,921 | $ | 1,888,585 | $ | 1,914,568 | ||||||||
Furniture and office equipment | 276,975 | 254,616 | 300,543 | 287,344 | ||||||||||||
Land and building | 561,987 | 590,662 | 560,333 | 574,744 | ||||||||||||
Vehicles | 359,383 | 363,295 | 353,791 | 362,085 | ||||||||||||
Solar energy system | 138,731 | 138,030 | 132,580 | 134,970 | ||||||||||||
Total property, plant and equipment, gross | 3,294,698 | 3,252,524 | 3,235,832 | 3,273,711 | ||||||||||||
Accumulated depreciation | (2,006,277 | ) | (1,860,630 | ) | (2,026,093 | ) | (2,018,409 | ) | ||||||||
Total property, plant and equipment, net | $ | 1,288,421 | $ | 1,391,894 | $ | 1,209,739 | $ | 1,255,302 | ||||||||
For the three and nine months ended March 31,September 30, 2023 depreciation expense for property, plant and equipment totaled $50,587 and $147,818, respectively,$44,762 as compared to $59,145 and $187,978$48,581 for the three and nine months ended March 31,September 30, 2022.
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NOTE 6.INTANGIBLE ASSETS
Intangible assets consisted of the following as of March 31,September 30, 2023 and June 30, 2022:2023:
SCHEDULE OF INDEFINITE-LIVED INTANGIBLE ASSETS
March 31, | June 30, | September 30, | June 30, | |||||||||||||
2023 | 2022 | 2023 | 2023 | |||||||||||||
Customer relationships | $ | 1,363,935 | $ | 1,363,935 | $ | 1,363,935 | $ | 1,363,935 | ||||||||
Brand name | 1,297,789 | 1,297,789 | 1,297,789 | 1,297,789 | ||||||||||||
Domain name | 36,913 | 36,913 | 36,913 | 36,913 | ||||||||||||
Recipes | 1,221,601 | 1,221,601 | 1,221,601 | 1,221,601 | ||||||||||||
Non-compete agreement | 274,982 | 274,982 | 274,982 | 274,982 | ||||||||||||
Internally developed software | 217,990 | 217,990 | 217,990 | 217,990 | ||||||||||||
Total | 4,413,210 | 4,413,210 | 4,413,210 | 4,413,210 | ||||||||||||
Less : accumulated amortization | (1,993,181 | ) | (1,704,314 | ) | (2,192,455 | ) | (2,083,240 | ) | ||||||||
Net intangibles | $ | 2,420,029 | $ | 2,708,896 | $ | 2,220,755 | $ | 2,329,970 | ||||||||
CUSTOMER RELATIONSHIPS
On August 11, 2015, the Company acquired Gourmet Foods, Ltd. The fair value on the acquired customer relationships was estimated to be $66,153$66,153 and is amortized over the remaining useful life of 10 years. On June 2, 2016, the Company acquired Brigadier. The fair value on the acquired customer relationships was estimated to be $434,099$434,099 and is amortized over the remaining useful life of 10 years. On December 18, 2017, the Company’s wholly owned subsidiary, Kahnalytics, Inc., acquired the assets of Original Sprout LLC. The fair value of the acquired customer relationships was determined to be $200,000$200,000 and is amortized over the remaining useful life of 7 years. On July 1, 2020, our wholly owned subsidiary, Gourmet Foods, Ltd., acquired Printstock Products Limited. The fair value of the acquired customer relationships was estimated to be $77,123$77,123 and is amortized over a useful life of 9 years. On June 20, 2022 2023 our wholly-owned subsidiary, Marygold UK, acquired Tiger Financial and Asset Management Limited. The fair value of the acquired customer relationships was estimated to be $587,328$587,328 and is amortized over a useful life of 7 years.
March 31, | June 30, | |||||||
2023 | 2022 | |||||||
Customer relationships | $ | 1,363,935 | 1,363,935 | |||||
Less: accumulated amortization | (586,929 | ) | (458,550 | ) | ||||
Total customer relationships, net | $ | 777,006 | $ | 905,385 | ||||
| September 30, | June 30, | |||||||
| 2023 | 2023 | |||||||
| Customer relationships | $ | 1,363,935 | $ | 1,363,935 | ||||
| Less: accumulated amortization | (672,673 | ) | (629,568 | ) | ||||
| Total customer relationships, net | $ | 691,262 | $ | 734,367 | ||||
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BRAND NAME
On August 11, 2015, the Company acquired Gourmet Foods, Ltd. The fair value on the acquired brand name was estimated to be $61,429 $61,429 and is amortized over the remaining useful life of 10 years. On June 2, 2016, the Company acquired Brigadier. The fair value on the acquired brand name was estimated to be $340,694 $340,694 and is amortized over the remaining useful life of 10 years. On December 18, 2017, the Company’s wholly owned subsidiary, Kahnalytics, Inc., acquired the assets of Original Sprout LLC. The fair value of the acquired brand name was determined to be $740,000 $740,000 and is considered to have an indefinite life. Unlike the brand names Gourmet Foods and Brigadier Security Systems, Original Sprout is an actual product name and recognized associated brand that is identifiable to consumers of the product and is the basis of the value proposition. That brand name will forever be associated with the product offering unless and until such time in the future as the Company may elect to discontinue the use of the brand and move towards establishment of an alternative product offering. On July 1, 2020, our wholly owned subsidiary, Gourmet Foods, Ltd., acquired Printstock Products Limited. The fair value of the brand name was determined to be $57,842 $57,842 and, like that of Original Sprout, would continue to stay in use for an indefinite period of time. Therefore, the Company will test for impairment of the brand names "Original Sprout"“Original Sprout” and "Printstock"“Printstock” at each reporting interval with no amortization recognized. On One June 20, 2022, our wholly-owned subsidiary, Marygold UK, acquired Tiger Financial and Asset Management Limited. The fair value of the acquired trade name, $24,456,$24,456, together with isits regulatory business certification, $73,368,$73,368, totaled $97,824$97,824 and, like those of Printstock and Original Sprout, would continue to stay in use for an indefinite period of time. Therefore, the Company will test for impairment at each reporting intervalinternal with no amortization recognized.
March 31, | June 30, | |||||||
2023 | 2022 | |||||||
Brand name | $ | 1,297,789 | $ | 1,297,789 | ||||
Less: accumulated amortization | (280,018 | ) | (249,831 | ) | ||||
Total brand name, net | $ | 1,017,771 | $ | 1,047,958 | ||||
| September 30, | June 30, | |||||||
| 2023 | 2023 | |||||||
| Brand name | $ | 1,297,789 | $ | 1,297,789 | ||||
| Less: accumulated amortization | (300,178 | ) | (290,042 | ) | ||||
| Total brand name, net | $ | 997,611 | $ | 1,007,747 | ||||
DOMAIN NAME
On August 11, 2015, the Company acquired Gourmet Foods, Ltd. The fair value on the acquired domain name was estimated to be $21,601$21,601 and is amortized over the remaining useful life of 5 years. On June 2, 2016, the Company acquired Brigadier. The fair value on the acquired domain name was estimated to be $15,312$15,312 and is amortized over the remaining useful life of 5 years. As of March 31,September 30, 2023, the fair value of the acquired domain names had been fully amortized.
March 31, | June 30, | September 30, | June 30, | |||||||||||||
2023 | 2022 | 2023 | 2023 | |||||||||||||
Domain name | $ | 36,913 | $ | 36,913 | $ | 36,913 | $ | 36,913 | ||||||||
Less: accumulated amortization | (36,913 | ) | (36,913 | ) | (36,913 | ) | (36,913 | ) | ||||||||
Total domain name, net | $ | - | $ | - | $ | - | $ | - | ||||||||
RECIPES AND FORMULAS
On August 11, 2015, the Company acquired Gourmet Foods, Ltd. The fair value on the recipes was estimated to be $1,221,601$21,601 and is amortized over the remaining useful life of 5 years. On December 18, 2017 the Company’s wholly owned subsidiary, Kahnalytics, Inc., acquired the assets of Original Sprout LLC. The fair value of the acquired recipes and formulas was determined to be $1,200,000$1,200,000 and is amortized over the remaining useful life of 8 years.
March 31, | June 30, | |||||||
2023 | 2022 | |||||||
Recipes and formulas | $ | 1,221,601 | $ | 1,221,601 | ||||
Less: accumulated amortization | (814,339 | ) | (701,736 | ) | ||||
Total recipes and formulas, net | $ | 407,262 | $ | 519,865 | ||||
| September 30, | June 30, | |||||||
| 2023 | 2023 | |||||||
| Recipes and formulas | $ | 1,221,601 | $ | 1,221,601 | ||||
| Less: accumulated amortization | (889,543 | ) | (851,735 | ) | ||||
| Total recipes and formulas, net | $ | 332,058 | $ | 369,866 | ||||
NON-COMPETE AGREEMENT
On June 2, 2016, the Company acquired Brigadier. The fair value on the acquired non-compete agreement was estimated to be $84,982$84,982 and is amortized over the remaining useful life of 5 years. On December 18, 2017 the Company’s wholly owned subsidiary, Kahnalytics, Inc., acquired the assets of Original Sprout LLC. The fair value of the acquired non-compete agreement was determined to be $190,000$190,000 and is amortized over the remaining useful life of 5 years. As of March 31, 2023, the value of the non-compete agreements had been fully amortized and the non-compete agreement is no longer effective.
March 31, | June 30, | September 30, | June 30, | |||||||||||||
2023 | 2022 | 2023 | 2023 | |||||||||||||
Non-compete agreement | $ | 274,982 | $ | 274,982 | $ | 274,982 | $ | 274,982 | ||||||||
| Finite-lived intangible assets, gross | $ | 274,982 | $ | 274,982 | ||||||||||||
Less: accumulated amortization | (274,982 | ) | (257,284 | ) | (274,982 | ) | (274,982 | ) | ||||||||
Total non-compete agreement, net | $ | - | $ | 17,698 | $ | - | $ | - | ||||||||
| Finite-lived intangible assets, net | $ | - | $ | - | ||||||||||||
| 18 |
INTERNAL USE SOFTWARE
During the first quarter ended December 31,of 2020, Marygold began incurring expenses in connection with the internal development of software applications that are planned for eventual integration to its consumer Fintech offering. Certain of these expenses, totaling $217,990$217,990 as of March 31, 2023 and June 30, 2022, 2023, have been capitalized as intangible assets. OnceAs of July 1, 2023 the development has been completed and the product iswas commercially available, theseviable. The capitalized costs will be amortized over theirits useful lives. Aslife of March 31,three years commencing during the quarter ended September 30, 2023 no amortization expense has been recorded for these intangible assets.when the assets were placed into service.
| September 30, | June 30, | |||||||
| 2023 | 2023 | |||||||
| Internally developed software | $ | 217,990 | $ | 217,990 | ||||
| Finite-lived intangible assets, gross | $ | 217,990 | $ | 217,990 | ||||
| Less: accumulated amortization | (18,166 | ) | - | |||||
| Total internally developed software | $ | 199,824 | $ | 217,990 | ||||
| Finite-lived intangible assets, net | $ | 199,824 | $ | 217,990 | ||||
AMORTIZATION EXPENSE
The total amortization expense for intangible assets for the three and nine months ended March 31,September 30, 2023 and 2022 was $89,069$109,215 and $288,867,$100,627, respectively. The total amortization expense for intangible assets for the three and nine months ended March 31, 2022 was $77,764 and $236,750, respectively.
Estimated remaining amortization expenses of intangible assets for the next five fiscal years, are as follows:
SCHEDULE OF FINITE-LIVED INTANGIBLE ASSETS, FUTURE AMORTIZATION EXPENSE
Years Ending June 30, | Expense | Expense | ||||||
2023 | $ | 90,059 | ||||||
2024 | 361,226 | |||||||
| Remainder of fiscal 2024 | $ | 324,673 | ||||||
2025 | 345,962 | 418,625 | ||||||
2026 | 234,194 | 306,858 | ||||||
2027 | 92,417 | 92,417 | ||||||
| 2028 | 92,417 | |||||||
Thereafter | 1,296,171 | 985,765 | ||||||
Total | $ | 2,420,029 | $ | 2,220,755 | ||||
| Total | $ | 2,220,755 | ||||||
|
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NOTE 7.OTHER ASSETS
Other Current Assets
Other current assets totaling $1,138,291$973,562 as of March 31,September 30, 2023 and $699,547$904,153 as of June 30, 2022 2023 are comprised of various components as listed below.
SCHEDULE OF OTHER ASSETS
As of March 31, 2023 | As of June 30, 2022 | As of September 30, 2023 | As of June 30, 2023 | |||||||||||||
Prepaid expenses | $ | 1,054,686 | $ | 630,285 | $ | 949,064 | $ | 889,128 | ||||||||
Other current assets | 83,605 | 69,262 | 24,498 | 15,025 | ||||||||||||
Total | $ | 1,138,291 | $ | 699,547 | $ | 973,562 | $ | 904,153 | ||||||||
Investments
USCF Investments, from time to time, provides initial seed capital in connection with the creation of ETPs or ETFs that are managed by USCF or USCF Advisers. USCF Investments classifies these investments as current assets as these investments are generally sold within one year of the balance sheet date. Investments in which no controlling financial interest or significant influence exists are recorded at fair value with the change included in earnings on the Condensed Consolidated Statements of Income. Investments in which no controlling financial interest exists, but significant influence exists are recorded per the equity method of investment accounting unless the fair value option is elected under Accounting Standards Codification ("ASC"(“ASC”) 825, Fair Value Option. As of March 31,September 30, 2023, and June 30 2022, the CompanyUSCF Advisers owned $1.3 $1.2 million and $1.3 million, respectively, of the USCF Gold Strategy Plus Income Fund ("GLDX"(“GLDX”), and $2.1 $0.5 million of the USCF Sustainable Battery Metals Strategy Fund ("ZSB"(“ZSB”), $3.2 million of the USCF Energy Commodity Strategy Absolute Return Fund (“USE”) asand $2.7 million of March 31, 2023, the USCF Sustainable Commodity Strategy Fund (“ZSC”), which launched in JanuaryAugust 2023. BothAs of June 30, 2023, USCF Advisers held positions in GLDX, ZSB and USE of $1.3 million, $1.9 million and $2.6 million, respectively. These funds are related parties managed by USCF Advisers, which are included in other equities in the below table. The Company elected the fair value option related to this investmentthese investments as the shares were purchased and will be sold on the market and this accounting treatment is deemed to be most informative. In addition to the holdings in GLDX, ZSB and ZSB,USE, the Company also invests in marketable securities. The Company recognized unrealized gains (losses) of ($88) $266 thousand and ($77) 112) thousand for the three and nine months ended March 31,September 30, 2023 and ($176) thousand and ($116) thousand for the three and nine months ended March 31,September 30, 2022, respectively. As of March 31,September 30, 2023 and June 30, 2022, 2023, the aggregate of such investments were approximately $8.7 $13.3million and $5.1 $11.5million, respectively.
| 19 |
All of the Company'sCompany’s short-term investments are classified as Level 1 assets as of March 31,September 30, 2023 and June 30, 2022. 2023. Investments measured at estimated fair value consist of the following as of March 31,September 30, 2023 and June 30, 2022:2023:
SCHEDULE OF AVAILABLE-FOR-SALE SECURITIES RECONCILIATION
March 31, 2023 | September 30, 2023 | |||||||||||||||||||||||||||||||
Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | |||||||||||||||||||||||||
Money market funds | $ | 3,036,823 | $ | - | $ | - | $ | 3,036,823 | $ | 3,427,983 | $ | - | $ | - | $ | 3,427,983 | ||||||||||||||||
Other short-term investments | 277,271 | - | (661 | ) | 276,610 | 283,883 | - | (1,420 | ) | 282,463 | ||||||||||||||||||||||
Short-term treasury bills | 1,958,546 | 13,374 | - | 1,971,920 | 1,944,981 | 19,339 | - | 1,964,320 | ||||||||||||||||||||||||
Other equities | 3,496,926 | 52,745 | (131,534 | ) | 3,418,137 | |||||||||||||||||||||||||||
| Other equities – related parties | 7,479,426 | 646,085 | (538,494 | ) | 7,587,017 | |||||||||||||||||||||||||||
Total short-term investments | $ | 8,769,566 | $ | 66,119 | $ | (132,195 | ) | $ | 8,703,490 | $ | 13,136,273 | $ | 665,424 | $ | (539,914 | ) | $ | 13,261,783 | ||||||||||||||
| June 30, 2023 | ||||||||||||||||
| Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | |||||||||||||
| Money market funds | $ | 3,402,472 | $ | - | $ | - | $ | 3,402,472 | ||||||||
| Other short-term investments | 280,401 | - | (1,653 | ) | 278,748 | |||||||||||
| Short-term treasury bills | 1,952,010 | 16,950 | - | 1,968,960 | ||||||||||||
| Other equities – related parties | 5,971,926 | 88,345 | (229,470 | ) | 5,830,801 | |||||||||||
| Total short-term investments | $ | 11,606,809 | $ | 105,295 | $ | (231,123 | ) | $ | 11,480,981 | |||||||
June 30, 2022 | ||||||||||||||||
Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | |||||||||||||
Money market funds | $ | 1,051,017 | $ | - | $ | - | $ | 1,051,017 | ||||||||
Other short term investments | 271,346 | - | (1,919 | ) | 269,427 | |||||||||||
Short-term treasury bills | 2,470,020 | - | (4,156 | ) | 2,465,864 | |||||||||||
Other equities | 1,246,926 | 32,697 | - | 1,279,623 | ||||||||||||
Total short-term investments | $ | 5,039,309 | $ | 32,697 | $ | (6,075 | ) | $ | 5,065,931 | |||||||
During the ninethree month and one year periods ended March 31,September 30, 2023 and June 30, 2022, 2023, respectively, there were no transfers between Level 1 and Level 2.
Restricted Cash
At March 31,September 30, 2023 and June 30, 2022, 2023, Gourmet Foods had on deposit approximately NZ$NZ$20,000 (approximately US$US$12,55011,993 and US$US$12,486,12,209, respectively after currency translation) securing a lease bond for one of its properties. The cash securing the bond is restricted from access or withdrawal so long as the bond remains in place.
