The Marygold Companies, Inc. (MGLD) 10-Q 2022 Q2 Quarterly report

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 December 31, 2021

OR

☐ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from           to           .

Commission File Number: 000-29913

CONCIERGE TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

Nevada	90-1133909
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

120 Calle Iglesia

Unit B

San Clemente, CA 92672

949-429-5370

Fax: 888.312.0124

(Address and telephone number of registrant'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
None

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 accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth 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 had 37,485,959 shares of Common Stock, $0.001 par value, and 49,360 shares of Series B Convertible, Voting, Preferred Stock outstanding on February11, 2022. Series B Preferred stock is convertible, under certain conditions, 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.

2

CONCIERGE TECHNOLOGIES, INC.

Table of Contents

	Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)	5
Condensed Consolidated Balance Sheets as of December 31, 2021 and June 30, 2021	5
Condensed Consolidated Statements of Income (Loss) for the Three and Six Months Ended December 31, 2021 and December 31, 2020	6
Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended December 31, 2021 and December 31, 2020	7
Condensed Consolidated Statements of Stockholders' Equity for the Three and Six Months Ended December 31, 2021 and December 31, 2020	8
Condensed Consolidated Statements of Cash Flows for the Six Months Ended December 31, 2021 and December 31, 2020	9
Notes to Condensed Consolidated Financial Statements	10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3. Quantitative and Qualitative Disclosures About Market Risk	37
Item 4. Controls and Procedures	37
PART II. OTHER INFORMATION	38
Item 1. Legal Proceedings	38
Item 1A. Risk Factors	40
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 3. Defaults Upon Senior Securities	40
Item 4. Mine Safety Disclosures	40
Item 5. Other Information	40
Item 6. Exhibits	40
Signatures	41

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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, Wainwright Holdings, and other related parties, as disclosed under “Item 1. Legal Proceedings”;

• 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; and the impact of the COVID-19 pandemic thereon;

• the sufficiency of our cash and cash equivalents to meet our working capital, capital expenditure, and liquidity needs; and the impact of the COVID-19 pandemic thereon;

• our operating subsidiaries' ability to attract and retain customers to use our products, to optimize the pricing for our products, to expand our sales to our customers, and to convince our existing customers to renew subscriptions;

• the evolution of technologies affecting our operating subsidiaries' products and markets;

• our operating subsidiaries' ability to innovate and provide a superior user experience and our intentions and strategy with respect thereto;

• our operating subsidiaries' ability to successfully penetrate enterprise markets; and the impact of the COVID-19 pandemic thereon;

• our operating subsidiaries' ability to successfully expand in our existing markets and into new markets, including international markets; and the impact of the COVID-19 pandemic thereon;

• the attraction and retention of key personnel;

• our ability to effectively manage our growth and future expenses;

• worldwide economic conditions, including the economic disruption imposed by the COVID-19 pandemic, and their impact on spending; and

• our operating subsidiaries' ability to comply with modified or new laws and regulations applying to our business, including privacy and data security regulations.

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, 2021, 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.

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	December 31, 2021		June 30, 2021 (1)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	13,285,452	$	16,072,955
Accounts receivable, net		1,165,881		1,070,541
Accounts receivable - related parties		1,782,034		2,038,054
Inventories		2,144,681		1,951,792
Prepaid income tax and tax receivable		1,068,143		747,343
Investments		2,853,574		1,828,926
Other current assets		442,470		399,524
Total current assets		22,742,235		24,109,135
Restricted cash		13,664		13,989
Property, plant and equipment, net		1,560,006		1,573,445
Operating lease right-of-use asset		1,716,883		1,058,199
Goodwill		1,043,473		1,043,473
Intangible assets, net		2,182,817		2,341,803
Deferred tax assets, net-U.S.		827,476		827,476
Other assets, long - term		789,880		540,160
Total assets	$	30,876,434	$	31,507,680
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable, accrued expenses	$	3,344,858	$	3,862,874
Expense waivers – related parties		128,748		69,684
Operating lease liabilities, current portion		687,333		513,071
Notes payable - related parties		603,500		603,500
Loans - property and equipment, current portion		35,090		15,094
Total current liabilities		4,799,529		5,064,223
LONG-TERM LIABILITIES
Loans - property and equipment, net of current portion		491,390		379,804
Operating lease liabilities, net of current portion		1,087,690		607,560
Deferred tax liabilities, net-foreign		169,429		169,429
Total long-term liabilities		1,748,509		1,156,793
Total liabilities		6,548,038		6,221,016
STOCKHOLDERS' EQUITY
Preferred stock, $0.001 par value; 50,000,000 authorized
Series B: 49,360 issued and outstanding at December 31, 2021 and at June 30, 2021		49		49
Common stock, $0.001 par value; 900,000,000 shares authorized; 37,485,959 shares issued and outstanding at December 31, 2021 and at June 30, 2021		37,486		37,486
Additional paid-in capital		9,330,843		9,330,843
Accumulated other comprehensive income		41,971		142,581
Retained earnings		14,918,047		15,775,705
Total stockholders' equity		24,328,396		25,286,664
Total liabilities and stockholders' equity	$	30,876,434	$	31,507,680

(1) Derived from audited financial statements

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

(UNAUDITED)

	Three Months Ended December 31, 2021			Three Months Ended December 31, 2020			Six Months Ended December 31, 2021			Six Months Ended December 31, 2020
Net revenue
Fund management - related party	$	5,701,384		$	6,149,415		$	11,358,411		$	13,185,716
Food products		2,108,257			2,134,402			4,468,402			4,191,974
Security systems		642,623			617,780			1,333,253			1,297,222
Beauty products		992,852			1,060,225			2,013,924			2,032,968
Net revenue		9,445,116			9,961,822			19,173,990			20,707,880
Cost of revenue		2,417,798			2,378,024			5,068,538			4,781,584
Gross profit		7,027,318			7,583,798			14,105,452			15,926,296
Operating expense
General and administrative expense		1,198,209			1,641,196			3,317,711			3,555,259
Fund operations		1,102,237			799,658			2,203,853			1,702,498
Marketing and advertising		690,831			742,529			1,409,486			1,540,351
Depreciation and amortization		133,191			177,225			287,849			343,124
Salaries and compensation		2,576,285			2,485,357			4,707,440			4,181,577
Legal settlement		0			0			2,500,000			0
Total operating expenses		5,700,753			5,845,965			14,426,339			11,322,809
(Loss) income from operations		1,326,565			1,737,833			(320,887	)		4,603,487
Other (expense) income:
Interest and dividend income		6,088			6,799			13,484			15,442
Interest expense		(10,085	)		(10,141	)		(20,285	)		(20,225	)
Other (expense) income		(214,981	)		55,695			(206,973	)		176,638
Total other (expense) income, net		(218,978	)		52,353			(213,774	)		171,855
Income (loss) before income taxes		1,107,587			1,790,186			(534,661	)		4,775,342
Provision of income taxes		(84,252	)		(438,398	)		(322,997	)		(1,204,120	)
Net income (loss)	$	1,023,335		$	1,351,788		$	(857,658	)	$	3,571,222
Weighted average shares of common stock
Basic and diluted		38,473,159			38,473,159			38,473,159			38,473,159
Net income (loss) per common share
Basic and diluted	$	0.03		$	0.04		$	(0.02	)	$	0.09

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

	Three Months Ended December 31, 2021			Three Months Ended December 31, 2020		Six Months Ended December 31, 2021			Six Months Ended December 31, 2020
Net income (loss)	$	1,023,335		$	1,351,788	$	(857,658	)	$	3,571,222
Other comprehensive income:
Foreign currency translation (loss) gain		(14,442	)		297,432		(100,610	)		370,146
Comprehensive income (loss)	$	1,008,893		$	1,649,220	$	(958,268	)	$	3,941,368

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

7

CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY 

FOR THE THREE AND SIX MONTH PERIODS ENDED DECEMBER 31, 2021 AND DECEMBER 31, 2020

(UNAUDITED)

Period Ending December 31, 2021	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		-		0		-		0		0		(86,168	)		0			(86,168	)
Net loss		-		0		-		0		0		0			(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		-		0		-		0		0		(14,442	)		0			(14,442	)
Net income		-		0		-		0		0		0			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

Period Ending December 31, 2020	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, 2020		53,032	$	53		37,412,519	$	37,412	$	9,330,913	$	(144,744	)	$	9,926,262	$	19,149,896
Gain on currency translation		-		0		-		0		0		72,714			0		72,714
Net income		-		0		-		0		0		0			2,219,434		2,219,434
Balance at September 30, 2020		53,032	$	53		37,412,519	$	37,412	$	9,330,913	$	(72,030	)	$	12,145,696	$	21,442,044
Gain on currency translation		-		0		-		0		0		297,432			0		297,432
Net income		-		0		-		0		0		0			1,351,788		1,351,788
Balance at December 31, 2020		53,032	$	53		37,412,519	$	37,412	$	9,330,913	$	225,402		$	13,497,484	$	23,091,264

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

8

CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED) 

	For the Six Month Period Ended
	December 31,
	2021			2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income	$	(857,658	)	$	3,571,222
Adjustments to reconcile net (loss) income to net cash provided by operating activities
Depreciation and amortization		287,849			343,124
Bad debt expense		0			14,075
Impairment to inventory value		3,478			32,688
Unrealized gain on investments		(29,251	)		(1,128	)
Loss (gain) on disposal of equipment		37,189			(2,122	)
Operating lease right-of-use asset - non-cash lease cost		337,850			231,879
Decrease (increase) in current assets:
Accounts receivable		(118,395	)		(373,656	)
Accounts receivable - related party		256,020			518,364
Prepaid income taxes and tax receivable		(324,699	)		292,905
Inventories		(196,514	)		(149,153	)
Other current assets		(74,549	)		82,433
(Decrease) increase in current liabilities:
Accounts payable, accrued expenses		(486,835	)		(466,096	)
Operating lease liabilities		(341,411	)		(233,222	)
Expense waivers - related party		59,064			553,336
Net cash (used in) provided by operating activities		(1,447,862	)		4,414,649
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for acquisition of business		0			(993,435	)
Purchase of real estate and equipment		(3,988	)		(30,213	)
Sale of investments		506,492			0
Purchase of investments		(1,533,385	)		(411	)
Net cash used in investing activities		(1,030,881	)		(1,024,059	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of property and equipment loans		(7,208	)		(3,445	)
Principle payment of finance lease liability		(1,753	)		0
Issuance costs pursuant to planned stock issuance		(249,720	)		0
Net cash used in financing activities		(258,681	)		(3,445	)
Effect of exchange rate change on cash and cash equivalents		(50,404	)		123,331
NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH		(2,787,828	)		3,510,476
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING BALANCE		16,086,944			9,826,042
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, ENDING BALANCE	$	13,299,116		$	13,336,518
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest paid	$	8,046		$	7,985
Income taxes paid, net of refunds	$	632,961		$	859,320
Non-cash financing and investing activities:
Reclassification of acquisition deposit	$	0		$	122,111
Acquisition of operating right-of-use assets through operating lease liability	$	995,805		$	730,741
Acquisition of equipment through finance lease liability	$	150,625		$	0

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIALS STATEMENTS

(UNAUDITED)

NOTE 1. ORGANIZATION AND DESCRIPTION OF BUSINESS

Concierge Technologies, Inc., (the “Company” or “Concierge”), a Nevada corporation, operates through its wholly owned subsidiaries who are engaged in varied business activities. The operations of the Company’s wholly owned subsidiaries are more particularly described herein but are summarized as follows:

● Wainwright Holdings, Inc. (“Wainwright”), a U.S. based company, is the sole member of two investment services limited liability company subsidiaries, United States Commodity Funds LLC (“USCF”), and USCF Advisers LLC (“USCF Advisers”), each of which manages, operates or is an investment advisor to exchange traded funds organized as limited partnerships or investment trusts that issue shares which 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 ("Printstock"), prints specialty wrappers for the food industry in New Zealand and Australia (collectively "Gourmet Foods").

● Brigadier Security Systems (2000) Ltd. (“Brigadier”), a Canadian based company, sells and installs commercial and residential alarm monitoring systems under the names Brigadier Security Systems and Elite Security in the province of Saskatchewan.

● 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") was established by Concierge to explore opportunities in the financial technology ("Fintech") space, is still in the development stage as of December 31, 2021, and is estimated to launch commercial services in the current fiscal year. Through December 31, 2021, expenditures have been limited to developing the business model and the associated application development.

● Marygold & Co. (UK) Limited, a newly formed U.K. limited company (“Marygold UK”), was established to act as a holding company for acquisitions to be made in the U.K. As of December 31, 2021, there have been no acquisitions completed and no operations. The expenses of Marygold UK have been included with those of Concierge.

Concierge 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 Concierge’s management in the day-to-day business affairs of its operating subsidiary businesses apart from oversight. Concierge’s 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. Concierge's 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. Across Concierge and its subsidiaries the Company employs 114 people.

As more fully detailed in the Company’s Definitive Information Statement on Schedule 14C, filed with the U.S. Securities and Exchange Commission on September 13, 2021, on August 24, 2021, the Board of Directors of the Company approved, by unanimous written consent in lieu of a meeting, to effect a name change of the Company to "The Marygold Companies, Inc." As of February 11, 2022, no action has been taken with respect to the name change and no definitive date has been set.

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 condensed consolidated balance sheets, related statements of income and comprehensive income, 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-Q should be read in conjunction with information included in the Company’s Annual Report on Form 10-K for year ended June 30, 2021 and filed with the U.S. Securities and Exchange Commission on September 22, 2021.

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements, which are referred to herein as the “Financial Statements” include the accounts of Concierge and its wholly owned subsidiaries, Wainwright, Gourmet Foods, Brigadier, Original Sprout, Marygold and Marygold UK.

10

 

All inter-company transactions and accounts have been eliminated in consolidation. 

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 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, Canada, and New Zealand. Accounts in the United States are insured by the Federal Deposit Insurance Corporation up to $250,000 per depositor, and accounts in Canada are insured by the Canada Deposit Insurance Corporation up to CD$100,000 per depositor. 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 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 December 31, 2021 and June 30, 2021, the Company had $0 and $15,499, respectively, reserved for as doubtful accounts.

Accounts receivable - related parties consist of fund asset management fees receivable related to the Wainwright business. Management fees receivable generally consist of one month of management fees which are collected in the month after they are earned. As of December 31, 2021 and June 30, 2021, there is 0 allowance for doubtful accounts as all amounts are deemed collectible.