At March 31,September 30, 2023, Marygold UK had on deposit ££326,491329,212 (approximately US$US$404,907401,622) securing a deferred purchase price payment due on December 31, 2023 to the seller of Tiger. At June 30, 2023 the amount on deposit to secure the final payment due under the stock purchase agreement to acquire Tiger Financial and Asset Management Limited.was £327,694 (approximately US$413,560 translated as of June 30, 2023). The cash securing the final paymentdeposit is restricted by covenant from access or withdrawal or movement from the account until such time as the final settlementprior to payment of the stockremaining deferred purchase agreement is reached with the seller. During the three month period ended March 31, 2023, Original Sprout began a campaign to match funds contributed for charitable donations. The total amount of restricted cash as of March 31, 2023 was $417,467 as compared to $1,013,279 as of June 30, 2022. The decrease relates to payments for consideration payable related to the Tiger Financial Asset Management acquisition to the seller.price.
Long Term Assets
Other long-term assets totaling $552,660 as of March 31,$552,660at September 30, 2023 and $540,160 at June 30, 2022 2023, were attributed to USCF Investments and Original Sprout and consisted of:
(i) | $500,000 as of | |
(ii) |
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NOTE 8.GOODWILL
Goodwill represents the excess of the aggregate purchase price over the fair value of the net assets acquired in business combinations.
Goodwill is comprised of the following amounts as of March 31,September 30, 2023 and June 30, 2022:2023:
SCHEDULE OF GOODWILL
March 31, | June 30, | September 30, | June 30, | |||||||||||||
2023 | 2022 | 2023 | 2023 | |||||||||||||
Goodwill – Original Sprout | $ | 416,817 | $ | 416,817 | $ | 416,817 | $ | 416,817 | ||||||||
Goodwill – Gourmet Foods | 275,311 | 275,311 | 275,311 | 275,311 | ||||||||||||
Goodwill – Brigadier | 351,345 | 351,345 | 351,345 | 351,345 | ||||||||||||
Goodwill - Marygold & Co. (UK) | 1,263,729 | 1,263,729 | ||||||||||||||
| Goodwill – Marygold & Co. (UK) | 1,263,729 | 1,263,729 | ||||||||||||||
Total | $ | 2,307,202 | $ | 2,307,202 | $ | 2,307,202 | $ | 2,307,202 | ||||||||
| Goodwill | $ | 2,307,202 | $ | 2,307,202 | ||||||||||||
| 20 |
The Company tests for goodwill impairment at each reporting unit. There was no goodwill impairment for the three months ended March 31,September 30, 2023 or 2022.year ended June 30, 2023.
|
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NOTE 9.ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consisted of the following as of March 31,September 30, 2023 and June 30, 2022:2023:
SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
March 31, | June 30, | September 30, | June 30, | |||||||||||||
2023 | 2022 | 2023 | 2023 | |||||||||||||
Accounts payable | $ | 1,421,818 | $ | 2,001,978 | $ | 2,449,564 | $ | 1,325,539 | ||||||||
Taxes payable | 111,922 | 196,473 | 66,680 | 97,453 | ||||||||||||
Accrued payroll, vacation and bonus payable | 254,301 | 331,644 | 331,968 | 454,786 | ||||||||||||
Accrued operating expenses | 626,587 | 275,695 | 643,331 | 834,153 | ||||||||||||
Total | $ | 2,414,628 | $ | 2,805,790 | $ | 3,491,543 | $ | 2,711,931 | ||||||||
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Notes Payable - Related PartiesNOTE 10.RELATED PARTY TRANSACTIONS
Notes payable totaling $600,000 in principal plus $144,000 in accrued interest were repaid to two shareholders as of June 30, 2022, and the Company currently has no notes payable outstanding to related parties. Interest expense for all related party notes for the three and nine months ended March 31, 2023 was $0 as compared to $5,987 and $18,226 for the three and nine months ended March 31, 2022, respectively.
USCF Investments -– Related Party Transactions
The Funds managed by USCF and USCF Advisers are deemed by management to be related parties. The Company’s USCF The Funds managed by USCF and USCF Advisers are deemed by management to be related parties. The Company’s USCF Investments revenues, totaling $5.0 $5.0 million and $5.9 $5.4 million for the three month periods months ended March 31,September 30, 2023 and 2022, respectively, and $15.7 million and $17.2 million for the nine month periods ended March 31, 2023 and 2022, respectively, were earned from these related parties. Accounts receivable, totaling $1.7 $1.7 million and $2.2 $1.7 million as of March 31,September 30, 2023 and June 30, 2022, 2023, respectively, were owed from the Funds that are related parties. Fund expense waivers, totaling $29 thousand$0.1 million and $122 thousandfund expense limitation amounts, totaling $0.1 million, for each of the three and nine months ended March 31,September 30, 2023 and $18 thousand and $77 thousand for the three and nine months ended March 31, 2022,respectively, were incurred on behalf of these related parties. Waivers payable, totaling $29 thousand$0.1 million and $70 thousand$0.1 million as of March 31,September 30, 2023 and June 30, 2022, 2023, respectively, were owed to these related parties. Fund expense waivers and fund expense limitation obligations are defined under Note 15 to the Condensed Consolidated Financial Statements. USCF Investments, from time to time, provides initial investments in the creation of ETP and ETF funds that USCF manages. Such investments included GLDX, ZSB, USE and ZSB,ZSC (launched in August 2023), related party funds managed by USCF Advisers, and as of March 31,September 30, 2023 had fair market values of $1.3 the investments totaled $1.2 million, $0.5 million, $3.2 million and $2.1 $2.7 million, respectively. As of June 30, 2022, only GLDX was held2023 the investments totaled $1.3 million, $1.9 million, $2.6 million and the fair market value totaled $1.3 million.$0, respectively. The Company owns approximately 40%% and % of the outstanding shares of GLDXthese investments as of March 31,September 30, 2023 and June 30, 2022, and 91% of ZSB as of March 31, 2023, which are included in "other equities" in Note 7.respectively.
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NOTE 11.LOANS – PROPERTY AND EQUIPMENT
As of March 31,September 30, 2023, Brigadier had an outstanding principal balance of CD$CD$456,469446,533 (approx. (approx. US$336,951328,646 translated as of March 31,September 30, 2023) due to Bank of Montreal related to the purchase of its Saskatoon office land and building. The Condensed Consolidated Balance Sheets as of March 31,September 30, 2023 and June 30, 2022 includereflect the amount of the principal balance which is due within twelve months as a current liability of US$328,646 as compared to US$14,854340,849 and US$15,135, respectively, and a long-term liabilityin current liabilities translated as of US$322,097 and US$350,293, respectively.June 30, 2023. Interest on the mortgage loan for the three months ended March 31,September 30, 2023 and 2022 was US$4,727 and US$3,5113,706, respectively.
In addition to the loan due by Brigadier, our subsidiary, Gourmet Foods, has a finance lease liability related to a solar energy system. Total lease liabilities under the lease as of September 30, 2023 were NZ$167,057 and (approximately US$US$3,865,100,178 respectively. Interest on the mortgage loan for the nine months ended March 31, 2023 was US$10,740translated as of September 30, 2023) as compared to $11,884 for the nine months ended March 31, 2022. The loan matures and is due in full on NZ$174,405 (approximately US$106,469 translated as of June 30, 2024, prepayments2023), respectively, and are not allowedincluded under terms of the loan agreement.
Included in loans related to propertyloans-property and equipment are the payments due under the solar energy system finance lease at Gourmet Foods. Theon our Condensed Consolidated Balance Sheets as of March 31, 2023 and June 30, 2022 include the present value amount due within twelve months as a current liability of US$18,453Sheets. and US$18,360, respectively, and a long term liability of US$95,597 and US$108,885, respectively. For details on the solar energy system finance lease commitment, refer to Note 15 herein.
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NOTE 12. STOCKHOLDERS’ EQUITY
Common Stock Issued in Underwritten Offering
On March 9, 2022, the Company entered into an underwriting agreement (the “Underwriting Agreement”) between the Company and Maxim Group LLC (the “Underwriter”), relating to the Company’s upsized underwritten public offering (the “Offering”) of 1,650,000 shares (the “Shares”) of the Company’s common stock, par value $0.001 per share (the “Common Stock”). The Offering was made pursuant to the Company’s registration statement on Form S-1 (File No.333-261522), previously filed with Securities Exchange Commission (SEC) and subsequently declared effective by the SEC on March 9, 2022.
Pursuant to the Underwriting Agreement, the public offering price was $2.00 per Share (the "Offering Price"), and the Underwriter purchased the Shares at a 7.0% discount to the public Offering Price. The Company granted the Underwriter the option to purchase, within 45 days from the date of the Underwriting Agreement, an additional 247,500 shares of CommonConvertible Preferred Stock at the same price per share as the Shares (the “Over-Allotment Option”), which the Underwriter exercised in full on March 11, 2022. Maxim Group LLC acted as sole book-running manager for the Offering.
The Underwriting Agreement includes customary representations, warrantiesCompany has common shares authorized, of which were issued and agreements by the Company, customary conditions to closing, indemnification obligationsoutstanding as of the CompanySeptember 30, 2023 and the Underwriter, including liabilities under the Securities Act of 1933, as amended, other obligations of the parties and termination provisions. In addition, pursuant to the terms of the Underwriting Agreement and related “lock-up” agreements, the Company, each director and executive officer of the Company and certain significant stockholders of the Company have agreed not to sell, transfer or otherwise dispose of securities of the Company, without the prior written consent of the Underwriter, for a 180-day period, subject to certain limitations therein.June 30,2023.
In exchange for the Underwriter’s services, the Company agreed to (i) sell the Common Stock to the Underwriter at a purchase price of $1.86 per share of Common Stock, reflecting the underwriting discount of 7%, and (ii) issue the Underwriter (or its designees) the Warrants to purchase shares of Common Stock equal to 5.0% of the aggregate number of shares of Common Stock sold in the Offering, along with associated registration rights (the “Underwriter’s Warrants”).
On March 14, 2022, the Offering closed resulting in the Company selling a total of 1,897,500 shares of common stock, including 247,500 shares sold pursuant to the full exercise of the underwriter’s over-allotment option. Gross proceeds from the offering were approximately $3,795,000 before underwriting discounts and other estimated offering expenses which totaled $265,650 and $545,090, respectively. There has been no material change in the planned use of proceeds as described in our final prospectus filed with the SEC on March 9, 2022 pursuant to Rule 424(b)(4).
Warrants to Purchase Common Stock
On March 14, 2022, pursuant to the Underwriting Agreement, the Company issued the Underwriter’s Warrants to purchase up to an aggregate of 82,500 shares of Common Stock as compensation for their services related to this issuance. The Underwriter’s Warrants may be exercised beginning on September 14, 2022, until March 14, 2027. The initial exercise price of each Warrant is $2.40$2.40 per share, which represents 120%120% of the Offering Price. The total fair value of the warrants granted to the Underwriter was $132,000.$132,000. The Company estimated the fair value of the warrants using the Black-Scholes option pricing model using the following assumptions: Risk-free interest rate of 2.10%2.10%, expected life of 5 years, dividend yield of 0%0% and volatility of 117%117%. As the warrant issuance was for services rendered related to an equity issuance, no expense was recognized for the three and nine months ending March 31, 2023 or the year ended June 30, 2023 and June 30, 2022 related to the issuance.
Convertible Preferred Stock
The Company has shares authorized to issue as Preferred Stock. The Preferred Stock is designated into two series, designated as Series A, and designated as Series B. As of March 31,September 30, 2023 and June 30, 2022 there were are issued or outstanding shares of Series A stock.
Each issued Series B Convertible Preferred Stock is convertible into shares of common stock and carries a vote of 20 shares of common stock in all matters brought before the shareholders for a vote. On January 15, 2021, the Company converted shares of Series B Convertible Preferred Stock to shares of common stock per the request of the shareholder and pursuant to the stock designation. After conversion, there remain There are shares of Series B Convertible Preferred Stock outstanding as of March 31,September 30, 2023 and June 30, 2022.2023.
| 22 |
Stock-based Compensation
DuringIn August 2021, the nine months ending March 31, 2023 Company adopted the Company's 2021 Omnibus Equity Incentive Plan issued 288,733 employee(“the Equity Plan”) which provides for the grant of stock-based awards, including stock options, restricted stock awards (“RSA”) and restricted stock units (“RSU”), to employees and non-employees. A total of shares of common stock are authorized for issuance under the Plan, of which are available for future grants as of September 30, 2023.
The fair value of stock options are estimated on the date of grant using the Black-Scholes option pricing model and recognized as compensation on a straight-line basis between the date of grant and the date the options become fully vested. During the three months ended September 30, 2023 the Company granted stock options with a weighted average grant date fair value of $per share. Stock options issued have terms of . The fair value atof the date of grant was $394,000 or $1.36 per share withoptions granted were estimated using the awards vesting over periods between 2023 and 2027.following assumptions:
Restricted Stock Outstanding as of March 31, 2023 | ||||||||
Number of Shares | Weighted Average Grant Date Fair Value | |||||||
Unvested as of June 30, 2022 | - | $ | - | |||||
Granted – quarter ending September 30, 2022 | 277,037 | $ | 1.35 | |||||
Granted – quarter ending March 31, 2023 | 11,696 | $ | 1.71 | |||||
Vested | - | $ | - | |||||
Forfeited | - | $ | - | |||||
Unvested as of March 31, 2023 | 288,733 | $ | 1.36 | |||||
Expected to vest | 288,733 | |||||||
| For the Three Months Ended September 30, 2023 | ||||
| Expected volatility | % - | % | ||
| Expected term | years | |||
| Risk-Free interest rate | % - | % | ||
| Weighted-average fair value per share of grants | $ | |||
| Expected dividend yield | % | |||
Options Outstanding as of March 31, 2023 | ||||||||
Outstanding Stock Options | Weighted Average Exercise Price | |||||||
Outstanding as of June 30, 2022 | - | $ | - | |||||
Granted – granted quarter ending December 31, 2022 | 50,000 | $ | 1.45 | |||||
Granted – granted quarter ending March 31, 2023 | 220,000 | $ | 1.64 | |||||
Exercised | - | $ | - | |||||
Forfeited | - | $ | - | |||||
Outstanding and expected to vest as of March 31, 2023 | 270,000 | $ | 1.61 | |||||
Exercisable as of March 31, 2023 | - | $ | - | |||||
| Options Outstanding as of September 30, 2023 | ||||||||||||||||
| Outstanding Stock Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (Years) | Aggregate Intrinsic Value | |||||||||||||
| Outstanding as of July 1, 2023 | 270,000 | $ | 1.61 | |||||||||||||
| Granted | 240,881 | $ | 1.18 | |||||||||||||
| Exercised | - | $ | - | |||||||||||||
| Forfeited | (20,000 | ) | $ | 1.64 | ||||||||||||
| Outstanding and expected to vest as of September 30, 2023 | 490,881 | $ | 1.40 | 9.6 | $ | - | ||||||||||
| Exercisable as of September 30, 2023 | - | $ | - | - | $ | - | ||||||||||
The estimated aggregate intrinsic value of stock options exercisable as of March 31, 2023 was $44,550. As of March 31, 2023, there was a total of $406,695 of unrecognized compensation expense related to outstanding stock options that will be recognized over a weighted average period of 4 years. The fair value of these options, calculated using the Black-Scholes option-pricing model, was determined to be $423,800$ using the following assumptions: expected termassumptions note above. The estimated aggregate intrinsic value of stock options exercisable as of September 30, 2023 was $. Stock-based compensation relating to stock options totaled $ and $ for the three months ending September 30, 2023 and 2022, respectively, and are included in the Condensed Consolidated Statements of Income. As of September 30, 2023, there was a total of $ of unrecognized compensation expense related to outstanding stock options that will be recognized over a remaining weighted average period of years, volatilityyears.
The following table summarizes the restricted stock activities for the Company’s Equity Plan for the three months ended September 30, 2023.
| Restricted Stock Outstanding as of September 30, 2023 | ||||||||
| Number of Shares | Weighted Average Grant Date Fair Value | |||||||
| Nonvested as of July 1, 2023 | 288,733 | $ | 1.36 | |||||
| Granted | 447,543 | $ | 1.03 | |||||
| Vested | (26,716 | ) | $ | - | ||||
| Forfeited | - | $ | - | |||||
| Nonvested as of September 30, 2023 | 709,560 | $ | 1.15 | |||||
| Expected to vest | 709,560 | |||||||
The fair value of 192%, risk free interest rateRSA’s is recognized as compensation on a straight-line basis between the date of 3.59%,grant and expected dividend ratethe date the RSA’s become fully vested. The fair value of 0%RSA’s is estimated on the grant date based on the closing quoted market price of the Company’s stock and generally vest over a period of a year period following issuance date, subject to continued service. In addition to the nonvested shares, there are approximately of vested but not issued awards as of September 30, 2023. The vested unissued units are included in outstanding shares for basic and diluted earnings per share data, but are not reported as issued and outstanding in the Condensed Consolidated Balance Sheets and Condensed Consolidated Statements in Shareholder’ Equity.
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During three months ended September 30, 2023, the Company granted RSA’s with a weighted average grant date fair value of $per share and a total fair value at date of grant of $. as of September 30, 2023. Stock-based compensation relating to RSA’s totaled $and $for the three months ended September 30, 2023 and 2022, respectively, and are included in the condensed consolidated statements of income. As of September 30, 2023, there was $of unrecognized compensation expense related to outstanding RSA’s that will be recognized over a remaining weighted average period of years. Holders of RSA’s generally have the rights and privileges of a stockholder with respect to the shares of common stock granted to the holder, including the right to vote such shares and the right to receive dividends with respect to such shares. However, all cash and stock dividends and distributions shall be held back by the Company for the holder’s account until such time as the related portion of the restricted stock award vests (at which time such dividends or distributions, as applicable, shall be released and paid). The Company does not consider the shares of common stock associated with the RSA’s to be issued and outstanding until vesting occurs.
The table below summarizes total remaining stock-based compensation for all outstanding awards:
SCHEDULE OF SHARE BASED PAYMENT ARRANGEMENT
| Fiscal Period | ||||
| Remainder of fiscal 2024 | $ | 329,882 | ||
| Fiscal 2025 | 474,180 | |||
| Fiscal 2026 | 346,121 | |||
| Fiscal 2027 | 176,233 | |||
| Fiscal 2028 | 10,290 | |||
| Total stock-based compensation | $ | 1,336,706 | ||
The aggregate expected stock-based compensation expense remaining to be recognized reflects only awards as of March 31,September 30, 2023 and assumes no forfeiture activity. The Company expects to recognize this expenseactivity and will be recognized over the remaininga weighted-average period of 2.3approximately years.
Fiscal Period | ||||
Remaining three months of fiscal 2023 | $ | 37,222 | ||
Fiscal 2024 | 182,919 | |||
Fiscal 2025 | 217,798 | |||
Fiscal 2026 | 253,875 | |||
Fiscal 2027 | 84,191 | |||
Total stock-based compensation | $ | 776,005 |
There were shares issued for vendor services during the three and nine months ending March 31,September 30, 2023 and March 31, 2022.or year ending June 30, 2023.
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NOTE 13.BUSINESS COMBINATIONS
On August 17, 2021, our wholly-owned subsidiary Marygold UK entered into a Stock Purchase Agreement (“SPA”) to acquire all the issued and outstanding shares of Tiger Financial and Asset Management Limited (“Tiger”), a company incorporated and registered in England and Wales and located in Northampton, England. Tiger is an asset manager and investment advisor operating pursuant to certification by the Financial Conduct Authority of the United Kingdom with approximately ££42 million in assets under management as of June 20, 2022. The transaction closed on June 20, 2022 with an agreed purchase price of ££2,382,372 (translated to US$US$2,913,164 as of the closing date June 20, 2022)), subject to adjustment as provided for in the SPA. As of MarchJune 30, 2022 approximately £1,018,935 (US$1,245,954) remained payable, £18,935 (US$23,154) of which was payable within 20 business days of closing, followed by subsequent equal payments of £500,000 due on December 31, 2023, £1,882,372 had been paid with £500,000 (approximately US$604,990 translated as of March 31, 2023) remaining due2022 and payable on December 31, 2023, subject to downward adjustment per the terms of the SPA for an amount up to ££500,000 should existing clientele close their accounts prior to December 31, 2023. There is no provision for any upward adjustments. As a result, management was able to complete its preliminary purchase price allocation as follows, under the assumption no downward adjustment will take place on December 31, 2023. Included in the allocation are estimated income tax liabilities of approximately US$US$86,277 pertaining to the operations prior to acquisition, and US$US$113,833 of deferred income tax liabilities associated with the value of the acquired intangible assets. The amounts have been translated to US currency as of the acquisition date. Tiger will be operated as a subsidiary of Marygold UK and is expected to be initially cash flow neutral. In addition to growing the business through increasing assets under management, Marygold UK intends to project the fintech mobile app services to be offered by Marygold in the U.S. into the U.K. through the established contacts and certifications held by Tiger.
Item | Amount | |||
Cash in bank | $ | 1,159,020 | ||
Prepayments/deposits | 17,962 | |||
Plant, property and equipment | 2,922 | |||
Intangible assets | 684,768 | |||
Goodwill | 1,263,729 | |||
Tax liability | (86,277 | ) | ||
Deferred tax liability | (113,833 | ) | ||
Accounts payable and accrued expenses | (15,127 | ) | ||
Total Purchase Price | $ | 2,913,164 | ||
Supplemental Pro Forma Information (Unaudited)
As of September 30, 2023, £500,000 (US$604,990) remains unpaid and due on December 31, 2023, subject to adjustment. The following unaudited supplemental pro forma information for the three months ended March 31, 2022, assumesforegoing amounts have been translated to US currency as of the acquisition of Tiger had occurred as of July 1, 2021, giving effect on a pro forma basis to purchase accounting adjustments such as depreciation of property and equipment, amortization of intangible assets, and acquisition related costs. The pro forma data is for informational purposes only and may not necessarily reflect the actual results of operations had Tiger been operated as part of the Company since July 1, 2021. Furthermore, the pro forma results do not intend to predict the future results of operations of the Company.date.
SCHEDULE OF RECOGNIZED IDENTIFIED ASSETS ACQUIRED AND LIABILITIES
| Three Months Ended March 31, 2022 | Three Months Ended March 31, 2022 | Nine Months Ended March 31, 2022 | Nine Months Ended March 31, 2022 | |||||||||||||
Actual | Pro Forma | Actual | Pro Forma | |||||||||||||
Net revenues | $ | 8,793,688 | $ | 9,291,945 | $ | 27,963,824 | $ | 28,462,081 | ||||||||
Net income | $ | 1,291,074 | $ | 1,342,779 | $ | 756,103 | $ | 934,000 | ||||||||
Basic earnings per share | $ | 0.02 | $ | 0.02 | $ | 0.00 | $ | 0.00 | ||||||||
Diluted earnings per share | $ | 0.02 | $ | 0.02 | $ | 0.00 | $ | 0.00 | ||||||||
| Item | Amount | |||
| Cash in bank | $ | 1,159,020 | ||
| Prepayments/deposits | 17,962 | |||
| Plant, property and equipment | 2,922 | |||
| Intangible assets | 684,768 | |||
| Goodwill | 1,263,729 | |||
| Tax liability | (86,277 | ) | ||
| Deferred tax liability | (113,833 | ) | ||
| Accounts payable and accrued expenses | (15,127 | ) | ||
| Total Purchase Price | $ | 2,913,164 | ||
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NOTE 14.INCOME TAXES
The Company accounts for income taxes under the asset and liability method, which recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the tax bases of assets and liabilities and their financial statement reported amounts, and for net operating losses and tax credit carryforwards. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company records a valuation allowance against deferred tax assets when it is more likely than not that such asset will not be realized. The Company continues to monitor the likelihood that it will be able to recover its deferred tax assets. If recovery is not likely, the Company must increase its provision for income taxes by recording a valuation allowance against the deferred tax assets.
The Company accounts for uncertain tax positions in accordance with the authoritative guidance on income taxes under which the Company may only recognize or continue to recognize tax positions that meet a "more“more likely than not"not” threshold. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of the provision for income taxes.
As of March 31,September 30, 2023, the Company'sCompany’s total unrecognized tax benefits were approximately $0.3$0.3 million, which would affect the effective tax rate if recognized. The Company will recognize interest and penalties, when they occur, related to uncertain tax positions as a component of tax expense. There is no interest or penalties to be recognized for the three months ended March 31,September 30, 2023 and March 31,September 30, 2022.
The Company is required to make its best estimate of the annual effective tax rate for the full fiscal year and use that rate to provide for income taxes on a current year-to-date basis. The Company recorded tax benefit (expense) of $30$303 thousand and ($305)226) thousand for the three and nine months ended March 31,September 30, 2023 respectively, as compared to tax expense of ($421) thousand and ($744) thousand for the three and nine months ended March 31,September 30, 2022, respectively. The effective tax rate could fluctuate in the future due to changes in the taxable income mix between various jurisdictions.
The Company is subject to income taxes in the U.S. federal, various states, Canada and New Zealand tax jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. The Company’s U.S. tax years 2018 through 2022 will remain open for examination by the federal and state authorities which is three and four years, respectively. The Company’s tax years from 2018 through 2022 remain open for examination by Canada and New Zealand authorities. As of March 31,September 30, 2023, there were no active taxing authority examinations.
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NOTE 15.COMMITMENTS AND CONTINGENCIES
Lease Commitments
The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use assets, accrued expenses, and long-term operating lease liabilities in the Condensed Consolidated Balance Sheets. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. In determining the present value of lease payments, the Company uses its incremental borrowing rate based on the information available at the lease commencement date. The operating lease right-of-use assets also include any lease payments made at or before the commencement date and are reduced by any lease incentives received. The Company’s lease terms may include options to extend or not terminate the lease when it is reasonably certain that it will exercise any such options. For the majority of its leases, the Company concluded that it is not reasonably certain that any renewal options would be exercised, and, therefore, the amounts are not recognized as part of operating lease right-of-use assets nor operating lease liabilities. Leases with an initial term of 12 months or less and certain office equipment leases which are deemed insignificant, are not recorded on the balance sheet and expensed as incurred and included within rent expense under general and administrative expense. Lease expense is recognized on a straight-line basis over the expected lease term.
The Company’s most significant operating leases are real estate leases of office, warehouse and production facilities. The remaining operating leases are primarily comprised of leases of printers and other equipment which are deemed insignificant. For all operating leases, the Company has elected the practical expedient permitted under Topic 842 to combine lease and non-lease components. As a result, non-lease components, such as common area or equipment maintenance charges, are accounted for as a single lease element.
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The Company has one finance lease wherein ownership of the underlying asset will be transferred to the Company at the end of the lease term. The underlying asset of the finance lease is a solar energy system at our Gourmet Foods subsidiary in New Zealand that is included with property, plant and equipment on the Condensed Consolidated Balance Sheets.
Fixed lease expense payments are recognized on a straight-line basis over the lease term. Variable lease payments vary because of changes in facts or circumstances occurring after the commencement date, other than the passage of time. Certain of the Company’s operating lease agreements include variable payments that are passed through by the landlord, such as insurance, taxes, and common area maintenance. Variable payments are deemed immaterial, expensed as incurred, and included within rent expense under general and administrative expense.
The Company leases various facilities and offices throughout the world including the following subsidiary locations:
Gourmet Foods has operating leases for its office, factory and warehouse facilities located in Tauranga, New Zealand, and facilities leased by its subsidiary, Printstock, in Napier, New Zealand, as well as for certain equipment including printers and copiers. These leases are generally for three-year terms, with some options to renew for an additional term. The company opted to renew two leases during the nine month period ended March 31, 2023 and recognized an increase in right of use asset and corresponding operating lease liability of US$103,603 translated as of December 31, 2022. The leases mature between October 2025 August 2024 and October 2026, and require monthly rental payments of approximately $23,903 (GST $22,843 (GST not included) translated to U.S. currency as of March 31,September 30, 2023. Additionally, Gourmet Foods has one finance lease for its solar energy system that ends in December 2031 at the monthly rate (GST not included) of approximately US$US$1,6451,580 translated as of March 31,September 30, 2023. Brigadier leases office and storage facilities in Regina, Saskatchewan. The minimum lease obligations for the Regina facility require monthly payments of approximately US$US$2,4342,427 translated to U.S. currency as of March 31,September 30, 2023. Original Sprout currently leases office and warehouse space in San Clemente, CA with 3-year3-year facility lease expiring on November 30, 2023. Minimum2023 and monthly lease payments of approximately $23,625 commenced December 1, 2022. $23,625. USCF Investments leases office space in Walnut Creek, California under an operating lease which expires in December 2023. Minimum monthly lease payments are approximately $13,063 $13,455 with increases annually.
For the three months month periods ended March 31,September 30, 2023 and 2022, the combined lease paymentscosts, including insignificant variable and short-term lease costs, of the Company and its subsidiaries totaled $204,709 $205,046 and $204,816, respectively. For the nine month periods ended March 31, 2023 $198,487, respectively, and2022, the combined lease payments of the Company and its subsidiaries totaled $606,913 and $616,075, respectively. Lease payments are recorded under general and administrative expense in the Condensed Consolidated Statements of Income. As of March 31,September 30, 2023 the Condensed Consolidated Balance Sheets included operating lease right-of-use assets totaling $1,040,356, recorded net of $26,098 in deferred rent,$701,248 and $1,066,454 $713,360 in total operating lease liabilities.
Future minimum consolidated lease payments for The Marygold Companies and its subsidiaries are as follows:
SCHEDULE OF FUTURE MINIMUM CONSOLIDATED LEASE PAYMENTS
Year Ended June 30, | Lease Amount | Finance Lease | Operating Leases | Finance Lease | ||||||||||||
2023 | $ | 191,781 | $ | 4,936 | ||||||||||||
2024 | 513,089 | 19,743 | ||||||||||||||
| Remainder of fiscal 2024 | $ | 328,594 | $ | 14,151 | ||||||||||||
2025 | 221,468 | 19,743 | 222,898 | 18,868 | ||||||||||||
2026 | 182,044 | 19,743 | 173,972 | 18,868 | ||||||||||||
2027 | 57,753 | 19,743 | 55,193 | 18,868 | ||||||||||||
| 2028 | - | 18,868 | ||||||||||||||
Thereafter | - | 87,199 | - | 64,465 | ||||||||||||
Total minimum lease payments | 1,166,135 | 171,107 | 780,657 | 154,088 | ||||||||||||
Less: present value discount | (99,681 | ) | (50,049 | ) | (67,297 | ) | (45,080 | ) | ||||||||
Total operating lease liabilities | $ | 1,066,454 | $ | 121,058 | ||||||||||||
| Total lease liabilities | $ | 713,360 | $ | 109,008 | ||||||||||||
The weighted average remaining lease term for the Company'sCompany’s operating leases was 3.012.91 years as of March 31,June 30, 2023 and a weighted-average discount rate of 5.6%5.49% was used to determine the total operating lease liabilities. The remaining lease term for the Company’s finance lease was 8.2 years as of September 30, 2023 with an annual interest rate of 6.99% and a present value discount of 28%.
Additionally, Gourmet Foods entered into a General Security Agreement in favor of the Gerald O’Leary Family Trust and registered on the Personal Property Securities Register for a priority sum of NZ$NZ$110,000 (approximately US$US$69,02365,963) to secure the lease of its primary facility. In addition, a NZ$NZ$20,000 (approximately US$US$12,55011,993) bond has been posted through ANZ Bank and secured with a cash deposit of equal amount to secure a separate facilities lease. The General Security Agreement and the cash deposit will remain until such time as the respective leases are satisfactorily terminated in accordance with their terms. Interest from the cash deposit securing the lease accumulates to the benefit of Gourmet Foods and is listed as a component of interest income/expense on the accompanying Condensed Consolidated Statements of Income.
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Other Agreements and Commitments
One of the funds, UNL managed by USCF, manages four Funds (BNO, CPER, UGA, UNL) which had expense waiver provisions during thecurrent and prior fiscal year,years, whereby USCF reimburses funds when fund expenditure levels exceed certain threshold amounts. Effective May 1, 2021 USCF discontinued expense waiver reimbursements for BNO, CPER and UGA with only UNL continuing. As of March 31,September 30, 2023 and June 30, 2022 2023 the expense waiver payable for the UNL fund was $29 thousand$0.1 million and $70 thousand,$0.1 million, respectively. USCF has no obligation to continue such payments for UNL into subsequent periods.
As Marygold builds out its application, it enters into agreements with various service providers. As of March 31,September 30, 2023, Marygold has future payment commitments with its primary service vendors totaling $1.5$1.5 million including approximately $0.7$1.1 million due induring the remainder of fiscal 2024 and $2023,$0.60.4 million due in fiscal 2024 and $0.2 million due in fiscal 2025.
Litigation
From time to time, the Company and its subsidiaries may be involved in legal proceedings arising primarily from the ordinary course of their respective businesses. Except as described below, there are no pending legal proceedings against the Company. USCF is an indirect wholly ownedwholly-owned subsidiary of the Company. USCF, as the general partner of the United States Oil Fund, LP ("USO"(“USO”) and the general partner and sponsor of the related public funds may, from time to time, be involved in litigation arising out of its operations in the ordinary course of business. Except as described herein, USO and USCF are not currently party to any material legal proceedings.
Optimum Strategies Action
On April 6, 2022, USO and USCF were named as defendants in an action filed by Optimum Strategies Fund I, LP, a purported investor in call option contracts on USO (the “Optimum Strategies Action”). The action is pending in the U.S. District Court for the District of Connecticut at Civil Action No.3:22-cv-00511.
The Optimum Strategies Action asserts claims under the Securities Exchange Act of 1934, as amended (the “1934 Act”), Rule 10b-5 thereunder, and the Connecticut Uniform Securities Act (“CUSA”). It purports to challenge statements in registration statements that became effective in February 2020, March 2020, and on April 20, 2020, as well as public statements between February 2020 and May 2020, in connection with certain extraordinary market conditions and the attendant risks that caused the demand for oil to fall precipitously, including the COVID-19 global pandemic and the Saudi Arabia-Russia oil price war. The complaint seeks damages, interest, costs, attorney’s fees, and equitable relief.
USCF and USO intend to vigorously contest such claims and have moved for their dismissal. On March 15, 2023, the Court issued a decision granting defendants’ motion to dismiss, with prejudice as to the 1934 Act claims and without prejudice as to the CUSA claim.
Settlement of SEC and CFTC Investigations
On November 8, 2021, one of The Marygold Companies, Inc.’s (the “Company”) indirect subsidiaries, the United States Commodity Funds LLC (“USCF”), together with United States Oil Fund, LP (“USO”), for which USCF is the general partner,and USO announced a resolution with each of the U.S. Securities and Exchange Commission (the “SEC”)SEC and the U.S. Commodity Futures Trading Commission (the “CFTC”)CFTC relating to matters set forth in certain Wells Notices issued by the staffs of each of the SEC and CFTC as detailedmore fully described below.
On August 17, 2020, USCF, USO, and John Love received a “Wells Notice” from the staff of the SEC (the “SEC Wells Notice”). The SEC Wells Notice stated that the SEC staff made a preliminary determination to recommend that the SEC file an enforcement action against USCF, USO, and Mr. Love alleging violations of Sections 17(a)(1)17(a)(1) and 17(a)(3)17(a)(3) of the Securities Act of 1933, as amended (the “1933“1933 Act”), and Section 10(b)10(b) of the Securities Exchange Act of 1934, Act, as amended (the “1934 Act”), and Rule 10b-510b-5 thereunder.
Subsequently, on August 19, 2020, USCF, USO, and Mr. Love received a Wells Notice from the staff of the CFTC (the “CFTC Wells Notice”). The CFTC Wells Notice stated that the CFTC staff made a preliminary determination to recommend that the CFTC file an enforcement action against USCF, USO, and Mr. Love alleging violations of Sections 4o(1)4o(1)(A) and (B) and 6(c)(1)6(c)(1) of the CEA, Commodity Exchange Act of 1936, as amended (the “CEA”), 7 U.S.C. §§ 6o(1)6o(1)(A), and (B), 9(1) (2018) and 9(1) (2018), and CFTC Regulations 4.26,4.41, and 180.1(a)180.1(a), 17 C.F.R. §§ 4.26,4.41,180.1(a) (2019) 180.1(a) (2019).