Major Customers and Suppliers – Concentration of Credit Risk

Concierge, as a holding company, operates through its wholly owned subsidiaries and has no concentration of risk either from customers or suppliers as a stand-alone entity. Marygold and Marygold UK, as newly formed development stage entities, had no revenues and no significant transactions for the three and six months ended December 31, 2021. Any transactions that did occur were included with those of Concierge.

For our subsidiary, Wainwright, the concentration of risk and the relative reliance on major customers are found within the various funds it manages and the associated three and six month revenues as of December 31, 2021 compared with those at December 31, 2020 along with the accounts receivable – related parties as of December 31, 2021 and June 30, 2021 as depicted below.

	For the Three Months Ended				For the Three Months Ended
	December 31, 2021				December 31, 2020
	Revenue				Revenue
Fund
USO	$	2,975,211	52	%	$	4,202,851	68	%
BNO		470,879	8	%		638,111	10	%
UNG		686,360	12	%		592,230	10	%
USCI		495,779	9	%		216,151	4	%
All Others		1,073,155	19	%		500,072	8	%
Total	$	5,701,384	100	%	$	6,149,415	100	%

	For the Six Months Ended				For the Six Months Ended
	December 31, 2021				December 31, 2020
	Revenue				Revenue
Fund
USO	$	6,117,818	54	%	$	9,096,383	69	%
BNO		990,797	9	%		1,396,837	11	%
UNG		1,114,147	10	%		1,143,783	9	%
USCI		971,363	8	%		466,416	3	%
All Others		2,164,286	19	%		1,082,297	8	%
Total	$	11,358,411	100	%	$	13,185,716	100	%

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	As of December 31, 2021				As of June 30, 2021
	Accounts Receivable				Accounts Receivable
Fund
USO	$	938,444	53	%	$	1,156,691	57	%
BNO		145,083	8	%		196,713	10	%
UNG		200,357	11	%		130,543	6	%
USCI		157,824	9	%		141,346	7	%
All Others		340,326	19	%		412,761	20	%
Total	$	1,782,034	100	%	$	2,038,054	100	%

Concierge, through Gourmet Foods and following the acquisition of Printstock Products Limited on July 1, 2020, has two major customer groups comprising gross revenues: 1) baking, and 2) printing. For the purpose of segment reporting (Note 15) both revenue streams are considered part of the same "food industry" segment as they are evaluated as one segment by the Company's Chief Operating Decision Maker.

Baking: Within the baking sector there are three major customer groups; 1) grocery, 2) gasoline convenience stores, and 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 months ended December 31, 2021, Gourmet Foods’ largest customer in the grocery industry, who operates through a number of independently branded stores, accounted for approximately 20% of baking sales revenues as compared to 18% for the three months ended December 31, 2020. For the six months ended December 31, 2021, the largest customer accounted for approximately 23% of baking sales revenues as compared to 20% for the six months ended December 31, 2020. This customer accounted for 4% of the baking accounts receivable as of December 31, 2021 as compared to 19% as of June 30, 2021. The second largest customer in the grocery industry accounted for approximately 6% and 8% of baking sales revenues during the three and six month periods ended December 31, 2021, respectively, as compared to 10% of baking sales revenues for the three and six months ended December 31, 2020. This customer accounted for 13% as compared to 27% of baking accounts receivable as of December 31, 2021 and June 30, 2021, respectively.

In the gasoline convenience store market customer group, Gourmet Foods supplies two major channels. The largest is a marketing consortium of gasoline dealers operating under the same brand who, for the three and six month periods ended December 31, 2021 accounted for approximately 52% and 49%, respectively, of baking sales revenues as compared to 55% and 53% for the three and six month periods ended December 31, 2020, respectively. No single member of the consortium is responsible for a significant portion of Gourmet Foods’ accounts receivable. A second consortium of gasoline convenience stores were not significant in sales volume, however did account for 24% and 23% of baking accounts receivable as of December 31, 2021 and June 30, 2021, respectively.

The third major customer group is independent retailers and cafes, which collectively accounted for the balance of baking sales revenue, however no single customer in this group was a significant contributor of baking sales revenues for the three and six month periods ended December 31, 2021 or December 31, 2020, nor a significant contributor to baking accounts receivable as of December 31, 2021 and June 30, 2021.

Printing: The printing sector of Gourmet Foods' gross revenues is comprised of many customers, some large and some small, with one customer accounting for 36% and 38% of the printing sector revenues for the three and six months ended December 31, 2021, respectively, as compared to 32% and 34% for the three and six months ended December 31, 2020, respectively. This same customer accounted for 44% and 40% of the printing sector accounts receivable as of December 31, 2021 and June 30, 2021, respectively.

Consolidated: With respect to Gourmet Foods’ consolidated risk, the largest 3 customers accounted for 32%, 15% and 12% of Gourmet Foods' consolidated gross revenues for the three months ended December 31, 2021 compared to 34%, 12% and 11% for the three months ended December 31, 2020. For the six month period ended December 31, 2021, these 3 customers accounted for 32%, 15% and 15% of consolidated gross revenues as compared to 33%, 13% and 12% for the six month period ended December 31, 2020. These customers accounted for nil%, 25% and 1% of the consolidated accounts receivable of Gourmet Foods as of December 31, 2021 as compared to nil%, 7% and 26%, respectively, as of June 30, 2021. 

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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.

Concierge, 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 49% and 51% of the total Brigadier revenues for the three and six month periods ended December 31, 2021, respectively, as compared to 58% and 54% for the three and six month periods ended December 31, 2020, respectively. The same customer accounted for approximately 24% of Brigadier's accounts receivable as of December 31, 2021 as compared to 31% as of June 30, 2021.

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.

Concierge, through Original Sprout, has thousands of customers and, from time to time, certain customers become significant during specific reporting periods, but may not be significant during other periods. Original Sprout had 0 significant customer for the three and six month periods ended December 31, 2021 as compared to the three and six month periods ended December 31, 2020 where 1 new customer accounted for 24% and 15% of sales revenues, respectively. Four other customers who were insignificant contributors to sales, but whose balance due exceeded 10% of total accounts receivable, collectively accounted for 68% and 73% of accounts receivable as of December 31, 2021 and June 30, 2021, respectively.

Concierge, through Original Sprout, is dependent upon its relationship with a product packaging company who, at the direction of Original Sprout, produces 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 this packaging company, although if this relationship were to fail there are other similar packaging companies available to Original Sprout at competitive pricing. 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-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.

Inventories

Inventories, consisting primarily of: (i) food products, printing supplies, and packaging in New Zealand; (ii) hair and skin care finished products and components in the U.S.; and, (iii) security system hardware in Canada, are valued at the lower of cost or net realizable value. Inventories in Canada and New Zealand are maintained on the first-in, first-out method, while inventory in the 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 six months ended December 31, 2021 and December 31, 2020, the expense for slow-moving or obsolete inventory was $3,478 and $32,688, respectively.

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation. Expenditures for maintenance and repairs are charged to operating expense as incurred; additions and 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 Consolidated Financial Statements). 

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 use software in process for the business applications of Marygold to be launched in the coming fiscal year. 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, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets. There was 0 impairment recorded for the six month period ended December 31, 2021 or the fiscal year ended June 30, 2021.

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'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 0 impairment recorded for the six month period ended December 31, 2021 or the fiscal year ended June 30, 2021.