On November 8, 2021, acting pursuant to an offer of settlement submitted by USCF and USO, the SEC issued an order instituting cease-and-desist proceedings, making findings, and imposing a cease-and-desist order pursuant to Section 8A of the 1933 Act, directing USCF and USO to cease and desist from committing or causing any violations of Section 17(a)(3)17(a)(3) of the 1933 Act, 15 U.S.C. § 77q(a)(3)77q(a)(3) (the “SEC Order”)SEC Order). In the SEC Order, the SEC made findings that, from April 24, 2020 to May 21, 2020, USCF and USO violated Section 17(a)(3)17(a)(3) of 1933 Act, which provides that it is “unlawful for any person in the offer or sale of any securities . . . to engage in any transaction, practice, or course of business which operates or would operate as a fraud or deceit upon the purchaser.” USCF and USO consented to entry of the SEC Order without admitting or denying the findings contained therein, except as to jurisdiction.
Separately, on November 8, 2021, acting pursuant to an offer of settlement submitted by USCF, the CFTC issued an order instituting cease-and-desist proceedings, making findings, and imposing a cease-and-desist order pursuant to Section 6(c)6(c) and (d) of the CEA, directing USCF to cease and desist from committing or causing any violations of Section 4o(1)4o(1)(B) of the CEA, 7 U.S.C. § 6o(1)6o(1)(B), and CFTC Regulation 4.41(a)(2)4.41(a)(2), 17 C.F.R. § 4.41(a)(2)4.41(a)(2) (the “CFTC Order”). In the CFTC Order, the CFTC made findings that, from on or about April 22, 2020 to June 12, 2020, USCF violated Section 4o(1)4o(1)(B) of the CEA and CFTC Regulation 4.41(a)(2)4.41(a)(2), which make it unlawful for any commodity pool operator (“CPO”) to engage in “any transaction, practice, or course of business which operates as a fraud or deceit upon any client or participant or prospective client or participant” and prohibit a CPO from advertising in a manner which “operates as a fraud or deceit upon any client or participant or prospective client or participant,” respectively. USCF consented to entry of the CFTC Order without admitting or denying the findings contained therein, except as to jurisdiction.
Pursuant to the SEC Order and the CFTC Order, in addition to the command to cease and desist from committing or causing any violations of Section 17(a)(3)17(a)(3) of the 1933 Act, Section 4o(1)4o(1)(B) of the CEA, and CFTC Regulation 4.14(a)(2)4.14(a)(2), civil monetary penalties totaling two million five hundred thousand dollars ($($2,500,000) in the aggregate were required to be paid to the SEC and CFTC, of which one million two hundred fifty thousand dollars ($($1,250,000) was paid by USCF to each of the SEC and the CFTC, respectively, pursuant to the offsets permitted under the orders. The SEC Order can be accessed at www.sec.gov and the CFTC Order can be accessed at www.cftc.gov.
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In re: United States Oil Fund, LP Securities Litigation
On June 19, 2020, USCF, USO, John P. Love, and Stuart P. Crumbaugh were named as defendants in a putative class action filed by purported shareholder Robert Lucas (the “Lucas Class Action”). The Court thereafter consolidated the Lucas Class Action with two related putative class actions filed on July 31, 2020 and August 13, 2020, and appointed a lead plaintiff. The consolidated class action is pending in the U.S. District Court for the Southern District of New York under the caption In re: United States Oil Fund, LP Securities Litigation, Civil Action No.1:20-cv-04740.20-cv-04740.
On November 30, 2020, the lead plaintiff filed an amended complaint (the “Amended Lucas Class Complaint”). The Amended Lucas Class Complaint asserts claims under the 1933 Act, the 1934Exchange Act, and Rule 10b-5.10b-5. The Amended Lucas Class Complaint challenges statements in registration statements that became effective on February 25, 2020 and March 23, 2020 as well as subsequent public statements through April 2020 concerning certain extraordinary market conditions and the attendant risks that caused the demand for oil to fall precipitously, including the COVID-19COVID-19 global pandemic and the Saudi Arabia-Russia oil price war. The Amended Lucas Class Complaint purports to have been brought by an investor in USO on behalf of a class of similarly-situated shareholders who purchased USO securities between February 25, 2020 and April 28, 2020 and pursuant to the challenged registration statements. The Amended Lucas Class Complaint seeks to certify a class and to award the class compensatory damages at an amount to be determined at trial as well as costs and attorney’s fees. The Amended Lucas Class Complaint named as defendants USCF, USO, John P. Love, Stuart P. Crumbaugh, Nicholas D. Gerber, Andrew F Ngim, Robert L. Nguyen, Peter M. Robinson, Gordon L. Ellis, and Malcolm R. Fobes III, as well as the marketing agent, ALPS Distributors, Inc., and the Authorized Participants: ABN Amro, BNP Paribas Securities Corporation, Citadel Securities LLC, Citigroup Global Markets, Inc., Credit Suisse Securities USA LLC, Deutsche Bank Securities Inc., Goldman Sachs & Company, J.P. Morgan Securities Inc., Merrill Lynch Professional Clearing Corporation, Morgan Stanley & Company Inc., Nomura Securities International Inc., RBC Capital Markets LLC, SG Americas Securities LLC, UBS Securities LLC, and Virtu Financial BD LLC.
The lead plaintiff has filed a notice of voluntary dismissal of its claims against BNP Paribas Securities Corporation, Citadel Securities LLC, Citigroup Global Markets Inc., Credit Suisse Securities USA LLC, Deutsche Bank Securities Inc., Morgan Stanley & Company, Inc., Nomura Securities International, Inc., RBC Capital Markets, LLC, SG Americas Securities LLC, and UBS Securities LLC.
USCF, USO, and the individual defendants in In re: United States Oil Fund, LP Securities Litigation intend to vigorously contest such claims and hashave moved for their dismissal. No accrual has been recorded with respect to the above legal matters as of September 30, 2023 and June 30, 2023. We are currently unable to predict the timing or outcome of, or reasonably estimate the possible losses or range of, possible losses resulting from these matters. It is reasonably possible that this estimate will change in the near term. An adverse outcome regarding these matters could materially adversely affect the Company’s financial condition, results of operations and cash flows.
Mehan Action
On August 10, 2020, purported shareholder Darshan Mehan filed a derivative action on behalf of nominal defendant USO, against defendants USCF, John P. Love, Stuart P. Crumbaugh, Nicholas D. Gerber, Andrew F Ngim, Robert L. Nguyen, Peter M. Robinson, Gordon L. Ellis, and Malcolm R. Fobes, III (the “Mehan Action”). The action is pending in the Superior Court of the State of California for the County of Alameda as Case No.RG20070732.
The Mehan Action alleges that the defendants breached their fiduciary duties to USO and failed to act in good faith in connection with a March 19, 2020 registration statement and offering and disclosures regarding certain extraordinary market conditions that caused demand for oil to fall precipitously, including the COVID-19COVID-19 global pandemic and the Saudi Arabia-Russia oil price war. The complaint seeks, on behalf of USO, compensatory damages, restitution, equitable relief, attorney’s fees, and costs. All proceedings in the Mehan Action are stayed pending disposition of the motion(s) to dismiss in In re: United States Oil Fund, LP Securities Litigation.
USCF, USO, and the other defendants intend to vigorously contest such claims.
In re United States Oil Fund, LP Derivative Litigation
On August 27, 2020, purported shareholders Michael Cantrell and AML Pharm. Inc. DBA Golden International filed two separate derivative actions on behalf of nominal defendant USO, against defendants USCF, John P. Love, Stuart P. Crumbaugh, Andrew F Ngim, Gordon L. Ellis, Malcolm R. Fobes, III, Nicholas D. Gerber, Robert L. Nguyen, and Peter M. Robinson in the U.S. District Court for the Southern District of New York at Civil Action No.1:20-cv-0697420-cv-06974 (the “Cantrell Action”) and Civil Action No.1:20-cv-0698120-cv-06981 (the “AML Action”), respectively.
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The complaints in the Cantrell and AML Actions are nearly identical. They each allege violations of Sections 10(b)10(b), 20(a)20(a) and 21D of the 1934Exchange Act, Rule 10b-510b-5 thereunder, and common law claims of breach of fiduciary duties, unjust enrichment, abuse of control, gross mismanagement, and waste of corporate assets. These allegations stem from USO’s disclosures and defendants’ alleged actions in light of the extraordinary market conditions in 2020 that caused demand for oil to fall precipitously, including the COVID-19COVID-19 global pandemic and the Saudi Arabia-Russia oil price war. The complaints seek, on behalf of USO, compensatory damages, restitution, equitable relief, attorney’s fees, and costs. The plaintiffs in the Cantrell and AML Actions have marked their actions as related to the Lucas Class Action.
The Court entered and consolidated the Cantrell and AML Actions under the caption In re United States Oil Fund, LP Derivative Litigation,, Civil Action No.1:20-cv-0697420-cv-06974 and appointed co-lead counsel. All proceedings in In re United States Oil Fund, LP Derivative Litigation are stayed pending disposition of the motion(s) to dismiss in In re: United States Oil Fund, LP Securities Litigation.
USCF, USO, and the other defendants intend to vigorously contest the claims in InIn re United States Oil Fund, LP Derivative Litigation.
Optimum Strategies Action
On April 6, 2022, USO and USCF were named as defendants in an action filed by Optimum Strategies Fund I, LP, a purported investor in call option contracts on USO (the “Optimum Strategies Action”). The action was in the U.S. District Court for the District of Connecticut at Civil Action No. 3:22-cv-00511.
The Optimum Strategies Action asserted claims under the Securities Exchange Act of 1934, as amended (the “1934 Act”), Rule 10b-5 thereunder, and the Connecticut Uniform Securities Act (“CUSA”). It purported to challenge statements in registration statements that became effective in February 2020, March 2020, and on April 20, 2020, as well as public statements between February 2020 and May 2020, in connection with certain extraordinary market conditions and the attendant risks that caused the demand for oil to fall precipitously, including the COVID-19 global pandemic and the Saudi Arabia-Russia oil price war. The complaint was seeking damages, interest, costs, attorney’s fees, and equitable relief.
On March 15, 2023, the court granted the USO defendants’ motion to dismiss the complaint. In its ruling, the court granted the USO defendants’ motion to dismiss, with prejudice, the plaintiff’s claims under Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and a claim for control person liability under Section 20(a) of the Exchange Act. Having dismissed all claims over which the court had original jurisdiction, the court declined to exercise supplemental jurisdiction over the plaintiff’s state law claim under CUSA and dismissed the claim without prejudice. No notice of appeal was filed.
No accrual has been recorded with respect to the above legal matters as of March 31,September 30, 2023 and June 30, 2022. 2023. We are currently unable to predict the timing or outcome of, or reasonably estimate the possible losses or range of, possible losses resulting from these matters. It is reasonably possible that this estimate will change in the near term. An adverse outcome regarding these matters could materially adversely affect the Company'sCompany’s financial condition, results of operations and cash flows.
Other Contingencies
On December 2, 2021, Marygold became aware of certain activity indicative of potential fraud on its Fintech platform, which was still in beta testing stage of development, and associated with the opening of end-customer accounts. As of the date of this Annual Report on Form 10-K filing, Marygold estimates that approximately 80 end-customer accounts were opened fraudulently that resulted in approximately $103,000 being misappropriated. Upon learning of this activity, Marygold removed its app from all App Stores including, Apple and Android, to prevent any fraudulent activity through opening of new accounts created on its platform. Marygold further believes that no personal identifiable information was compromised. Marygold continues to monitor the security measures of its Fintech platform while continuing development. The accrual of approximately $250,000 was recorded through other income (expense) during the quarter ended December 31,2021, and was reduced by approximately $147,000 during the quarter ended March 31,2022 as the total amount of the estimated loss decreased.
Retirement Plan
The Marygold Companies, through its wholly ownedwholly-owned subsidiary USCF, Investments, has a 401(k)401(k) Profit Sharing Plan ("(“401K Plan" Plan”) covering U.S. employees, including Original Sprout and Marygold, who are over 21 years of age and who have completed a minimum of 1,000 hours of service and have worked for USCF Investments, Original Sprout orthe respective Marygold Companies subsidiary for at least three months. Participants may make contributions pursuant to a salary reduction agreement. In addition, the 401K Plan makes a safe harbor matching contribution. Profit sharingQuarterly profit-sharing contributions paid on a consolidated basis, totaled approximately $56$60 thousand and $46$42 thousand for each of the three months ended March 31,September 30, 2023 and 2022, respectively, and for the nine months ended March 31, 2023 and 2022, totaled $190 thousand and $134 thousand, respectively.
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NOTE 16.SEGMENT REPORTING
With the acquisition of USCF Investments, Gourmet Foods, Brigadier, Tiger, the launch of the Original Sprout business unit of Kahnalytics, and with the acquisitiontransition of Tiger Financial and Asset Management by our subsidiary Marygold UK,to an operating company as of July 1, 2023, the Company has identified fiveseven segments for its products and services; U.S.A. investment fund management, U.S.A. beauty products, New Zealand food industry, Canada security alarm systems, and UKFinancial services. For clarity in segment reporting, the assets and results of operations of Marygold U.S.A. and Marygold U.K. are separated while they are combined on the Condensed Consolidated Statements of Income as financial services. Our development stage subsidiary, Marygold, has not begun operations, so their accounts have been consolidated with those of the parent, The Marygold Companies, and are not identified as a separate segment. The Company'sCompany’s reportable segments are business units located in different global regions. The Company’s operations in the U.S.A. include the manufacture and wholesale distribution of hair and skin care products by Original Sprout, and the income derived from management of various investment funds by our subsidiary USCF Investments.Investments, and the income from investment advisory and transaction fees earned by Marygold U.SA. In New Zealand operations include the production, packaging and distribution on a commercial scale of gourmet meat pies and related bakery confections, and the printing of specialized food wrappers through our wholly ownedwholly-owned subsidiary Gourmet Foods, Ltd. and itstheir subsidiary, Printstock. In Canada, the Company provides security alarm system installation and maintenance services to residential and commercial customers sold through its wholly ownedwholly-owned subsidiary, Brigadier. InOur subsidiary in the U.K., the Company offers investment advice and manages investments for U.K. customers through Marygold UK, andearns management fees through its wholly ownedwholly-owned subsidiary, Tiger, Financialas an investment advisor and Asset Management.asset manager. Separate management of each segment is required because each business unit is subject to different operational issues and strategies due to their particular regional location. The Company accounts for intra-company sales and expenses as if the sales or expenses were to third parties and eliminates them in the consolidation. Amounts are adjusted for currency translation as of the balance sheet date and presented in US dollars. The Company files income taxes as a combined group and records most income taxes at the parent level.
The following table presents a summary of identifiable assets as of March 31,September 30, 2023 and June 30, 2022.2023.
SUMMARY OF IDENTIFIABLE ASSETS AND ASSET LOCATION OF PROPERTY PLANT AND EQUIPMENT
| September 30, | June 30, | |||||||
| 2023 | 2023 | |||||||
| Identifiable assets: | ||||||||
| U.S.A.: corporate headquarters (1) | $ | 3,849,377 | $ | 4,133,619 | ||||
| U.S.A.: investment fund management – related party | 19,666,773 | 19,601,960 | ||||||
| U.S.A.: beauty products | 2,911,041 | 2,888,721 | ||||||
| New Zealand: food industry | 3,705,553 | 3,933,463 | ||||||
| Canada: security systems | 2,174,608 | 2,820,798 | ||||||
| U.K.: financial services | 1,816,148 | 1,902,266 | ||||||
| U.S.A.: financial services (1) | 1,341,700 | - | ||||||
| Consolidated total | $ | 35,465,200 | $ | 35,280,827 | ||||
March 31, | June 30, | |||||||
2023 | 2022 | |||||||
Identifiable assets: | ||||||||
Corporate headquarters - including Marygold | $ | 4,258,754 | $ | 7,243,332 | ||||
U.S.A. : investment fund management - related party | 19,013,425 | 18,006,771 | ||||||
U.S.A. : beauty products | 3,055,745 | 3,484,315 | ||||||
New Zealand: food industry | 3,980,514 | 3,983,381 | ||||||
Canada: security systems | 2,562,869 | 2,592,778 | ||||||
U.K.: financial services (1) | 1,863,414 | - | ||||||
Consolidated total | $ | 34,734,721 | $ | 35,310,577 | ||||
| (1) | The assets of Marygold, identified as located in the U.S.A.: financial services segment as of September 30, 2023, were combined with those of the parent, identified as U.S.A.: corporate headquarters, as of June 30, 2023 and totaled $897,024. |
(1) The assets of Marygold & Co. (UK) were included with corporate headquarters at June 30, 2022 and totaled US$2,490,712 translated as of June 30, 2022.
The following table presents a summary of operating information for the three months ended December 31:September 30:
SUMMARY OF OPERATING INFORMATION AND CAPITAL EXPENDITURE
Three Months Ended | Three Months Ended | Three Months Ended | Three Months Ended | |||||||||||||
March 31, 2023 | March 31, 2022 | September 30, 2023 | September 30, 2022 | |||||||||||||
Revenues from external customers: | ||||||||||||||||
U.S.A. : investment fund management - related party | $ | 5,022,398 | $ | 5,868,558 | ||||||||||||
U.S.A. : beauty products | 745,468 | 702,779 | ||||||||||||||
New Zealand : food industry | 1,824,789 | 1,667,345 | ||||||||||||||
| U.S.A.: investment fund management – related party | $ | 5,049,550 | $ | 5,419,435 | ||||||||||||
| U.S.A.: beauty products | 774,626 | 804,078 | ||||||||||||||
| New Zealand: food industry | 1,730,527 | 1,937,426 | ||||||||||||||
Canada : security systems | 576,248 | 555,006 | 553,719 | 628,892 | ||||||||||||
U.K.: financial services | 129,868 | - | 126,691 | 133,457 | ||||||||||||
| U.S.A.: financial services (1) | 401 | - | ||||||||||||||
Consolidated total | $ | 8,298,771 | $ | 8,793,688 | $ | 8,235,514 | $ | 8,923,288 | ||||||||
Net income (loss): | ||||||||||||||||
U.S.A. : investment fund management - related party | $ | 1,892,103 | $ | 2,322,177 | ||||||||||||
U.S.A. : beauty products | (132,603 | ) | (146,959 | ) | ||||||||||||
New Zealand : food industry | (34,477 | ) | (72,388 | ) | ||||||||||||
| U.S.A.: investment fund management – related party | $ | 1,951,786 | $ | 1,785,259 | ||||||||||||
| U.S.A.: beauty products | (322,281 | ) | (19,757 | ) | ||||||||||||
| New Zealand: food industry | 24,889 | 200,554 | ||||||||||||||
Canada : security systems | 73,132 | 39,689 | 57,973 | 107,124 | ||||||||||||
U.K.: financial services | 10,256 | - | (68,330 | ) | 10,155 | |||||||||||
Corporate headquarters - including Marygold | (1,655,117 | ) | (1,272,385 | ) | ||||||||||||
| U.S.A.: financial services (1) | (1,453,061 | ) | - | |||||||||||||
| U.S.A.: corporate headquarters (1) | (691,157 | ) | (1,586,167 | ) | ||||||||||||
Consolidated total | $ | 153,294 | $ | 870,134 | $ | (500,181 | ) | $ | 497,168 | |||||||
| (1) | The revenues and net income of Marygold, identified as located in the U.S.A.: financial services segment for the three months ended September 30, 2023 were combined with those of the parent, identified as U.S.A.: corporate headquarters, for the three months ended September 30, 2022 where Marygold revenues were $0 and Marygold net loss was ($641,363). |
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The following table presents a summary of operating information for the nine months ended December 31:
Nine Months Ended | Nine Months Ended | |||||||
March 31, 2023 | March 31, 2022 | |||||||
Revenues from external customers: | ||||||||
U.S.A. : investment fund management - related party | $ | 15,708,004 | $ | 17,226,969 | ||||
U.S.A. : beauty products | 2,334,009 | 2,716,702 | ||||||
New Zealand : food industry | 5,701,714 | 6,131,791 | ||||||
Canada : security systems | 1,870,986 | 1,888,362 | ||||||
U.K.: financial services | 387,811 | - | ||||||
Consolidated total | $ | 26,002,524 | $ | 27,963,824 | ||||
Net (loss) income: | ||||||||
U.S.A. : investment fund management - related party | 5,459,141 | 3,939,412 | ||||||
U.S.A. : beauty products | (193,705 | ) | (155,155 | ) | ||||
New Zealand : food industry | 183,600 | 217,280 | ||||||
Canada : security systems | 253,540 | 180,641 | ||||||
U.K.: financial services | 33,312 | - | ||||||
Corporate headquarters - including Marygold | (4,903,632 | ) | (4,169,702 | ) | ||||
Consolidated total | $ | 832,256 | $ | 12,476 | ||||
The following table presents a summary of capital expenditures for the three month periods ended December 31:September 30:
Three Months Ended | Three Months Ended | Three Months Ended | Three Months Ended | |||||||||||||
March 31, 2023 | March 31, 2022 | September 30, 2023 | September 30, 2022 | |||||||||||||
Capital expenditures: | ||||||||||||||||
U.S.A.: investment fund management | $ | - | $ | - | $ | - | $ | - | ||||||||
U.S.A. : beauty products | - | 968 | ||||||||||||||
| U.S.A.: beauty products | 9,718 | 1,128 | ||||||||||||||
New Zealand: food industry | 34,559 | 676 | 7,957 | 5,854 | ||||||||||||
Canada: security systems | 4,493 | - | - | 698 | ||||||||||||
U.K.: financial services | - | - | - | 1,738 | ||||||||||||
U.S.A. : corporate headquarters - including Marygold | - | - | ||||||||||||||
| U.S.A.: financial services | 4,677 | - | ||||||||||||||
| U.S.A.: corporate headquarters | 2,837 | - | ||||||||||||||
Consolidated | $ | 39,052 | $ | 1,644 | $ | 25,189 | $ | 9,418 | ||||||||
The following table presents a summary of capital expenditures for the nine month periods ended December 31,:
Nine Months Ended | Nine Months Ended | |||||||
March 31, 2023 | March 31, 2022 | |||||||
Capital expenditures, net of disposals: | ||||||||
U.S.A.: investment fund management | $ | - | $ | - | ||||
U.S.A.: beauty products | 1,778 | 1,508 | ||||||
New Zealand: food industry | 41,889 | 3,716 | ||||||
Canada: security systems | 8,630 | - | ||||||
U.K.: financial services | 1,772 | - | ||||||
U.S.A.: corporate headquarters - including Marygold | 19,913 | - | ||||||
Consolidated | $ | 73,982 | $ | 5,224 | ||||
The following table represents the property, plant and equipment in use at each of the Company'sCompany’s locations as of March 31,September 30, 2023 and June 30, 2022:2023:
| As of September 30, 2023 | As of June 30, 2023 | |||||||
| Asset Location | ||||||||
| U.S.A.: investment fund management | $ | - | $ | - | ||||
| U.S.A. : beauty products | 72,174 | 62,456 | ||||||
| New Zealand: food industry | 2,208,605 | 2,240,357 | ||||||
| Canada: security systems | 877,554 | 900,123 | ||||||
| U.K.: financial services | 22,905 | 23,695 | ||||||
| U.S.A.: financial services (1) | 36,508 | - | ||||||
| U.S.A. : corporate headquarters (1) | 18,086 | 47,080 | ||||||
| Total all locations | 3,235,832 | 3,273,711 | ||||||
| Less accumulated depreciation | (2,026,093 | ) | (2,018,409 | ) | ||||
| Net property, plant and equipment | $ | 1,209,739 | $ | 1,255,302 | ||||
| (1) | The property, plant and equipment of Marygold, identified as located in the U.S.A.: financial services segment as of September 30, 2023, were combined with those of the parent, identified as U.S.A.: corporate headquarters, as of June 30, 2023 and totaled $31,831. |
As of March 31, 2023 | As of June 30, 2022 | |||||||
Asset Location | ||||||||
U.S.A.: investment fund management | $ | - | $ | - | ||||
U.S.A. : beauty products | 62,456 | 60,678 | ||||||
New Zealand: food industry | 2,290,034 | 2,235,896 | ||||||
Canada: security systems | 880,144 | 916,054 | ||||||
U.K.: financial services | 21,722 | 19,467 | ||||||
U.S.A. : corporate headquarters - including Marygold | 40,342 | 20,429 | ||||||
Total all Locations | 3,294,698 | 3,252,524 | ||||||
Less accumulated depreciation | (2,006,277 | ) | (1,860,630 | ) | ||||
Net property, plant and equipment | $ | 1,288,421 | $ | 1,391,894 | ||||
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NOTE 17.SUBSEQUENT EVENTS
The Company evaluated subsequent events for recognition and disclosure through the date the financial statements were issued or filed. Nothing has occurred outside normal operations since that required recognition or disclosure in these financial statements apart from the events noted below.statements.
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| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
The following discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements and the accompanying notes thereto and is qualified in its entirety by the foregoing and by more detailed financial information appearing elsewhere in this quarterly report on Form 10-Q. See "Financial“Financial Statements." ”
Forward-Looking Statements
In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. See “Forward-Looking Statements.” Our results and the timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under “Item 1A. Risk Factors” in Part II of this report and “Item 1A. Risk Factors” in the Form 10-K.
Overview
The Marygold Companies, Inc. (“The Marygold Companies” or the “Company”) conducts business through its wholly ownedwholly-owned operating subsidiaries operating in the U.S., New Zealand and Canada. Further, the Company anticipates operating in, the United Kingdom upon the consummation of the pending acquisition of Tiger Financial & Asset Management Limited, a U.K. limited company.and Canada. The operations of the Company’s wholly ownedwholly-owned subsidiaries are more particularly described herein but are summarized as follows:
● | USCF Investments, Inc. | |
● | Gourmet Foods, Ltd., a New Zealand based company, manufactures and distributes New Zealand meat pies on a commercial scale and its | |
● | Brigadier Security Systems (2000) Ltd. (“Brigadier”), a Canadian based company, sells and installs commercial and residential alarm monitoring systems. | |
● | Kahnalytics, Inc. dba/Original Sprout (“Original Sprout”), a U.S. based company, is engaged in the wholesale distribution of hair and skin care products under the brand name Original Sprout on a global scale. | |
● | Marygold & Co., a newly formed U.S. based company, together with its | |
● | Marygold & Co. (UK) Limited, a newly formed U.K. limited company, |
Because the Company conducts its businesses through its wholly owned operating subsidiaries, the risks related to our wholly owned subsidiaries are also risks that impact the Company'sCompany’s financial condition and results of operations. See, "“Note 2. Summary ofSignificant Accounting Policies/ Major Customers and Suppliers -– Concentration of Credit Risk"” in the notes to the condensed consolidated financial statements for more information. The emergence of a novel coronavirus on a global scale, known as COVID-19, and related geopolitical events hascould lead to increased market volatility, disruption to U.S. and world economies and markets and may have significant adverse effects on the Company and its wholly owned subsidiaries. The financial risk to future operations is largely unknown, (refer to Part II, Item 1A, for further details.)
Results of Operations
The Marygold Companies and Subsidiaries
Financial summary and comparison data for the three month periods ended March 31,September 30, 2023and March 31,September 30, 2022.
For the Three Months Ended March 31,September 30, 2023 Compared to the Three Months Ended March 31,September 30, 2022
Revenue and Operating Income
Consolidated revenue for the three months ended March 31,September 30, 2023 was $8.3$8.2 million representing a $0.5$0.7 million decrease from the three months ended March 31,September 30, 2022 revenue of $8.8$8.9 million. The decrease in consolidated revenuesrevenue was primarily attributed to a decrease of $0.8 million in revenues of USCF Investments which were impacted by lower assets underwhere Assets Under Management ("AUM"(“AUM”). The other operating subsidiaries combined for an increase of $0.3 million for the three months ended March 31,September 30, 2023 as compared to March 31,was lower than 2022, which partially offsetresulted in a revenue decrease of approximately $0.4 million, Gourmet Foods, where revenue decreased by $0.2 million, was impacted by a strong U.S. Dollar where approximately half of the decrease of USCF Investments.was due to currency translation from lower same dollar sales. and our Canadian subsidiary, Brigadier, which experienced a $0.1 million decrease primarily due to currency translation. Our recent Marygold UK acquisition alsoU.K. subsidiary contributed $0.1 million to overall revenue comparedwhich was comparable to $0 during the three months ended March 31,September 30, 2022.
Expenses and Operating (Loss) Income
The Marygold Companies produced an operating incomeloss for the three months ended March 31,September 30, 2023 of $0.2($1.0) million as compared to an operating income of $1.0 million for the three months ended March 31, 2022. This represents an decrease in operating income of $0.8 million for the three months ended March 31,September 30, 2022. This represents a decrease in operating income of $1.8 million for the three months ended September 30, 2023 when compared to the three months ended March 31,September 30, 2022. Apart from the $0.5$0.7 million decline in revenues, the remaining $1.1 million difference in operating income is primarily attributed to higher general & administrative ("G&A") expenses and additional expensesthe expense increases of $0.8 million incurred by our subsidiary, Marygold & Co., in development of its mobile fintech app which amountedas well as a $0.2 million increase in marketing and advertising at Original Sprout related to approximately $1.0 million.a new product launch. Operating expenses also included $0.1 million in stock-based compensation from stock grants with the Company’s stock Equity Plan.
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Other (Expense) Income (Expenses)
Other income (expense) income for the three months ended March 31,September 30, 2023 wasand 2022 were $233 thousand and ($43)54) thousand, compared to the same period in 2022 where other income was $247 thousand,respectively, resulting in income (loss) before income tax of ($0.8) million and $0.7 million, respectively.
Income Tax
Income tax benefit (provision) for the three months ended March 31, 2023 and 2022 of $0.1 million and $1.3 million, respectively.
Income Tax
Benefit (provision) for income tax for the three months ended March 31,September 30, 2023 and 2022 was $30 thousand$0.3 million and ($421) thousand,0.2) million, respectively, primarily attributable to our United States operations through our USCF Investments subsidiary. Income tax benefit recorded at The Company files income taxes asMarygold Companies level totaled $0.2 million for the three months ended September 30, 2023, while a combined group and records most income taxes attax expense of $0.2 million was recorded for the parent level.three months ended September 30, 2022. The remaining income tax expense was recorded at the subsidiary level during the three months ended March 31,September 30, 2023 and 2022.
Net Income
Overall, the net (loss) income between the three months ended March 31,September 30, 2023 as compared to the three months ended March 31,September 30, 2022 decreased by approximately $0.7$1.0 million or approximately 82%, to approximately $0.2($0.5) million. The decrease in net income for the three months ended March 31,September 30, 2023 was primarily dueattributable to $0.5$0.7 million in lower revenue, an increase in staffing and otherrevenues coupled with increased expenses at our development stage company, Marygold & Co of $0.8 million partially offset by increases in other income and otherthe recording of a tax benefit for the period. The Company continues to contribute capital and profits into the Marygold & Co. fintech subsidiary. The current quarter included $1.45 million of Marygold & Co. expenses rather than other income. paid entirely from the Company.
Comprehensive Income
After giving consideration to currency translation (loss) gainloss of approximately ($30) thousand0.1) million our comprehensive (loss) for the three months ended September 30, 2023 was ($0.6) million as compared to comprehensive income for the three months ended March 31, 2023 was $123 thousand as compared to the three months ended March 31,September 30, 2022 where there was a currency translation gainloss of $79 thousand($0.3) million which resulted in comprehensive income of $950 thousand.$0.2 million. Comprehensive gaingains and losslosses are comprised of fluctuations in foreign currency exchange rates and effects in the valuation of our holdings in the U.K., New Zealand and Canada.
For the Nine Months Ended March 31, 2023 Compared to the Nine Months Ended March 31, 2022
Revenue and Operating Income
Consolidated revenue for the nine months ended March 31, 2023 was $26 million representing a $2 million decrease from the same prior year period revenue of $28 million. Net revenues declined from our fund management business as a result of lower AUM by approximately $1.5 million, or 9%, for the nine months ended March 31, 2023 as compared to the nine months ended March 31, 2022. The Company's revenues derived from its other operating units decreased by $0.4 million, or 4%, from the same prior year period offset by $0.4 million from our Marygold UK subsidiary which had $0 revenue in the prior year nine month period, resulting in an overall decrease in consolidated revenue of approximately 7%. The Marygold Companies produced an operating income for the nine months ended March 31, 2023 of $1.0 million as compared to an operating income of $0.7 million for the nine months ended March 31, 2022. The increase in operating income was primarily attributable to the $2.5 million SEC / CFTC Wells Notice settlement incurred in the prior year nine month period in addition to lower revenue from USCF Investments and our other operating subsidiaries.
Other Income
Other income for the nine months ended March 31, 2023 increased $55 thousand compared to the same period in 2022 due to higher interest income and lower interest expense, and were $90 thousand and $35 thousand, respectively, resulting in income before taxes of $1.1 million and $0.8 million, respectively.
Income Tax
Provision for income tax for the nine months ended March 31, 2023 and 2022 were $0.3 million and $0.7 million, respectively, primarily attributable to our United States operations through our USCF Investment subsidiary. The Company files income taxes as a combined group and records most income taxes at the Parent level.
NetIncome (Loss) and ComprehensiveIncome (Loss)
Overall, the net income for the nine months ended March 31, 2023 as compared to the nine months ended March 31, 2022 increased by approximately $0.8 million. The increase in profits for the nine months ended March 31, 2023 was primarily attributable to the $2.5 million SEC / CFTC Wells Notice settlement recorded in the prior year reporting period in addition to lower revenue from each of our operating subsidiaries. Adding to the loss were expenses of $2.4 million related to our development stage subsidiary, Marygold. After giving consideration to currency translation loss of ($10) thousand our comprehensive income for the nine months ended March 31, 2023 was $0.8 million as compared to the nine months ended March 31, 2022 where there was a currency translation loss of ($21) thousand resulting in a comprehensive loss of ($9) thousand. Comprehensive gain and loss are comprised of fluctuations in foreign currency exchange rates related to the effects in the valuation of our holdings in New Zealand and Canada.
Investment Fund Management -– USCF Investments
USCF Investments was founded as a holding company in March 2004 as a Delaware corporation with one subsidiary, Ameristock Corporation, which was an investment adviser to Ameristock Mutual Fund, Inc., a large cap value equity fund registered under the Investment Company Act of 1940, as amended (the “1940 Act”). In January 2010, Ameristock Corporation was spun off as a standalone company. In May 2005, USCF was formed as a single member limited liability company in the state of Delaware. In June 2013, USCF Advisers was formed as a Delaware limited liability company and in July 2014, was registered as an investment adviser under the Investment Advisers Act of 1940, as amended. In November 2013, the USCF Advisers board of managers formed USCF ETF Trust (“ETF Trust”) as an open-end management investment company registered under the 1940 Act. The Trust is authorized to have multiple segregated series or portfolios. USCF Investments owns all of the issued and outstanding limited liability company membership interests of its subsidiaries, USCF and USCF Advisers, each a Delaware limited liability company and are affiliated companies. USCF serves as the general partner (“General Partner”) for various limited partnerships (“LP”) and sponsor (“Sponsor”) as noted below. USCF and USCF Advisers are subject to federal, state and local laws and regulations generally applicable to the investment services industry. USCF is a commodity pool operator (“CPO”) subject to regulation by the Commodity Futures Trading Commission (the “CFTC”) and the National Futures Association (the “NFA”) under the Commodities Exchange Act (“CEA”). USCF Advisers is an investment adviser registered under the Investment Advisers Act of 1940, as amended and has registered as a CPO under the CEA. Exchange traded products (“ETPs”) issued or sponsored by USCF are required to be registered with the Securities and Exchange Commission (the “SEC”) in accordance with the Securities Act of 1933. USCF Investments operates through USCF and USCF Advisers, which collectively operate twelvefifteen exchange-traded products (“ETPs”) and exchange traded funds (“ETFs”), regulated by the 1940 Act and 1933 Act, and listed on the NYSE Arca, Inc. (“NYSE Arca”) with a total of approximately $3.7$3.5 billion assets under management as of March 31,September 30, 2023. USCF Investments and subsidiaries USCF and USCF Advisers are collectively referred to as “USCF Investments” hereafter.