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 0 impairment recorded for the six month period ended December 31, 2021 or the fiscal year ended June 30, 2021.

Investments and Fair Value of Financial Instruments

Short-term investments are classified as available-for-sale 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. The Company values its investments in accordance with Accounting Standards Codification ("ASC") 820 – Fair Value Measurements and Disclosures (“ASC 820”). ASC 820 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurement. ASC 820 establishes a fair value hierarchy that distinguishes between: (1) market participant assumptions developed based on market data obtained from sources independent of the Company (observable inputs) and (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.

14

 

Revenue Recognition

Revenue consists of fees earned through management of investment funds, sale of gourmet meat pies and printing of food wrappers in New Zealand, 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, these criteria are met at the time the product is shipped, the subscription period commences, or the management fees earned each month. 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 generates revenue, in part, through contractual monthly recurring fees received for providing ongoing customer support services to monitoring company clientele. The five-step process governing contract revenue reporting includes:

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; and

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'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 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 (Loss), which for the three and six months ended December 31, 2021, were approximately $219,904 and $407,629, or approximately 34% and 30%, of the total security system revenues as compared to $174,656 and $355,764 for the three and six months ended December 31, 2020, respectively, or 28% and 27% of the total security system revenues. These revenues for the three and six months ended December 31, 2021 account for approximately 2% and 2%, respectively, of total consolidated revenues as compared to 2% and 2% for the three and six months ended December 31, 2020, respectively. 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, 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.

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-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 December 31, 2021 and December 31, 2020 were $0.7 million and $0.7 million, respectively. Marketing and advertising costs for the six months ended December 31, 2021 and December 31, 2020 were $1.4 million and $1.5 million, respectively.

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Other Comprehensive Income (Loss)

Foreign Currency Translation

We record foreign currency translation adjustments and transaction gains and losses in accordance with ASC 830-30, Foreign Currency Translation. The accounts of Gourmet Foods use the New Zealand dollar as the functional currency. The accounts of Brigadier Security Systems use the Canadian dollar 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'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 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 six months ended December 31, 2021 and December 31, 2020 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, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and also issued subsequent amendments to the initial guidance: ASU 2018-19, ASU 2019-04, ASU 2019-05, ASU 2019-10, and ASU 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 amended by ASU 2019-10), including interim periods within that annual period. The Company anticipates the adoption of the standard will lead to changes in disclosures as well as insignificant changes related to the period of recognition of losses on its receivables. 

In August 2020, the FASB issued ASU No. 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40). The amendment is meant to simplify the accounting for convertible instruments by removing certain separation models in subtopic 470-20 for convertible instruments. The amendment also changed the method used to calculate diluted earnings per share ("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 consolidated financial statements and related disclosures given its current and anticipated operations.

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance, which aims to provide increased transparency by requiring business entities to disclose information about certain types of government assistance they receive in the notes to the annual financial statements. The guidance will become effective for annual reporting periods beginning after December 15, 2021, including interim periods within those fiscal years. The Company anticipates the adoption of the standard will not have a material impact on its consolidated financial statements and related disclosures given its current and anticipated operations. 

NOTE 3. BASIC AND DILUTED NET INCOME PER SHARE

Basic net income per share is based upon the weighted average number of common shares outstanding. This calculation also includes the weighted average number of Series B Convertible Preferred shares outstanding as they are deemed to be substantially similar to the common shares and shareholders are entitled to the same liquidation and dividend rights. Diluted net income per share is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and warrants 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. The Company does not have any options or warrants or other dilutive financial instruments. As such, basic and diluted earnings per share are the same. 

16

 

On August 25, 2021 the Company adopted the Concierge Technologies, Inc. 2021 Omnibus Equity Incentive Plan (the "Plan") and had not issued any awards under the Plan as of December 31, 2021. 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 is to be effected, and with the exact ratio of any Reverse Stock Split to be set within the above range as determined by the Board in its discretion.

Basic and diluted net income per share reflects the effects of shares actually potentially issuable upon conversion of convertible preferred stock.

The components of basic and diluted earnings per share were as follows: 

	For the Three Months Ended December 31, 2021
	Net Income		Shares		Per Share
Basic net income per share:
Net income available to common shareholders	$	996,012		37,445,919	$	0.03
Net income available to preferred shareholders		27,323		1,027,240	$	0.03
Basic and diluted net income per share	$	1,023,335		38,473,159	$	0.03

	For the Three Months Ended December 31, 2020
	Net Income		Shares		Per Share
Basic net income per share:
Net income available to common shareholders	$	1,314,521		37,412,519	$	0.04
Net income available to preferred shareholders		37,267		1,060,640	$	0.04
Basic and diluted net income per share	$	1,351,788		38,473,159	$	0.04

	For the Six Months Ended December 31, 2021
	Net Loss			Shares		Per Share
Basic net loss per share:
Net loss available to common shareholders	$	(835,651	)		37,485,959	$	(0.02	)
Net loss available to preferred shareholders		(22,007	)		987,200	$	(0.02	)
Basic and diluted net loss per share	$	(857,658	)		38,473,159	$	(0.02	)

	For the Six Months Ended December 31, 2020
	Net Income		Shares		Per Share
Basic net income per share:
Net income available to common shareholders	$	3,571,222		37,412,519	$	0.10
Net income available to preferred shareholders		98,453		1,060,640	$	0.09
Basic and diluted net income per share	$	3,571,222		38,473,159	$	0.09

NOTE 4. INVENTORIES

Inventories for Gourmet Foods, Brigadier and Original Sprout consisted of the following totals as of December 31, 2021 and June 30, 2021:

	December 31,		June 30,
	2021		2021
Raw materials	$	1,038,700	$	942,911
Supplies and packing materials		237,991		193,322
Finished goods		867,990		815,559
Total inventories	$	2,144,681	$	1,951,792

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NOTE 5. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consisted of the following as of December 31, 2021 and June 30, 2021:

	December 31,			June 30,
	2021			2021
Plant and equipment(1)	$	2,230,449		$	2,147,617
Furniture and office equipment		244,536			246,697
Vehicles		393,885			613,891
Land and building		597,574			412,681
Total property, plant and equipment, gross		3,466,444			3,420,886
Accumulated depreciation (2)		(1,906,438	)		(1,847,441	)
Total property, plant and equipment, net	$	1,560,006		$	1,573,445

(1) Included with plant and equipment as of December 31, 2021 are the underlying assets of the solar energy finance lease at Gourmet Foods totaling $150,625. 

(2) Included with accumulated depreciation is the amortization of the underlying assets of the solar energy finance lease at Gourmet Foods, which totaled $415 as of December 31, 2021.

For the three and six months ended December 31, 2021 depreciation expense for property, plant and equipment totaled $56,514 and $128,864, respectively, as compared to $92,138 and $172,030 for the three and six months ended December 31, 2020.

NOTE 6. INTANGIBLE ASSETS

Intangible assets consisted of the following as of December 31, 2021 and June 30, 2021:

	December 31,			June 30,
	2021			2021
Customer relationships	$	777,375		$	777,375
Brand name		1,199,965			1,199,965
Domain name		36,913			36,913
Recipes		1,221,601			1,221,601
Non-compete agreement		274,982			274,982
Internally developed software		217,990			217,990
Total		3,728,826			3,728,826
Less : accumulated amortization		(1,546,009	)		(1,387,023	)
Net intangibles	$	2,182,817		$	2,341,803

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 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 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 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 and is amortized over a useful life of 9 years.