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USCF currently serves as the General Partner or the Sponsor to the following commodity pools, each of which is currently conducting a public offering of its shares pursuant to the Securities Act of 1933, as amended:
USCF as General Partner for the following funds | ||
United States Oil Fund, LP (“USO”) | Organized as a Delaware limited partnership in May 2005 | |
United States Natural Gas Fund, LP (“UNG”) | Organized as a Delaware limited partnership in November 2006 | |
United States Gasoline Fund, LP (“UGA”) | Organized as a Delaware limited partnership in April 2007 | |
United States 12 Month Oil Fund, LP (“USL”) | Organized as a Delaware limited partnership in June 2007 | |
United States 12 Month Natural Gas Fund, LP (“UNL”) | Organized as a Delaware limited partnership in June 2007 | |
United States Brent Oil Fund, LP (“BNO”) | Organized as a Delaware limited partnership in September 2009 | |
USCF as fund Sponsor | ||
United States Commodity Index Fund (“USCI”) | Series of the USCIF Trust created in April 2010 | |
United States Copper Index Fund (“CPER”) | Series of the USCIF Trust created in November 2010 | |
USCF Advisers, a registered investment adviser, serves as the investment adviser to the funds listed below within the USCF ETF Trust (the “ETF Trust”) and has overall responsibility for the general management and administration for the ETF Trust. Pursuant to the current Investment Advisory Agreements, USCF Advisers provides an investment program for each of series within the ETF Trust and manages the investment of the assets.
USCF Advisers as fund manager for each series within the USCF ETF Trust: | ||
USCF SummerHaven Dynamic Commodity Strategy No K-1 Fund | Fund launched May 2018 | |
USCF Midstream Energy Income Fund | Fund launched March 2021 | |
USCF Gold Strategy Plus Income Fund | Fund launched November 2021 | |
USCF Dividend Income Fund | Fund launched June 2022 | |
USCF Sustainable Battery Metals Strategy Fund | Fund launched January 2023 | |
| USCF Energy Commodity Strategy Absolute Return Fund (“USE”) | Fund launched May 2023 | |
| USCF Sustainable Commodity Strategy Fund (“ZSC”) | Fund launched August 2023 | |
All commodity pools managed by USCF and each series of the ETF Trust managed by USCF Advisers are collectively referred to as the “Funds” hereafter.
USCF Investments'Investments’ revenue and expenses are primarily driven by the amount of AUM. USCF Investments earns monthly management and advisory fees based on agreements with each Fund as determined by the contractual basis point management fee structure in each agreement multiplied by the average AUM over the given period. Many of the company’s expenses are dependent upon the amount of AUM. These variable expenses include Fund administration, custody, accounting, transfer agency, marketing and distribution, and sub-adviser fees and are primarily determined by multiplying contractual fee rates by AUM. Total Operating Expenses are grouped into the following financial statement line items: General and Administrative, Marketing, Operations and Salaries and Compensation.
For the Three Months Ended March 31,September 30, 2023 Compared to the Three Months Ended March 31,September 30, 2022
Revenue
Average AUM for the three months ended March 31,September 30, 2023 was at $3.7$3.5 billion, as compared to approximately $4.4$3.9 billion from the three months ended March 31,September 30, 2022 primarily due to a decrease in USO, USCI and CPERBNO AUM, partially offset by an increase in UNG and UMI AUM. As a result, the revenues from management and advisory fees decreased by approximately $846$370 thousand, or 14%7%, to $5.0 million for the three months ended March 31,September 30, 2023 as compared to the three months ended March 31,September 30, 2022 where revenues from management and advisory fees totaled $5.9$5.4 million.
Expenses
USCF Investments total operating expenses for three months ended March 31,September 30, 2023 decreased approximately $561by $245 thousand to $3.1$3.3 million, compared toor approximately 7%, from $3.6 million for the three months ended March 31,September 30, 2022. Variable expenses, as described above, decreased by $355$260 thousand due to a decrease in total AUM along with a new negotiated agreement with the existing marketing distributor resulting in lower fees, which included a $292$252 thousand decrease in variable marketing and distribution expenses, a decrease of $52 thousand in additionsub-advisory fees related to small decreaseslower USCI AUM and a $44 thousand increase in fund accounting and administration expenses anddue to an increase in sub-advisory fees related to lower AUM over the prior year quarter.number of funds under management. General and administrative ("(“G&A"&A”) expenses of $543 thousand decreased $69 thousand to $535$42 thousand from $604$585 thousand for the three months ended March 31,September 30, 2023 compared to three months ended March 31,September 30, 2022, respectively. G&A expenses decreased primarily due to lower legal and professional expenses. Total marketing expenses decreased $251$192 thousand to $374$420 thousand from $612 thousand for the three months ended March 31,September 30, 2023 compared to $625 thousand for the three months ended March 31,and September 30, 2022, due to the new reduced fee agreement with the existing marketing distributor as noted above.respectively. Employee salaries and benefit compensation expenses were approximately $1.0 million for the months ended September 30, 2023 compared to $1.2 million for three months ended March 31, 2023 and $1.2September 30, 2022 primarily due to lower bonus accruals. Operations expenses increased $130 thousand to $1.3 million for the three months ended March 31, 2022 due to allocating employee costs related to time working at the Marygold Companies, Inc. corporate level. Operations expenses decreased $90 thousand to $1.1 million during the quarterSeptember 30, 2023 compared $1.2 million to the prior year quarter.quarter of $1.1 million due an increase in license fees for new funds.
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Income
Operating income decreased $0.3$125 thousand to $1.7 million tofor the three months ended September 30, 2023 from $1.9 million for the three months ended March 31, 2023 from $2.2 million for the three months ended March 31,September 30, 2022. The decrease was primarily due to lower revenue. Other income (expense) was ($52)$218 thousand for the three months ended March 31,September 30, 2023 compared to $93($62) thousand for the three months ended March 31,September 30, 2022 due to dividend income and realized and unrealized (losses) gains in investments partially offset by interest income./ losses on investments. Net income before income taxes for the three months ended March 31,September 30, 2023 decreased $0.4increased $0.2 million to $1.9$2.0 million compared to $2.3a $1.8 million for three months ended March 31,September 30, 2022 due to a $0.9$0.4 million decrease in revenue as a result of lower AUM, offset by a $0.6$0.2 million decrease in total expenses and a $0.1 million increase in Other non-operating expenses.
For the Nine Months Ended March 31, 2023, Compared to the Nine Months Ended March 31, 2022
Revenue
Average AUM for the nine months ended March 31, 2023 was at $3.8 billion, as compared to approximately $4.3 billion from the nine months ended March 31, 2022 primarily due to decreases in USO, BNO and USL AUM. As a result, the revenues from management and advisory fees decreased by approximately $1.5 million, or 9%, to $15.7 million for the nine months ended March 31, 2023 as compared to the nine months ended March 31, 2022 where revenues from management and advisory fees totaled $17.2 million.
Expenses
USCF Investments total operating expenses decreased to $10.3 million, or approximately 23%, from $13.4 million for the nine months ended March 31, 2023 compared to same prior year period after recording the $2.5 million SEC / CFTC Wells Notice settlement in the prior year period. Excluding the Wells Notice settlement from the prior year period, total operating expenses decreased $603 thousand, or approximately 6%. Variable expenses, as described above, decreased by the same amount of $603 thousand over the respective nine-month period due to lower overall average AUM offset by a small increase in sub-advisory fees for UMI which did not exist for the full prior year nine month period, as well as with small offset decreases in USCI and CPER sub-advisory fees due to decreases in their respective AUM from the prior year nine month period. G&A expenses were $1.8 million and $1.6 million for the nine months ended March 31, 2023 and March 31, 2022, respectively. G&A expenses increased $0.2 million due to increases in travel & entertainment and professional fees. Total marketing expenses decreased $0.5 million to $1.3 million for the nine months ended March 31, 2023 as compared to the prior year period due to a decrease in variable distribution costs as a result of lower AUM and reduced rates in marketing distribution expenses as mentioned above partially offset by increases in marketing and conference expenses. Employee salaries and benefit compensation expenses were approximately $3.7 million and $4.0 million for the nine months ended March 31, 2023 and March 31, 2022, respectively due to to allocating employee costs related to time working at the Marygold Companies, Inc. corporate level. Operations expenses remained flat at approximately $3.3 million.
Income
Operating income, excluding the $2.5 million settlement expense in the prior year, decreased $0.9 million to $5.4 million for the nine months ended March 31, 2023, or approximately 14%, from $6.3 million for the nine months ended March 31, 2022. Other income (expense) was $66 thousand for the nine months ended March 31, 2023 compared to $136 thousand for the nine months ended March 31, 2022. Income before income taxes for the nine months ended March 31, 2023 decreased $1.0 million, to $5.4 million, excluding the prior year SEC / CFTC Wells Notice settlement, compared to $6.4 million for nine months ended March 31, 2022 due to a $1.5 million decrease in revenue as a result of lower AUM offset by a decrease of $0.6 million in total operating expenses and an decrease of $0.1$0.3 million increase in other income.
Food Products -– Gourmet Foods, Ltd. and Printstock Products Limited
Gourmet Foods Ltd. was organized in its current form in 2005 (previously known as Pats Pantry Ltd). Pats Pantry was founded in 1966 to produce and sell wholesale bakery products, meat pies and patisserie cakes and slices, in New Zealand. Gourmet Foods, located in Tauranga, New Zealand, sells substantially all of its goods to supermarkets and service station chains with stores located throughout New Zealand. Gourmet Foods Ltd. also has a large number of smaller independent lunch bars, cafes and corner dairies among the customer list, however they comprise a relatively insignificant dollar volume in comparison to the primary accounts of large distributors and retailers. On July 1, 2020, Gourmet Foods Ltd. acquired the New Zealand company, Printstock Products Limited.Limited (“Printstock”). Located in nearby Napier, New Zealand, Printstock prints wrappers for food products, including those used by Gourmet Foods, Ltd.Foods. Printstock is a wholly ownedwholly-owned subsidiary of Gourmet Foods Ltd. and its operating results are consolidated with those of Gourmet Foods Ltd. from July 1, 2020 onwards.
Gourmet Foods operates exclusively in New Zealand and thus the New Zealand dollar is its functional currency. In order to consolidate The Marygold Companies’ reporting currency, the US dollar, with that of Gourmet Foods, The Marygold Companies records foreign currency translation adjustments and transaction gains and losses in accordance with ASC 830-30. The translation of New Zealand currency into U.S. dollars is performed for balance sheet accounts using the exchange rates in effect at the balance sheet date and for revenue and expense accounts using a weighted average exchange rate during the period. Gains and losses resulting from foreign currency translations are included in foreign currency translation (loss) gain on the Condensed Consolidated Statements of Comprehensive Income as well as accumulated other comprehensive (loss) income found on the Condensed Consolidated Balance Sheets.
For the Three Months Ended March 31,September 30, 2023 Compared to the Three Months Ended March 31,September 30, 2022
Revenue
Net revenues for the three months ended March 31,September 30, 2023 were $1.8$1.7 million with cost of goods sold of $1.5$1.3 million resulting in a gross profit of $0.3$0.4 million, or approximately 18%24% gross margin, as compared to the three month period ended March 31,September 30, 2022 where net revenues were $1.7$1.9 million and cost of goods sold were $1.4$1.3 million producing a gross profit of $0.3$0.6 million, or approximately 18%32%. The decrease in net revenues is attributed to increased shipping charges resulting in fewer sales to distant customers, and further negative effects of an unfavorable trend in local currency translation to the U.S. dollar.
Expenses
Operating expenses, including wages and marketing, for the three month periods ended March 31,September 30, 2023 and March 31,September 30, 2022 were $0.4 million and $0.4 million, respectively, producing an operating lossincome of ($42)$10 thousand and ($84) thousand,$0.3 million, respectively, or approximately nil%1% operating income for the three months ended March 31,September 30, 2023 and (5%)13% for the three months ended March 31,September 30, 2022. Other income totaled $6$12 thousand for three months ended March 31,September 30, 2023 as compared to $13$5 thousand for the three months ended March 31,September 30, 2022.
(Loss) Income
(Loss)Net income for the three months ended March 31,September 30, 2023 was approximately ($36)$22 thousand as compared to ($72)a net income of $0.2 million after income tax provision of $61 thousand for the three months ended March 31,September 30, 2022.
For the Nine Months Ended March 31, 2023, Compared to the Nine Months Ended March 31, 2022
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Revenue
Net revenues for the nine months ended March 31, 2023 were $5.7 million with cost of goods sold of $4.3 million resulting in a gross profit of $1.4 million, or approximately 25% gross margin, as compared to the nine month period ended March 31, 2022 where net revenues were $6.1 million and cost of goods sold were $4.6 million producing a gross profit of $1.5 million, or approximately 24%. The decrease in revenues is largely due to a changing product mix due to the rising costs of some raw ingredients, and the company's response to focus on production of higher margin products even though they may have a lower selling price.
Expenses
General, administrative and selling expenses, including wages and marketing, for the nine month periods ended March 31, 2023 and 2022 were $1.2 million and $1.2 million producing operating income of $0.2 million and $0.3 million, respectively, or approximately 4% net operating profit for the nine months ended March 31, 2023 and 5% for the nine months ended March 31, 2022. Other income for the nine month periods ended March 31, 2023 and 2022 were $15 thousand and $23 thousand, respectively.
Income
Income for the nine months ended March 31, 2023, after income tax provision of approximately $62 thousand, resulted in a net income of approximately $186 thousand, as compared to $215 thousand for the nine months ended March 31, 2022 where the income tax provision was approximately $88 thousand.
Security Systems -– Brigadier Security Systems (2000) Ltd.
Brigadier Security Systems, founded in 1985, is a leading electronic security company in the province of Saskatchewan. Brigadier Security Systems has offices located in the urban areas of Saskatchewan, Canada; Brigadier Security Systems in Saskatoon, and operating as Elite Security in Regina. The company has a combined industry experience of over 135136 years. Brigadier provides comprehensive security solutions including access control, camera systems, fire alarm monitoring panels, and intrusion alarms to home and business owners as well as government offices, schools, and public buildings. Their experience as the provider of choice on many large notable sites shows a commitment to design, service and support. Brigadier specializes, and is certified, in several major manufacturers’ products: Honeywell Security, Panasonic, Avigilon and JCI/DSC/Kantech security products. The company and staff are recognized for dedication to customer service with annual awards from SecurTek including being recipients of the Customer Retention, Service Excellence, and overall best dealer with the President’s Award. The company demonstrates a commitment to delivering outstanding quality to customers by the notable facilities, businesses, and homes they secure.
Brigadier Security Systems is an authorized SecurTek dealer. SecurTek is owned by SaskTel which is Saskatchewan'sSaskatchewan’s leading Information and Communications Technology (ICT) provider with over 1.4 million customer connections across Canada. Under the terms of its authorized dealer contract with the monitoring company, Brigadier earns monthly payments during the term of the monitoring contract in exchange for performance of customer service activities on behalf of the monitoring company.
Brigadier operates exclusively in Canada and thus the Canadian dollar is its functional currency. In order to consolidate The Marygold Companies’ reporting currency, the U.S. dollar, with that of Brigadier, The Marygold Companies records foreign currency translation adjustments and transaction gains and losses in accordance with ASC 830, Foreign Currency Matters. The translation of Canadian currency into U.S. dollars is performed for balance sheet accounts using the exchange rates in effect at the balance sheet date and for revenue and expense accounts using a weighted average exchange rate during the period.
For the Three Months Ended March 31,September 30, 2023 Compared to the Three Months Ended March 31,September 30, 2022
Revenue
Net revenues for the three months ended March 31,September 30, 2023 were $0.8$0.5 million with cost of goods sold recorded as approximately $0.3$0.2 million, resulting in a gross profit of approximately $0.5$0.3 million with a gross margin of approximately 57%55% as compared to the three months ended March 31,September 30, 2022 where net revenues were approximately $0.6 million with cost of goods sold of $0.3$0.2 million and a gross profit of $0.3$0.4 million, or approximately 54%61%.
Expenses
Operating expenses for the three months ended March 31,September 30, 2023 were $0.2 million producing an operating profit of $0.1 million$53 thousand or approximately 13%10% as compared to the three months ended March 31,September 30, 2022 where operating profits were $38 thousand,$0.1 million, or approximately 7%19%, with operating expenses of $0.3 million.
Income
Other income comprised of interest income, rental income and commission income totaled approximately $9$13 thousand for the three months ended March 31,September 30, 2023, and provision for income tax expense was $10$5 thousand, resulting in net income after income taxes of approximately $84$61 thousand as compared to net income after income taxes of approximately $40$107 thousand for the three months ended March 31,September 30, 2022 where other income totaled $5$14 thousand and income tax was $4$23 thousand.
For the Nine Months Ended March 31, 2023 Compared to the Nine Months Ended March 31, 2022
Revenue
Net revenues for the nine months ended March 31, 2023 were $1.9 million with cost of goods sold recorded as approximately $0.8 million, resulting in a gross profit of approximately $1.0 million with a gross margin of approximately 55% as compared to the nine months ended March 31, 2022 where net revenues were approximately $1.9 million with cost of goods sold of $0.9 million and a gross profit of $1.0 million, or approximately 53%.
Expenses
Operating expenses for the nine months ended March 31, 2023 were $0.8 million producing an operating profit of $0.3 million or approximately 14% as compared to the nine months ended March 31, 2022 where operating profits were $0.2 million, or approximately 11%, with operating expenses of $0.8 million.
Income
Other income totaled approximately $36 thousand and income tax provision was $44 thousand for the nine months ended March 31, 2023 resulting in income after income taxes of approximately $302 thousand as compared to income after income taxes of approximately $188 thousand for the nine months ended March 31, 2022 where other income totaled approximately $19 thousand and provision for income tax was approximately $33 thousand.