	December 31,			June 30,
	2021			2021
Customer relationships	$	777,375			777,375
Less: accumulated amortization		(413,413	)		(369,471	)
Total customer relationships, net	$	363,962			407,904

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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 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 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 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 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" and "Printstock" at each reporting interval with no amortization recognized. 

	December 31,			June 30,
	2021			2021
Brand name	$	1,199,965		$	1,199,965
Less: accumulated amortization		(229,890	)		(209,620	)
Total brand name, net	$	970,075		$	990,345

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 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 and is amortized over the remaining useful life of 5 years. As of December 31, 2021, the fair value of the acquired domain names had been fully amortized.

	December 31,			June 30,
	2021			2021
Domain name	$	36,913		$	36,913
Less: accumulated amortization		(36,913	)		(36,913	)
Total brand name, net	$	0		$	0

RECIPES AND FORMULAS

On August 11, 2015, the Company acquired Gourmet Foods, Ltd. The fair value on the recipes was estimated to be $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 and is amortized over the remaining useful life of 8 years.

	December 31,			June 30,
	2021			2021
Recipes and formulas	$	1,221,601		$	1,221,601
Less: accumulated amortization		(627,354	)		(551,737	)
Total recipes and formulas, net	$	594,247		$	669,864

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 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 and is amortized over the remaining useful life of 5 years.

	December 31,			June 30,
	2021			2021
Non-compete agreement	$	274,982		$	274,982
Less: accumulated amortization		(238,439	)		(219,282	)
Total non-compete agreement, net	$	36,543		$	55,700

INTERNAL USE SOFTWARE

During the quarter ended December 31, 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 as of December 31, 2021, have been capitalized as intangible assets. Once development has been completed and the product is commercially available, these capitalized costs will be amortized over their useful lives. As of December 31, 2021, 0 amortization expense has been recorded for these intangible assets.

19

 

AMORTIZATION EXPENSE

The total amortization expense for intangible assets for the three and six months ended December 31, 2021 was $76,677 and $158,985, respectively. The total amortization expense for intangible assets for the three and six months ended December 31, 2020 was $85,085 and $171,094, respectively.

Estimated remaining amortization expenses of intangible assets for the next five fiscal years, are as follows:

Years Ending June 30,	Expense
2022	$	156,392
2023		292,261
2024		277,378
2025		262,114
2026		150,345
Thereafter		1,044,327
Total	$	2,182,817

NOTE 7. OTHER ASSETS

Other Current Assets

Other current assets totaling $442,470 as of December 31, 2021 and $399,524 as of June 30, 2021 are comprised of various components as listed below.

	As of December 31, 2021		As of June 30, 2021
Prepaid expenses	$	262,955	$	373,381
Other current assets		179,515		26,143
Total	$	442,470	$	399,524

Investments

Wainwright, from time to time, provides initial investment in the creation of ETP funds that Wainwright manages. Wainwright 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 in accordance with ASC 825, Financial Instruments, with the change included in earnings on the 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. As of December 31, 2021 and June 30, 2021, there were no investments in its ETP funds or investments requiring equity method investment accounting. The Company also invests in marketable securities. As of December 31, 2021 and June 30, 2021, such investments were approximately $2.8 million and $1.8 million, respectively. Of these amounts, $1.3 million and $0 were invested in the USCF Gold Strategy Plus Income Fund ("GLDX"), a related party managed by USCF, as of December 31, 2021 and June 30, 2021, respectively. The Company owns approximately 40% and 0% of the outstanding shares of this investment as of December 31, 2021 and June 30, 2021, respectively, which are included in "other equities" in the tables below.

Investments measured at estimated fair value consist of the following as of December 31, 2021 and June 30, 2021:

	December 31, 2021
	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Money market funds	$	1,299,303	$	5,378	$	0	$	1,304,681
Other short-term investments		270,413		174		0		270,587
Other equities		1,246,926		31,380		0		1,278,306
Total short-term investments	$	2,816,642	$	36,932	$	0	$	2,853,574

	June 30, 2021
	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Money market funds	$	1,044,748	$	5,378	$	-		$	1,050,126
Other short term investments		772,981		4,568		0			777,549
Other equities		1,421		0		(170	)		1,251
Total short-term investments	$	1,819,150	$	9,946	$	(170	)	$	1,828,926

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All of the Company's short-term investments are Level 1 as of December 31, 2021 and June 30, 2021. During the six months ended December 31, 2021 and December 31, 2020, there were no transfers between Level 1 and Level 2.

Restricted Cash

At December 31, 2021 and June 30, 2021, Gourmet Foods had on deposit NZ$20,000 (approximately US$13,664 and US$13,989, 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.

Long Term Assets

Other long-term assets totaling $789,880 as of December 31, 2021 and $540,160 at June 30, 2021 consisted of

(i)	$500,000 as of December 31, 2021 and June 30, 2021 representing 10% equity investment in a registered investment adviser accounted for on a cost basis, minus impairment, which we believe approximates fair value, given the lack of observable price changes in orderly transactions. There was 0 impairment recorded for the six months ended December 31, 2021 or the year ended June 30, 2021;
(ii)	$40,160 as of December 31, 2021 and at June 30, 2021 representing lease deposits and prepayments; and
(iii)	$249,720 as of December 31, 2021 and $0 as of June 30, 2021 representing incurred costs associated with a planned stock issuance pursuant to an underwritten finance agreement. Upon issuance of the shares pursuant to the finance agreement, the amount recorded herein will be reclassified to equity.

NOTE 8. GOODWILL

Goodwill represents the excess of the aggregate purchase price over the fair value of the net assets acquired in business combinations. The amount recorded in goodwill at December 31, 2021 and June 30, 2021 was $1,043,473.

Goodwill is comprised of the following amounts as of December 31, 2021 and June 30, 2021:

	December 31,		June 30,
	2021		2021
Goodwill – Original Sprout		416,817		416,817
Goodwill – Gourmet Foods		275,311		275,311
Goodwill – Brigadier		351,345		351,345
Total	$	1,043,473	$	1,043,473

The Company tests for goodwill impairment at each reporting unit. There was 0 goodwill impairment as of December 31, 2021 or as of June 30, 2021.  

NOTE 9. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consisted of the following as of December 31, 2021 and June 30, 2021:

	December 31,		June 30,
	2021		2021
Accounts payable	$	2,407,685	$	1,672,647
Accrued interest		141,836		129,596
Taxes payable		324,489		238,020
Accrued payroll, vacation and bonus payable		271,950		1,049,359
Accrued operating expenses		198,898		773,252
Total	$	3,344,858	$	3,862,874

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NOTE 10. RELATED PARTY TRANSACTIONS

Notes Payable - Related Parties

Current related party notes payable consist of the following as of December 31, 2021 and June 30, 2021:

	December 31,		June 30,
	2021		2021
Notes payable to shareholder, interest rate of 8%, unsecured and payable on December 31, 2012 (past due)	$	3,500	$	3,500
Notes payable to shareholder, interest rate of 4%, unsecured and payable on May 25, 2022		250,000		250,000
Notes payable to shareholder, interest rate of 4%, unsecured and payable on April 8, 2022		350,000		350,000
	$	603,500	$	603,500

Interest expense for all related party notes for the three and six months ended December 31, 2021 and December 31, 2020 was $6,120 and $12,240, respectively. Total accrued interest due to related parties was $141,836 and $129,596 as of December 31, 2021 and June 30, 2021, respectively.

Wainwright - Related Party Transactions

The Funds managed by USCF and USCF Advisers are deemed by management to be related parties. The Company’s Wainwright revenues, totaling $5.7 million and $6.1 million for the three month periods ended December 31, 2021 and 2020, respectively, and $11.4 million and $13.2 million for the six month periods ended December 31, 2021 and 2020, respectively, were earned from these related parties. Accounts receivable, totaling $1.8 million and $2.0 million as of December 31, 2021 and June 30, 2021, respectively, were owed from the Funds that are related parties. Fund expense waivers, totaling $0.1 million and $0. 2 million and fund expense limitation amounts, totaling $0.1 million and $0.1 million, for the three month periods ended December 31, 2021 and December 31, 2020, respectively, were incurred on behalf of these related parties. Fund expense waivers, totaling $0.1 million and $0.6 million and fund expense limitation amounts, totaling $0.1 million and $0.1 million, for the six month periods ended December 31, 2021 and December 31, 2020, respectively, were incurred on behalf of these related parties. Waivers payable, totaling $0.1 million and $0.1 million as of December 31, 2021 and June 30, 2021, respectively, were owed to these related parties. Fund expense waivers and fund expense limitation obligations are defined under Note 14 to the Condensed Consolidated Financial Statements.

NOTE 11. LOANS - PROPERTY AND EQUIPMENT

As of December 31, 2021, Brigadier had an outstanding principal balance of $377,193 due to Bank of Montreal related to the purchase of its Saskatoon office land and building. The Consolidated Balance Sheets as of December 31, 2021 and June 30, 2021 reflect the amount of the principal balance which is due within twelve months as a current liability of $14,999 and a long-term liability of $362,194. Interest expense on the mortgage loan for the three months ended December 31, 2021 and December 31, 2020 was $4,026 and $4,013, respectively. Interest expense on the mortgage loan for the six months ended December 31, 2021 and December 31, 2020 was $8,014 and $7,977 respectively. Also included as of December 31, 2021, are the short and long-term finance lease liabilities related to our subsidiary Gourmet  Foods of $20,090 and $129,196, respectively. There were 0 finance lease liabilities as of June 30, 2021 (refer to Note 15, Lease Committments).

NOTE 12. STOCKHOLDERS' EQUITY

Convertible Preferred Stock

Each issued Series B Convertible Preferred Stock is convertible into 20 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 February 7, 2019, the Company converted 383,919 shares of Series B Convertible Preferred Stock to 7,678,380 shares of common stock per the request of the shareholder and pursuant to the stock designation. After the conversion, there remained 53,032 shares of Series B Convertible Preferred Stock outstanding as of June 30, 2020. On January 15, 2021, the Company converted 3,672 shares of Series B Convertible Preferred Stock to 73,440 shares of common stock per the request of the shareholder and pursuant to the stock designation. After conversion, there remain 49,360 shares of Series B Convertible Preferred Stock outstanding as of December 31, 2021.  

NOTE 13. BUSINESS COMBINATIONS

On March 11, 2020 our wholly owned subsidiary Gourmet Foods, Ltd. entered into a Stock Purchase Agreement to acquire all the issued and outstanding shares of Printstock, a New Zealand private company located in Napier, New Zealand. Printstock is a printer of wrappers distributed to food manufacturers primarily within New Zealand and limited export to Australia. The company will be operated as a subsidiary of Gourmet Foods and is expected to incrementally reduce the cost of goods sold through reduction in the cost of wrappers purchased by Gourmet Foods by elimination of inter-company profit while increasing overall revenues and profits to Gourmet Foods on a consolidated basis through inclusion of Printstock operations. The purchase price was agreed to be NZ$1.9 million subject to adjustment within 90 days of the closing date. The transaction closed on July 1, 2020 with a payment of NZ$1.5M and an estimated final payment due of NZ$420,552 on December 31, 2020. Included in the below purchase price allocation are estimated deferred income tax liabilities of US$68,061 pertaining to the increase in the value of fixed assets above their book value and the acquired intangible assets. The amounts have been translated to US currency as of the acquisition date, July 1, 2020.

Item	Amount
Cash in bank	$	118,774
Accounts receivable		384,222
Prepayments/deposits		1,372
Inventories		509,796
Operating lease right of use asset		201,699
Plant, property and equipment		401,681
Intangible assets		134,965
Goodwill		127,683
Deferred tax liability		(68,061	)
Assumed lease liabilities		(201,699	)
Accounts payable and accrued expenses		(376,112	)
Total Purchase Price	$	1,234,320

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On August 13, 2021, Marygold UK entered into a Share Purchase Agreement that, when consummated, would result in the acquisition of all the outstanding and issued shares of Tiger Financial and Asset Management Limited, a U.K. limited company, ("Tiger") in exchange for GBP 1,500,000 (approximately US$2,100,000) plus acquired cash-on-hand at the time of closing. Marygold UK will pay the purchase price in 3 approximately equal payments commencing at closing and at each annual anniversary date. Funding for the purchase price will be provided through a loan facility granted by Concierge Technologies. The Company plans to expand its Marygold fintech services offering into the U.K. market provided a successful launch in the U.S. is realized. Tiger is an established and certified investment advisor in the U.K., and will be able to more easily offer such services as Marygold's to its clientele and other U.K. residents thus greatly reducing the cost and time to market for Marygold. As of February 11, 2022 the transaction remains subject to completion of the required closing conditions.

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 likely than 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 December 31, 2021, the Company's total unrecognized tax benefits were approximately $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 0 interest or penalties to be recognized for the three and six months ended December 31, 2021 and December 31, 2020.

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 expense of ($84) thousand and ($323) thousand for the three and six months ended December 31, 2021, respectively, as compared to tax expense of ($438) thousand and ($1.2) million for the three and six months ended December 31, 2020, 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 2017 through 2020 will remain open for examination by the federal and state authorities which is three and four years, respectively. The Company’s tax years from 2017 through 2020 remain open for examination by Canada and New Zealand authorities. As of February 14, 2022, there were no active taxing authority examinations.  

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 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.

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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.

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 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 leases mature between October 2022 and October 2026, and require monthly rental payments of approximately $23,533 (GST not included) translated to U.S. currency as of December 31, 2021. 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 $1,558 translated as of December 31, 2021. Brigadier leases office and storage facilities in Regina, Saskatchewan. The minimum lease obligations for the Regina facility require monthly payments of approximately $2,588 translated to U.S. currency as of December 31, 2021. Original Sprout currently leases office and warehouse space in San Clemente, CA with 3-year facility lease expiring on November 30, 2023. Minimum monthly lease payments of approximately $22,750 commenced December 1, 2021 with annual increases. Wainwright leases office space in Walnut Creek, California under an operating lease which expires in December 2024. Minimum monthly lease payments are approximately $13,063 with increases annually.