Beauty Products -– Original Sprout
Kahnalytics was founded in 2015 and adopted the dba/Original Sprout in December 2017. Original Sprout formulates and packages Kahnalytics was founded in 2015 and adopted the dba/Original Sprout in December 2017. Original Sprout formulates and packages various hair and skin care products that are 100% vegan, tested safe and non-toxic, and marketed globally through distribution networks to salons, resorts, grocery stores, health food stores, e-tail sites and on the company'scompany’s website. The company operates from warehouse and sales offices located in San Clemente, CA, USA. As a result of the ongoing COVID-19 pandemic lock downs, Original Sprout has made adjustments to its primary channels to market.market to allow for online shopping and contactless deliveries. Prior to the pandemic, Original Sprout relied heavily upon its wholesale distribution network to place products at retail locations and generally to make products available to consumers, whereas inpost-COVID-19 wholesale distributors have now adopted the current environmentpractice of social distancing and closures of retail businesses the company found a significant drop in sales volumes as consumers avoided traditional sales outlets. Moreover, distributors found it more profitable to sell directlyselling direct to consumers via ecommerce thate-tail platforms such as Amazon. This trend has eroded the retail price point and made it difficult for Original Sprout to sell wholesalemaintain a presence on the shelf of retail outlets. As a result, many of the agreements with domestic wholesalers have been cancelled in an effort to resellers. The result was a dramatic downturnthwart brand and price erosion. New channel partners are being established and aggressive marketing campaigns have been implemented to reestablish the brand in retail outlets. Management expects to realize operating losses for the short term due to these marketing costs, however recover through this transition and realize higher revenues and positive operating results in the average selling price of Original Sprout products on ecommerce sites as distributors began selling to end users at wholesale price. In response to this trend, Original Sprout has established new sales channels with online retailers and also reconstructed many of its distribution agreements and pricing tiers. The positive effects of this transition are expected to take up to 12 months to realize, while the negative effects of the COVID-19 pandemic on the wholesale distribution business seems to be easing somewhat and management expects overall positive results to occur in the global marketplace. The company has also incurred expenses related to new product development and creation of upcoming marketing collateral, which is expected to continue well into calendar year 2023 as the company pursues its growth initiatives. coming fiscal year.
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For the Three Months Ended March 31,September 30, 2023 Compared to the Three Months Ended March 31,September 30, 2022
Revenue
Net revenues for the three months ended March 31,September 30, 2023 were $0.7$0.8 million as compared to $0.7$0.8 million for the three months ended March 31,September 30, 2022. Cost of goods sold for the three months ended March 31,September 30, 2023 and March 31,September 30, 2022 were $0.4$0.5 million and $0.4$0.5 million, respectively, resulting in a gross profit of approximately $0.3 million and $0.3 million, respectively, or 40%39% as compared to 38%43% gross margin. The failure to increase in gross profit percentage wasrevenues during the three months ended September 30, 2023 compared to September 30, 2022 is due primarily to the restructuringcancellation of domestic distribution channelsagreements and the aggressive policing of online sales platforms in an effort to thwart Internet diverters.advance of a new marketing campaign.
Expenses
Operating expenses were approximately $0.4$0.6 million resulting in an operating loss of ($132)$319 thousand, as compared to $0.4 million of operating expenses resulting in an operating loss of ($148)$20 thousand for the three months ended March 31,September 30, 2022.
Income (Loss)
The net loss for the three months ended March 31,September 30, 2023, was approximately ($133) thousand after other expenses of $1$3 thousand, was approximately $322 thousand as compared to ($147)a $20 thousand net loss for the three months ended March 31, 2022 where other income totaled $1 thousand.September 30, 2022.
Financial Services – Marygold (U.K.)
Marygold U.K. operates through its wholly owned subsidiary Tiger Financial & Asset Management Limited (“Tiger”), which was acquired in June 2022. Tiger acts as an investment advisor and financial planner to its clients and has two principal revenue streams which comprise ongoing fees for providing investment advice, and commissions for the intermediation of insurance-based products. Tiger does not provide investment management services directly, rather the clients’ assets are referred to third party investment managers, primarily discretionary investment managers. Tiger receives fees for the ongoing advice and financial planning services which are charged as a percentage of the assets under management, which as of June 30, 2023 was approximately $40 million. The ratio of fees earned from investment advice as compared to commissions earned is approximately 80:20 for any given period.
For the NineThree Months Ended March 31,September 30, 2023 Compared to the NineThree Months Ended March 31,September 30, 2022
Revenue
Net revenues for the nine months ended March 31, 2023 were $2.3 million as compared to $2.7 million for the nine months ended March 31, 2022. Cost of goods sold for the nine months ended March 31, 2023 and March 31, 2022 were $1.3 million and $1.6 million, respectively, resulting in a gross profit of approximately $1.0 million and $1.1, respectively, for each period.
Expenses
Operating expenses for the nine months ended March 31, 2023 were approximately $1.2 million resulting in an operating loss of approximately ($192) thousand, as compared to $1.3 million of operating expenses resulting in an operating loss of approximately ($160) thousand for the nine months ended March 31, 2022.
Income (Loss)
The net loss for the nine months ended March 31, 2023 was approximately ($193) thousand after other expense of approximately $1 thousand as compared to ($155) thousand net loss for the nine months ended March 31, 2022 where the other income totaled approximately $5 thousand.
Financial Services - Marygold & Co. (UK) Limited
Marygold & Co. (UK) Limited was formed in August 2021 as a wholly owned subsidiary of The Marygold Companies. There were no operations in Marygold UK until June 20, 2022 when the acquisition of Tiger Financial and Asset Management Limited was completed in the U.K. Tiger is a company incorporated and registered in England and Wales and located in Northampton, England. Tiger is an asset manager and investment advisor operating pursuant to certification by the Financial Conduct Authority of the United Kingdom. Tiger derives revenues from providing ongoing investment advice to clients as a percentage of total Assets Under Management (‘AUM’) which, as of March 31, 2023, totaled approximately £35 million. Additionally, the company earns fees and commissions on the sale of insurance-based products and other financial instruments secured through third parties. Results of operations for the period from June 20, 2022 through June 30, 2022 were insignificant and thus combined with those of the parent. Because the company has only begun operations in the current fiscal year, there is no comparison data for the prior year period. The accounts of Tiger are consolidated with those of Marygold UK.
Marygold UK operates exclusively in the U.K. and thus the Great Britain Pound (“GBP”) is its functional currency. In order to consolidate The Marygold Companies’ reporting currency, the U.S. dollar, with that of Marygold UK, The Marygold Companies records foreign currency translation adjustments and transaction gains and losses in accordance with ASC 830, Foreign Currency Matters. The translation of U.K. currency into U.S. dollars is performed for balance sheet accounts using the exchange rates in effect at the balance sheet date and for revenue and expense accounts using a weighted average exchange rate during the period.
For the three months ended March 31, 2023
Revenues
Net revenues for the three months ended March 31,September 30, 2023 were $130 thousand, resulting in a gross profit of $130$127 thousand as there are no cost of goods sold withincompared to the business.three months ended September 30, 2022 where net revenues were $133 thousand.
Expenses
Operating expenses for the three months ended September 30, 2023 were approximately $197 thousand as compared to $114 thousand resultingfor the three months ended September 30, 2022 representing an increase of approximately 73% in an operating incomeexpenses. Management attributes the increase to the hiring of $16 thousand.additional staff in preparation for the development of the Marygold mobile fintech app in the U.K.
Income
Net income,loss, after giving consideration to interest income of $1 thousand and income tax provision of $5$2 thousand, was $12 thousand.$68 thousand for the three months ended September 30, 2023 as compared to a net income of $10 thousand for the three months ended September 30, 2022.
Financial Services – Marygold (U.S.A.)
For the nine months ended March 31,Three Months Ended September 30, 2023 Compared to the Three Months Ended September 30, 2022
RevenuesMarygold & Co. is a financial technology company, not a bank, providing an all-in-one banking and payment services app offering FDIC-insured accounts with a Debit Mastercard®. Like a private banker on your phone, Marygold is introducing a secure way to send, receive, spend, save and invest with no banking fees or minimum balance requirements and aims to redefine mobile banking and payments, all in one app. Marygold completed its development phase in June 2023 and continues to devote considerable resources to the development and launch of its proprietary Fintech app. Revenue is earned from the Mastercard® interchange system with debit card spend by users and from asset management fees earned on investments through the use of MoneyPools, which are goal based savings and investment accounts.
Net revenues forRevenue
On boarding of new customers commenced during the ninethree months ended March 31,September 30, 2023 were $388 thousand, resulting in a gross profitnominal revenue of $388 thousand.$401.
Expenses
Operating expenses were approximately $336for the three months ended September 30, 2023 increased $810 thousand resultingto $1.45 million compared to $641 thousand in an operating incomethe prior year quarter. The increase was attributed to ongoing development of $52 thousand.the app and continued ramping up for the product post launch. Increases from the prior year’s quarter included additional spend of $369 thousand in product development and app service provider infrastructure, a $193 thousand increase in advertising and marketing and a $196 thousand increase in employee compensation & benefits.
Income
Net income, after giving consideration to interest income of $3 thousand and income tax provision of $16 thousand, was $39 thousand.
Plan of Operation for the Next Twelve Months
Our plan of operation for the next twelve months is to apply necessary resources, which may include experienced personnel, cash, or synergistic acquisitions made with cash, equity or debt, into growing each of our business units to their potential. Original Sprout is transitioning fromhas found it necessary to alter its approach through domestic distribution channels. Due to the effects of the COVID-19 pandemic on consumer shopping habits, many domestic distributors have found it advantageous to sell direct to consumers online, thus becoming retailers in lieu of distributors. The result has been an erosion of profit margins and a largely boutique offering distributed through specialty wholesalersfragmented sales channel which have slowed the product roll out plans of Original Sprout. They are in the final stages of correcting this situation and, in spite of incurring losses as a result, expect to a more mainstream product available at traditional outlets and online and as such we anticipate measurablerealize significant growth in revenues forsales volume and profits in the coming years, though there may be one-time initial expenses associated with the launch of new sales channels.fiscal year. Additionally, we are expecting moderate growth in Brigadier through focused management initiatives and consolidation within the security industry coupledpartnering with expanded product offerings.local telecoms and contractors. Similarly, we expect Gourmet Foods to be operating more efficiently under current management and continue to increase market share through additional product offerings andas low margin products are eliminated, new channels to market includingare established, and the printing and sale of food wrappers by their subsidiary, Printstock.Printstock, continue to improve. USCF Investments expectswill continue to continue development ofdevelop innovative and new fund products to grow its portfolio. In addition to our long-term mission that is an acquisition strategy based upon identifying and acquiring profitable, mature, companies of a diverse nature and with in-place management that produces increased revenue streams, the Company is also focused upon building expertise and developing Fintech opportunities in the financial services sector through its development stage subsidiary Marygold and Co. To augment that effort, the Company established a subsidiary in England, Marygold UK, who acquired a registered UK investment advisor, Tiger Financial and Asset Management (“Tiger”). We hope to leverage the client list, industry experience, and banking relationships of Tiger to project our Marygold & Co fintech offerings in the UK during the coming fiscal year. In a more general sense, the Company is characterizing its business in two categories: 1) financial services and 2) other consumer-based operating units. The purpose is to isolate the cyclical, and sometimes volatile, nature of the financial servicesUSCF Investments business from our other industry segments. As revenues from financial services fluctuate over time due to varying performance of the commodities markets, our other operations are expected to be stable and sustainable by comparison. By these initiatives we seek to:
● | continue to gain market share for our | |
| increase our |
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● | lower our operating costs by unburdening certain selling expenses to third party distributors, | |
● | have sufficient cash reserves to pay down accrued | |
● | attract parties who have an interest in selling their privately held companies to us, | |
● | achieve efficiencies in accounting and reporting through adoption of standards used by all subsidiaries on a consistent basis, | |
● | strategically pursue additional company acquisitions, and | |
● |
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Liquidity and Capital Resources
The Marygold Companies is a holding company that conducts its operations through its subsidiaries. At the holding-company level, its liquidity needs relate to operational expense, the funding of additional business acquisitions and new investment opportunities. Our operating subsidiaries'subsidiaries’ principal liquidity requirements arise from cash used in operating activities, debt service, and capital expenditures, including purchases of equipment and services, operating costs and expenses, and income taxes. Cash is managed at the holding company or the subsidiary level. There are no limitations or constraints on the movement of funds between the entities.
As of March 31,September 30, 2023, we had $10.3$7.0 million of cash and cash equivalents, excluding $0.4 million in restricted cash, on a consolidated basis as compared to $12.9$8.2 million as of June 30, 2022. 2023. The decrease in cash was primarily due to the continuing investment in the development of the mobile fintech app by Marygold along with providing initial seed capital for the USCF Investments ZSC fund launch.
During the past five fiscal years combined, The Marygold Companies has invested an aggregate of approximately $6.6 million in cash towards purchasing and assimilating Printstock within Gourmet Foods, and adding the Original Sprout assets into the The Marygold Companies group of companies as well as forming a new U.K. limited company, Marygold UK, and funding it with enough capital to pay approximately $1.8 million in cash towards the $2.9 million purchase price of its subsidiary, Tiger. We have also invested approximately $8$11.1 million in the development of our Fintech applications through our development stage subsidiary, Marygold. Despite these cash investments and expenses, our working capital position remains strong at $22approximately $22.4 million. While The Marygold Companies intends to maintain and improve its revenue stream from wholly ownedwholly-owned subsidiaries, The Marygold Companies continues to pursue acquisitions of other profitable companies which meet its target profile. Provided The Marygold Companies’ subsidiaries continue to operate as they are presently, and are projected to operate, The Marygold Companies has sufficient capital to pay its general and administrative expenses for the coming fiscal year and to adequately pursue its long-term business objectives. However, given the significant economic and financial market disruptions associated with the COVID-19 pandemic, and the conflictconflicts in Israel and the Ukraine, the Company’s results of operations could be adversely impacted.
Lease Liability
The Company has various operating leases.leases for offices, warehouses and manufacturing facilities. The total amount due under these obligations was $1,166,135$713,360 and $1,404,880$837,844 as of March 31,September 30, 2023 and June 30, 2022,2023, respectively. The obligations will reduce over the passage of time through periodic lease payments. See Note 15 for further analysis of this obligation.
Borrowings
As of March 31,September 30, 2023, we had $0.4 million of third-party indebtedness on a consolidated basis as compared to $0.4$0.3 million of third-party and related-party indebtedness as of June 30, 2022.2023. Approximately US$336,951328,646 is owed by Brigadier and secured with the land and building in Saskatoon purchased in July 2019. The initial principal balance was CD$525,000 (approximately US$401,000 translated as of the loan date July 1, 2019) with an annual interest rate of 4.14% maturing June 30, 2024. The short-term portion of principal for this loan due within 12 months as of March 31, 2023 is approximately US$14,854, and the long term principal amount due is approximately US$322,097. Interest on the loan is expensed or accrued as it becomes due. Interest expense on the loan for the three and nine months ended March 31,September 30, 2023 wereand 2022 was US$3,5113,488 and US$10,740, respectively. Interest expense on the loan for the three and nine months ended March 31, 2022 were $3,865 and $11,884,3,706, respectively.
In addition to the loan due by Brigadier, our subsidiary, Gourmet Foods, on December 21, 2021 entered intohas a finance lease agreementliability related to a solar energy system. The present value ofTotal lease liabilities under the leased asset is included on the Consolidated Balance Sheets with property, plant and equipment as $121,058. The solar assets are amortized over a life span of 10 years with monthly payments, including GST, totaling $4,935lease for the three months ended March 31,September 30, 2023 and $14,805 for the nine months ended March 31, 2023. 2022 were NZ$167,058 (approximately US$100,178 translated as of September 30, 2023) as compared to NZ$174,405 (approximately US$106,469 translated as of June 30, 2023), respectively, and are included under loans - property and equipment on our consolidated balance sheets.
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The Marygold Companies, without inclusion of its subsidiary companies, as of March 31, 2023, has no debt.
Investments
USCF Investments, from time to time, provides initial investments in the creation of ETP funds that USCF Investments manages. USCF Investments classifies these investments as current assets as these investments are generally sold within one year from the balance sheet date. As of March 31,September 30, 2023, and June 30, 2022, USCF Investments held an investment positionpositions in four of its 40 Act funds, including GLDX, ZSB, USE and ZSC (launched in August 2023) of $1.2 million, $0.5 million, $3.2 million, and $2.7 million, respectively. As of June 30, 2023 USCF held position in GLDX, ZSB, and USE of $1.3 million, $1.9 million, and $1.3$2.6 million, respectively, along with ZSB, launched January 2023, of $2.1 million as of March 31, 2023. This investmentrespectively. These investments along with other investments, as applicable, are described further in Note 7 to our Financial Statements.
Dividends
Our strategy on dividends is to declare and pay dividends only from retained earnings and only when our Board of Directors deems it prudent and in the best interests of the Company to declare and pay dividends. We paid no dividends during the three months ended March 31,September 30, 2023 and 2022.or year ended June 30, 2023.
Quantitative and Qualitative Disclosures about Market Risk. |
As a "smaller“smaller reporting company"company”, we are not required to provide the information required by this Item.
Controls and Procedures |
(a)Evaluation of Disclosure Controls and Procedures
The Marygold Companies maintains disclosure controls and procedures that are designed to provide reasonable assurances that the information required to be disclosed in The Marygold Companies’ periodic reports filed or submitted under the Securities Exchange Act of 1934, as amended (the "Exchange Act"“Exchange Act”), is recorded, processed, summarized and reported within the time period specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that there are inherent limitations to the effectiveness of any system of disclosure controls and procedures and any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving their control objectives.
The duly appointed officers of The Marygold Companies, including its chief executive officer and chief financial officer, who perform functions equivalent to those of a principal executive officer and principal financial officer of The Marygold Companies, have evaluated the effectiveness of The Marygold Companies’ disclosure controls and procedures and have concluded that the disclosure controls and procedures of The Marygold Companies were effective as of the end of the period covered by this quarterly report on Form 10-Q.
(b)Change in Internal Control Over Financial Reporting
There were no significant changes in the Company'sCompany’s internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act) during the quarterly period covered by this report that have materially affected, or are reasonably likely to materially affect our internal controls over financial reporting.
Legal Proceedings |
From time to time, the Company and its subsidiaries may be involved in legal proceedings arising primarily from the ordinary course of their respective businesses. Except as described below, there are no pending legal proceedings against the Company. USCF is an indirect wholly ownedwholly-owned subsidiary of the Company. USCF, as the general partner of USOthe United States Oil Fund, LP (“USO”) and the general partner and sponsor of the related public funds may, from time to time, be involved in litigation arising out of its operations in the ordinary course of business. Except as described herein, USO and USCF are not currently party to any material legal proceedings.