For the three month periods ended December 31, 2021 and December 31, 2020, the combined lease payments of the Company and its subsidiaries totaled $209,172 and $161,440, respectively. For the six month periods ended December 31, 2021 and December 31, 2020, the combined lease payments of the Company and its subsidiaries totaled $411,261 and $325,942, respectively. Lease payments are recorded under general and administrative expense in the Condensed Consolidated Statements of Income. As of December 31, 2021 the Condensed Consolidated Balance Sheets included operating lease right-of-use assets totaling $1,716,883, recorded net of $58,140 in deferred rent, and $1,775,023 in total operating lease liabilities. Accounting for the increase in the right-of-use assets as of December 31, 2021 compared to June 30, 2021 were the renewal of operating leases at our Gourmet Foods and Printstock facilities in New Zealand. The underlying assets of the finance lease totaling $150,625 are included in property, plant and equipment while the lease liability of $149,286 is included in long-term and short-term Loans-property and equipment, net of principal payments, on the Condensed Consolidated Balance Sheets as of December 31, 2021. There was 0 finance lease at June 30, 2021. The assets of the solar lease are amortized on a straight-line basis over the 10 year term of the lease. Amortization of the leased assets totaled $415 for the three and six months ended December 31, 2021 and is included in depreciation expense on the Consolidated Statements of Income (Loss). Interest expense for the finance lease totaled $39 for the three and six months ended December 31, 2021 and is included in interest expense on the Consolidated Statements of Income (Loss). 

Future minimum consolidated lease payments for Concierge and its subsidiaries are as follows:

Year Ended June 30,	Operating Lease			Finance Lease
2022	$	374,667		$	10,747
2023		737,420			21,495
2024		479,871			21,495
2025		180,910			21,495
2026		166,677			21,495
Thereafter		69,449			116,427
Total minimum lease payments		2,008,994			213,154
Less: present value discount		(233,971	)		(63,868	)
Total lease liabilities	$	1,775,023		$	149,286

The weighted average remaining lease term for the Company's operating leases was 3.1 years as of December 31, 2021 and a weighted-average discount rate of 5.6% was used to determine the total operating lease liabilities. The remaining lease term for the Company’s finance lease was 10 years with a discount rate of 5.8%. Finance lease right-of-use assets are combined with those of property, plant and equipment with lease liabilities included in long-term and short-term Loans-property and equipment on the Consolidated Balance Sheets. 

24

 

Additionally, Gourmet Foods, Ltd. 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$110,000 (approximately US$75,146) to secure the lease of its primary facility. In addition, a NZ$20,000 (approximately US$13,664) 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, Ltd. and is listed as a component of interest income/expense on the accompanying Consolidated Statements of Income.

Other Agreements and Commitments

USCF manages four Funds (BNO, CPER, UGA, UNL) which had expense waiver provisions during the prior fiscal year, 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 December 31, 2021 and June 30, 2021 the expense waiver payable was $0.1 million and $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 December 31, 2021, Marygold has future payment commitments with its primary service vendors totaling $357,000 including approximately $70,000 due in 2023. 

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 owned subsidiary of the Company.  USCF, as the general partner of 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, (refer to Part II, Item 1. Legal Proceedings) neither the Company or its subsidiaries are currently party to any material legal proceedings.

SEC and CFTC Wells Notices

On November 8, 2021, one of Concierge Technologies, 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, announced a resolution with each of the U.S. Securities and Exchange Commission (the “SEC”) and the U.S. Commodity Futures Trading Commission (the “CFTC”) relating to matters set forth in certain Wells Notices issued by the staffs of each of the SEC and CFTC, as detailed 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 relates to USO's disclosures in late April 2020 and early May 2020 regarding constraints imposed on USO's ability to invest in Oil Futures Contracts. The SEC Wells Notice states that the SEC staff has 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 1933 Act and Section 10(b) of the 1934 Act and Rule 10b-5 thereunder, in each case with respect to its disclosures and USO’s actions.

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 states that the CFTC staff has 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, 7 U.S.C. §§ 6o(1)(A), (B), 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), in each case with respect to its disclosures and USO’s actions.

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”). 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.

25

 

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 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.

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 1934 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 has moved for their dismissal.

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.

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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 1934 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.

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 In re United States Oil Fund, LP Derivative Litigation.  NaN accrual has been recorded with respect to the above legal matters as of December 31, 2021 and June 30, 2021. 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.

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 10-Q filing, Marygold estimates that approximately 80 end-customer accounts were opened fraudulently that resulted in approximately $250,000 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.

Retirement Plan

Concierge through its wholly owned subsidiary USCF, has a 401(k) Profit Sharing Plan ("401K Plan") covering U.S. employees, including Original Sprout, who are over 21 years of age and who have completed a minimum of 1,000 hours of service and have worked for USCF or Original Sprout 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 sharing contributions paid totaled approximately $54 thousand and $48 thousand for each of the three months ended December 31, 2021 and 2020, respectively, and for the six months ended December 31, 2021 and 2020, totaled $88 thousand and $81 thousand, respectively.

NOTE 16. SEGMENT REPORTING

With the acquisition of Wainwright, Gourmet Foods, Brigadier, and the launch of the Original Sprout business unit of Kahnalytics, the Company has identified 4 segments for its products and services; U.S.A. investment fund management, U.S.A. beauty products, New Zealand food industry and Canada security alarm systems. Our recently incorporated subsidiary, Marygold, has not begun operations, so its accounts have been consolidated with those of the parent, Concierge, and is not yet identified as a separate segment. The Company'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 Wainwright. 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 owned subsidiary Gourmet Foods, Ltd. and its subsidiary, Printstock. In Canada, the Company provides security alarm system installation and maintenance services to residential and commercial customers sold through its wholly owned subsidiary, Brigadier. 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 Concierge level.

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The following table presents a summary of identifiable assets as of December 31, 2021 and June 30, 2021.

	December 31,		June 30,
	2021		2021
Identifiable assets:
U.S.A. : investment fund management - related party	$	16,386,171	$	17,467,044
U.S.A. : beauty products		3,870,938		4,024,803
New Zealand: food industry		4,655,674		3,831,539
Canada: security systems		2,513,760		2,671,286
Corporate headquarters - including Marygold		3,449,891		3,513,008
Consolidated total	$	30,876,434	$	31,507,680

The following table presents a summary of operating information for the three months ended December 31:

	Three Months Ended			Three Months Ended
	December 31, 2021			December 31, 2020
Revenues from external customers:
U.S.A. : investment fund management - related party	$	5,701,384		$	6,149,415
U.S.A. : beauty products		992,852			1,060,225
New Zealand : food industry		2,108,257			2,134,402
Canada : security systems		642,623			617,780
Consolidated total	$	9,445,116		$	9,961,822
Net (loss) income:
U.S.A. : investment fund management - related party	$	1,985,141		$	2,269,276
U.S.A. : beauty products		(12,718	)		(61,234	)
New Zealand : food industry		136,465			239,830
Canada : security systems		62,547			31,610
Corporate headquarters - including Marygold		(1,148,100	)		(1,127,694	)
Consolidated total	$	1,023,335		$	1,351,788

The following table presents a summary of operating information for the six months ended December 31:

	Six Months Ended			Six Months Ended
	December 31, 2021			December 31, 2020
Revenues from external customers:
U.S.A. : investment fund management - related party	$	11,358,411		$	13,185,716
U.S.A. : beauty products		2,013,924			2,032,968
New Zealand : food industry		4,468,402			4,191,974
Canada : security systems		1,333,253			1,297,222
Consolidated total	$	19,173,990		$	20,707,880
Net (loss) income:				��
U.S.A. : investment fund management - related party	$	1,617,234		$	5,498,271
U.S.A. : beauty products		(8,196	)		4,038
New Zealand : food industry		289,667			332,128
Canada : security systems		140,954			198,693
Corporate headquarters - including Marygold		(2,897,317	)		(2,461,908	)
Consolidated total	$	(857,658	)	$	3,571,222