Optimum Strategies Action
On April 6, 2022, USO and USCF were named as defendants in an action filed by Optimum Strategies Fund I, LP, a purported investor in call option contracts on USO (the “Optimum Strategies Action”). The action is pending in the U.S. District Court for the District of Connecticut at Civil Action No. 3:22-cv-00511.
The Optimum Strategies Action asserts claims under the Securities Exchange Act of 1934, as amended (the “1934 Act”), Rule 10b-5 thereunder, and the Connecticut Uniform Securities Act ("CUSA"). It purports to challenge statements in registration statements that became effective in February 2020, March 2020, and on April 20, 2020, as well as public statements between February 2020 and May 2020, in connection with certain extraordinary market conditions and the attendant risks that caused the demand for oil to fall precipitously, including the COVID-19 global pandemic and the Saudi Arabia-Russia oil price war. The complaint seeks damages, interest, costs, attorney’s fees, and equitable relief.
USCF and USO intend to vigorously contest such claims and have moved for their dismissal. On March 15, 2023, the Court issued a decision granting defendants’ motion to dismiss, with prejudice as to the 1934 Act claims and without prejudice as to the CUSA claim.
Settlement of SEC and CFTC Investigations
On November 8, 2021, one of The Marygold Companies, Inc.’s (the “Company”) indirect subsidiaries, the United States Commodity Funds LLC (“USCF”), together with United States Oil Fund, LP (“USO”), for which USCF is the general partner,and USO announced a resolution with each of the U.S. Securities and Exchange Commission (the “SEC”)SEC and the U.S. Commodity Futures Trading Commission (the “CFTC”)CFTC relating to matters set forth in certain Wells Notices issued by the staffs of each of the SEC and CFTC as detailedmore fully described below.
On August 17, 2020, USCF, USO, and John Love received a “Wells Notice” from the staff of the SEC (the “SEC Wells Notice”). The SEC Wells Notice stated that the SEC staff made a preliminary determination to recommend that the SEC file an enforcement action against USCF, USO, and Mr. Love alleging violations of Sections 17(a)(1) and 17(a)(3) of the Securities Act of 1933, as amended (the “1933 Act”), and Section 10(b) of the Securities Exchange Act of 1934, Act,as amended (the “1934 Act”), and Rule 10b-5 thereunder.
Subsequently, on August 19, 2020, USCF, USO, and Mr. Love received a Wells Notice from the staff of the CFTC (the “CFTC Wells Notice”). The CFTC Wells Notice stated that the CFTC staff made a preliminary determination to recommend that the CFTC file an enforcement action against USCF, USO, and Mr. Love alleging violations of Sections 4o(1)(A) and (B) and 6(c)(1) of the CEA,Commodity Exchange Act of 1936, as amended (the “CEA”), 7 U.S.C. §§ 6o(1)(A), and (B), and 9(1) (2018), and CFTC Regulations 4.26, 4.41, and 180.1(a), 17 C.F.R. §§ 4.26, 4.41, 180.1(a) (2019).
On November 8, 2021, acting pursuant to an offer of settlement submitted by USCF and USO, the SEC issued an order instituting cease-and-desist proceedings, making findings, and imposing a cease-and-desist order pursuant to Section 8A of the 1933 Act, directing USCF and USO to cease and desist from committing or causing any violations of Section 17(a)(3) of the 1933 Act, 15 U.S.C. § 77q(a)(3) (the “SEC Order”)SEC Order). In the SEC Order, the SEC made findings that, from April 24, 2020 to May 21, 2020, USCF and USO violated Section 17(a)(3) of 1933 Act, which provides that it is “unlawful for any person in the offer or sale of any securities . . . to engage in any transaction, practice, or course of business which operates or would operate as a fraud or deceit upon the purchaser.” USCF and USO consented to entry of the SEC Order without admitting or denying the findings contained therein, except as to jurisdiction.
Separately, on November 8, 2021, acting pursuant to an offer of settlement submitted by USCF, the CFTC issued an order instituting cease-and-desist proceedings, making findings, and imposing a cease-and-desist order pursuant to Section 6(c) and (d) of the CEA, directing USCF to cease and desist from committing or causing any violations of Section 4o(1)(B) of the CEA, 7 U.S.C. § 6o(1)(B), and CFTC Regulation 4.41(a)(2), 17 C.F.R. § 4.41(a)(2) (the “CFTC Order”). In the CFTC Order, the CFTC made findings that, from on or about April 22, 2020 to June 12, 2020, USCF violated Section 4o(1)(B) of the CEA and CFTC Regulation 4.41(a)(2), which make it unlawful for any commodity pool operator (“CPO”) to engage in “any transaction, practice, or course of business which operates as a fraud or deceit upon any client or participant or prospective client or participant” and prohibit a CPO from advertising in a manner which “operates as a fraud or deceit upon any client or participant or prospective client or participant,” respectively. USCF consented to entry of the CFTC Order without admitting or denying the findings contained therein, except as to jurisdiction.
Pursuant to the SEC Order and the CFTC Order, in addition to the command to cease and desist from committing or causing any violations of Section 17(a)(3) of the 1933 Act, Section 4o(1)(B) of the CEA, and CFTC Regulation 4.14(a)(2), civil monetary penalties totaling two million five hundred thousand dollars ($2,500,000) in the aggregate were required to be paid to the SEC and CFTC, of which one million two hundred fifty thousand dollars ($1,250,000) was paid by USCF to each of the SEC and the CFTC, respectively, pursuant to the offsets permitted under the orders. The SEC Order can be accessed at www.sec.gov and the CFTC Order can be accessed at www.cftc.gov.
In re: United States Oil Fund, LP Securities Litigation
On June 19, 2020, USCF, USO, John P. Love, and Stuart P. Crumbaugh were named as defendants in a putative class action filed by purported shareholder Robert Lucas (the “Lucas Class Action”). The Court thereafter consolidated the Lucas Class Action with two related putative class actions filed on July 31, 2020 and August 13, 2020, and appointed a lead plaintiff. The consolidated class action is pending in the U.S. District Court for the Southern District of New York under the caption In re: United States Oil Fund, LP Securities Litigation, Civil Action No. 1:20-cv-04740.
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On November 30, 2020, the lead plaintiff filed an amended complaint (the “Amended Lucas Class Complaint”). The Amended Lucas Class Complaint asserts claims under the 1933 Act, the 1934Exchange Act, and Rule 10b-5. The Amended Lucas Class Complaint challenges statements in registration statements that became effective on February 25, 2020 and March 23, 2020 as well as subsequent public statements through April 2020 concerning certain extraordinary market conditions and the attendant risks that caused the demand for oil to fall precipitously, including the COVID-19 global pandemic and the Saudi Arabia-Russia oil price war. The Amended Lucas Class Complaint purports to have been brought by an investor in USO on behalf of a class of similarly-situated shareholders who purchased USO securities between February 25, 2020 and April 28, 2020 and pursuant to the challenged registration statements. The Amended Lucas Class Complaint seeks to certify a class and to award the class compensatory damages at an amount to be determined at trial as well as costs and attorney’s fees. The Amended Lucas Class Complaint named as defendants USCF, USO, John P. Love, Stuart P. Crumbaugh, Nicholas D. Gerber, Andrew F Ngim, Robert L. Nguyen, Peter M. Robinson, Gordon L. Ellis, and Malcolm R. Fobes III, as well as the marketing agent, ALPS Distributors, Inc., and the Authorized Participants: ABN Amro, BNP Paribas Securities Corporation, Citadel Securities LLC, Citigroup Global Markets, Inc., Credit Suisse Securities USA LLC, Deutsche Bank Securities Inc., Goldman Sachs & Company, J.P. Morgan Securities Inc., Merrill Lynch Professional Clearing Corporation, Morgan Stanley & Company Inc., Nomura Securities International Inc., RBC Capital Markets LLC, SG Americas Securities LLC, UBS Securities LLC, and Virtu Financial BD LLC.
The lead plaintiff has filed a notice of voluntary dismissal of its claims against BNP Paribas Securities Corporation, Citadel Securities LLC, Citigroup Global Markets Inc., Credit Suisse Securities USA LLC, Deutsche Bank Securities Inc., Morgan Stanley & Company, Inc., Nomura Securities International, Inc., RBC Capital Markets, LLC, SG Americas Securities LLC, and UBS Securities LLC.
USCF, USO, and the individual defendants in In re: United States Oil Fund, LP Securities Litigation intend to vigorously contest such claims and have moved for their dismissal. No accrual has been recorded with respect to the above legal matters as of June 30, 2023 and 2022. We are currently unable to predict the timing or outcome of, or reasonably estimate the possible losses or range of, possible losses resulting from these matters. It is reasonably possible that this estimate will change in the near term. An adverse outcome regarding these matters could materially adversely affect the Company’s financial condition, results of operations and cash flows.
Mehan Action
On August 10, 2020, purported shareholder Darshan Mehan filed a derivative action on behalf of nominal defendant USO, against defendants USCF, John P. Love, Stuart P. Crumbaugh, Nicholas D. Gerber, Andrew F Ngim, Robert L. Nguyen, Peter M. Robinson, Gordon L. Ellis, and Malcolm R. Fobes, III (the “Mehan Action”). The action is pending in the Superior Court of the State of California for the County of Alameda as Case No. RG20070732.
The Mehan Action alleges that the defendants breached their fiduciary duties to USO and failed to act in good faith in connection with a March 19, 2020 registration statement and offering and disclosures regarding certain extraordinary market conditions that caused demand for oil to fall precipitously, including the COVID-19 global pandemic and the Saudi Arabia-Russia oil price war. The complaint seeks, on behalf of USO, compensatory damages, restitution, equitable relief, attorney’s fees, and costs. All proceedings in the Mehan Action are stayed pending disposition of the motion(s) to dismiss in In re: United States Oil Fund, LP Securities Litigation.
USCF, USO, and the other defendants intend to vigorously contest such claims.
In re United States Oil Fund, LP Derivative Litigation
On August 27, 2020, purported shareholders Michael Cantrell and AML Pharm. Inc. DBA Golden International filed two separate derivative actions on behalf of nominal defendant USO, against defendants USCF, John P. Love, Stuart P. Crumbaugh, Andrew F Ngim, Gordon L. Ellis, Malcolm R. Fobes, III, Nicholas D. Gerber, Robert L. Nguyen, and Peter M. Robinson in the U.S. District Court for the Southern District of New York at Civil Action No. 1:20-cv-06974 (the “Cantrell Action”) and Civil Action No. 1:20-cv-06981 (the “AML Action”), respectively.
The complaints in the Cantrell and AML Actions are nearly identical. They each allege violations of Sections 10(b), 20(a) and 21D of the 1934Exchange Act, Rule 10b-5 thereunder, and common law claims of breach of fiduciary duties, unjust enrichment, abuse of control, gross mismanagement, and waste of corporate assets. These allegations stem from USO’s disclosures and defendants’ alleged actions in light of the extraordinary market conditions in 2020 that caused demand for oil to fall precipitously, including the COVID-19 global pandemic and the Saudi Arabia-Russia oil price war. The complaints seek, on behalf of USO, compensatory damages, restitution, equitable relief, attorney’s fees, and costs. The plaintiffs in the Cantrell and AML Actions have marked their actions as related to the Lucas Class Action.
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The Court entered and consolidated the Cantrell and AML Actions under the caption In re United States Oil Fund, LP Derivative Litigation,, Civil Action No. 1:20-cv-06974 and appointed co-lead counsel. All proceedings in In re United States Oil Fund, LP Derivative Litigation are stayed pending disposition of the motion(s) to dismiss in In re: United States Oil Fund, LP Securities Litigation.
USCF, USO, and the other defendants intend to vigorously contest the claims in InIn re United States Oil Fund, LP Derivative Litigation.
Optimum Strategies Action
On April 6, 2022, USO and USCF were named as defendants in an action filed by Optimum Strategies Fund I, LP, a purported investor in call option contracts on USO (the “Optimum Strategies Action”). The action was in the U.S. District Court for the District of Connecticut at Civil Action No. 3:22-cv-00511.
The Optimum Strategies Action asserted claims under the Securities Exchange Act of 1934, as amended (the “1934 Act”), Rule 10b-5 thereunder, and the Connecticut Uniform Securities Act (“CUSA”). It purported to challenge statements in registration statements that became effective in February 2020, March 2020, and on April 20, 2020, as well as public statements between February 2020 and May 2020, in connection with certain extraordinary market conditions and the attendant risks that caused the demand for oil to fall precipitously, including the COVID-19 global pandemic and the Saudi Arabia-Russia oil price war. The complaint was seeking damages, interest, costs, attorney’s fees, and equitable relief.
On March 15, 2023, the court granted the USO defendants’ motion to dismiss the complaint. In its ruling, the court granted the USO defendants’ motion to dismiss, with prejudice, the plaintiff’s claims under Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and a claim for control person liability under Section 20(a) of the Exchange Act. Having dismissed all claims over which the court had original jurisdiction, the court declined to exercise supplemental jurisdiction over the plaintiff’s state law claim under CUSA and dismissed the claim without prejudice. No notice of appeal was filed.
No accrual has been recorded with respect to the above legal matters as of March 31,June 30, 2023 and 2022. We are currently unable to predict the timing or outcome of, or reasonably estimate the possible losses or range of, possible losses resulting from these matters. It is reasonably possible that this estimate will change in the near term. An adverse outcome regarding these matters could materially adversely affect the Company'sCompany’s financial condition, results of operations and cash flows.
Risk Factors |
The Marygold Companies and its subsidiaries (referred to herein as “we,” “us,” “our” or similar expressions) are subject to certain risks and uncertainties in its business operations. In addition to the other information set forth in this report, you should carefully consider the factors discussed in “Risk Factors” in our registration statement, as amended, filed March 8, 2022December 7, 2021 and the September 28, 202225, 2023 filing of our Annual Report on Form 10-K, which could materially affect our business, financial condition and/or operating results. The risks described in our registration statement and Annual Report are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition and/or operating results.
Abrupt changes in market and general economic conditions may in the future adversely affect our business and profitability and cause volatility in our results of operations.
Economic and market conditions may have a direct and material impact on our results of operations and financial condition because performance in the financial services industry is heavily influenced by the overall strength of general economic conditions and financial market activity.
Recently, concerns have arisen with respect to the financial condition of a number of banking organizations in the United States, in particular those with exposure to certain types of depositors and large portfolios of investment securities. On March 10, 2023, Silicon Valley Bank (“SVB”) was closed by the California Department of Financial Protection and Innovation, and the Federal Deposit Insurance Corporation (the “FDIC”) was appointed receiver of SVB. On March 12, 2023, the FDIC was appointed receiver of Signature Bank. While we do not have any exposure to SVB, Signature Bank, or any other bank that has become insolvent to date, we do maintain our cash at financial institutions, often in balances that exceed the current FDIC insurance limits. If other banks and financial institutions enter receivership or become insolvent in the future due to financial conditions affecting the banking system and financial markets, our ability to access our cash, cash equivalents and investments, including transferring funds, making payments or receiving funds, may be threatened and could have a material adverse effect on our business and financial condition. In addition, the operating environment and public trading prices of financial services sector securities can be highly correlated, in particular in times of stress, which may adversely affect the trading price of our common stock and potentially our results of operations.
Our banking is directly related to general economic conditions and corresponding financial market activity. When the outlook for such economic conditions is uncertain or negative, financial market activity generally tends to decrease, which reduces banking investments and revenues. Reduced expectations of U.S. economic growth or a decline in the global economic outlook could cause financial market activity to decrease and negatively affect our banking investments and revenues. A sustained and continuing market downturn could lead to or exacerbate declines in the financial condition of the Company.
In addition, global economic conditions and global financial markets remain vulnerable to the potential risks posed by certain events, which could include, among other things, level and volatility of interest rates, availability and market conditions of financing, economic growth or its sustainability, unforeseen changes to gross domestic product, inflation, energy prices, fluctuations or other changes in both debt and equity capital markets and currencies, political and financial uncertainty in the United States and the European Union, ongoing concern about Asia’s economies, global supply disruptions, complications involving terrorism and armed conflicts around the world (including the conflict between Russia and Ukraine), or other challenges to global trade or travel, such as those that have occurred due to the COVID-19 pandemic. More generally, because our business is closely correlated to the general economic outlook, a significant deterioration in that outlook or realization of certain events would likely have an immediate and significant negative impact on our business and overall results of operations
There have been no other material changes to the risk factors discussed in “Risk Factors” in our registration statement, as amended, filed on December 7, 2021, the related prospectus, and the September 28, 202225, 2023 filing of our Annual Report on Form 10-K. These risk factors should be read in connection with the other information included in this quarterly report on Form 10-Q, including Management’s Discussion and Analysis of Financial Condition and Results of Operations and our financial statements and the related notes.
Unregistered Sales of Equity Securities and Use of Proceeds |
None.
Defaults Upon Senior Securities |
None.
Mine Safety Disclosures |
Not applicable.
Other Information |
The Company is aware that the Federal Deposit Insurance Corp. ("FDIC") has taken control of Silicon Valley Bank (“SVB”). The Company endeavors to not exceed the FDIC insured amount of $250,000 at SVB, though from time to time we have done so. The Company was not impacted by the failure of SVB.None.41
Exhibits |
The following exhibits are filed or incorporated by reference as part of this Form 10-Q:
3.1 | |
3.2 | |
3.3 | |
3.4 | |
3.5 | |
3.6 | |
10.1 | |
10.2* | |
10.3* | |
10.4* | |
10.5* | |
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| 31.1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
31.2 | |
32.1 | |
32.2 |
* Indicates management contract or any compensatory plan, contract or arrangement.
101.INS | Inline XBRL Instance Document# |
101.SCH | Inline XBRL Taxonomy Extension Schema Document# |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document# |
101.LAB | Inline XBRL Taxonomy Extension Labels Linkbase Document# |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document# |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document# |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
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Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
THE MARYGOLD COMPANIES, INC. | |||
Dated: | By: | /s/ Nicholas Gerber | |
Nicholas Gerber | |||
Principal Executive Officer | |||
By: | /s/ Stuart Crumbaugh | ||
Stuart Crumbaugh | |||
Principal Financial and Accounting Officer | |||
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