The following table presents a summary of capital expenditures for the three month periods ended December 31,:

	Three Months Ended		Three Months Ended
	December 31, 2021		December 31, 2020
Capital expenditures:
U.S.A.: investment fund management	$	0	$	0
U.S.A. : beauty products		428		27,930
New Zealand: food industry		0		4,303
Canada: security systems		0		(7,677	)
U.S.A. : corporate headquarters - including Marygold		0		0
Consolidated	$	428	$	24,556

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The following table presents a summary of capital expenditures for the six month periods ended December 31,:

	Six Months Ended		Six Months Ended
	December 31, 2021		December 31, 2020
Capital expenditures:
U.S.A.: investment fund management	$	0	$	0
U.S.A.: beauty products		948		28,757
New Zealand: food industry (1)		3,040		417,465
Canada: security systems		0		(14,981	)
U.S.A.: corporate headquarters - including Marygold		0		653
Consolidated	$	3,988	$	431,894

(1) Includes $401,681 related to the acquisition of Printstock in July 2020. See Note 13, Business Combinations

The following table represents the property, plant and equipment in use at each of the Company's locations as of December 3, 2021 and June 30, 2021:

	As of December 31, 2021			As of June 30, 2021
Asset Location
U.S.A.: investment fund management	$	0		$	0
U.S.A. : beauty products		59,909			58,961
New Zealand: food industry(1)		2,416,722			2,345,569
Canada: security systems		972,069			998,612
U.S.A. : corporate headquarters - including Marygold		17,744			17,744
Total All Locations		3,466,444			3,420,886
Less accumulated depreciation		(1,906,438	)		(1,847,441	)
Net property, plant and equipment	$	1,560,006		$	1,573,445

(1) Includes the underlying assets of the solar energy system finance lease totaling $150,625 at Gourmet Foods.

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.

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 Statements."

Overview

Concierge Technologies, Inc. (“Concierge” or the “Company”) conducts business through its wholly 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 Tiger acquisition. The operations of the Company’s wholly owned subsidiaries are more particularly described herein but are summarized as follows:

● Wainwright Holdings, Inc. (“Wainwright”), 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 "Gourmet Foods") 

● 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. 

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● Marygold & Co., a newly formed U.S. based company, together with its wholly owned limited liability company, Marygold & Co. Advisory Services, LLC,  (collectively "Marygold") was established by Concierge to explore opportunities in the financial technology ("Fintech") space, still in the development stage as of December 31, 2021, and estimated to launch commercial services in the current fiscal year. Through December 31, 2021, expenditures have been limited to developing the business model and the associated application development.

● Marygold & Co. (UK) Limited, a newly formed U.K. limited company (“Marygold UK”), was established to act as a holding company for acquisitions to be made in the U.K. As of December 31, 2021, there have been no acquisitions completed and no operations. The expenses of Marygold UK have been combined with those of Concierge.

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's financial condition and results of operations.  See, "Note 2. Summary of Significant 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 could 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

Concierge and Subsidiaries

Financial summary and comparison data for the three and six month periods ended December 31, 2021 and December 31, 2020.

For the Three Months Ended December 31, 2021 Compared to the Three Months Ended December 31, 2020

Revenue and Operating Income

Consolidated revenue for the three months ended December 31, 2021 was $9.4 million representing a $0.6 million decrease from the same prior year period revenue of $10.0 million. Net revenues decreased as a result of lower Fund AUM from our fund management business by approximately $1.4 million, or 20%, for the three months ended December 31, 2021 as compared to the three months ended December 31, 2020. The Company's revenues derived from its other operating units decreased slight by $0.1 million, or 2%, from the same prior year period, resulting in an overall decrease in consolidated revenue of approximately 5%. Concierge had an operating income for the three months ended December 31, 2021 of  $1.3 million as compared to operating income of $1.7 million for the three months ended December 31, 2020.

Other Income (Expense) 

Other (expense) income for the three months ended December 31, 2021 and December 31, 2020, was ($219) thousand and $52 thousand, respectively, resulting in income before income taxes of 1.1 million and $1.8 million, respectively.

Income Tax

Provision for income tax expense for the three months ended December 31, 2021 and December 31, 2020 were $84 thousand and $438 thousand, respectively, attributable through our United States operations and specifically to expenses incurred by our Marygold subsidiary and from our Wainwright subsidiary who recorded a lower income for the period ended December 31, 2021 as compared to the income for the period ended December 31, 2020. The Company files income taxes as a combined group and records most income taxes at the Concierge level. 

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Net Income (Loss) and Comprehensive Income (Loss)

Overall, the net income for the three months ended December 31, 2021 decreased by $0.4 million to $1.0 million, as compared to net income of $1.4 million for the three months ended December 31, 2020. The decrease in profits for the three months ended December 31, 2021 was primarily due to increased costs at our Marygold subsidiary and slightly lower fund management fee revenue from Wainwright due to a lower amount of AUM. All Other Operating Units contributed approximately $187 thousand of net income before tax representing a $24 thousand decrease from the same prior year period primarily as result of higher costs and lower profit margins within Original Sprout. Contributing to the overall decrease in net income were expenses of $940 thousand related to our development stage subsidiary, Marygold. After giving consideration to currency translation loss of ($14) thousand our comprehensive income for the three months ended December 31, 2021 was $1.0 million as compared to the three months ended December 31, 2020 where there was a currency translation gain of $297 thousand resulting in comprehensive income of $1.6 million. Comprehensive gains and losses are comprised of fluctuations in foreign currency exchange rates related to the effects in the valuation of our holdings in New Zealand and Canada.

For the Six Months Ended December 31, 2021 Compared to the Six Months Ended December 31, 2020

Revenue and Operating Income

Consolidated revenue for the six months ended December 31, 2021 was $19.2 million representing a $1.5 million decrease from the same prior year period revenue of $20.7 million. Net revenues declined from our fund management business as a result of lower AUM by approximately $1.8 million, or 14%, for the six months ended December 31, 2021 as compared to the six months ended December 31, 2020. The Company's revenues derived from its other operating units decreased by $0.3 million, or 4%, from the same prior year period, resulting in an overall decrease in consolidated revenue of approximately 7%. Concierge produced an operating (loss) for the six months ended December 31, 2021 of  ($0.3) million as compared to an operating income of $4.6 million for the six months ended December 31, 2020. The decrease in operating income was primarily attributable to the $2.5 million SEC / CFTC Wells Notice settlement in addition to lower fund management revenue from Wainwright due to lower AUM as well as higher costs within Original Sprout.

Other (Expense) Income

Other (expense) income for the six months ended December 31, 2021 and 2020, were ($214) thousand and $172 thousand, respectively, resulting in (loss) income before taxes of ($0.9) million and $4.8 million, respectively. 

Income Tax

Provision for income tax for the six months ended December 31, 2021 and 2020 were $0.3 million and $1.2 million, respectively, primarily attributable to our United States operations through our Wainwright subsidiary. The Company files income taxes as a combined group and records most income taxes at the Concierge level.

Net Income (Loss) and Comprehensive Income (Loss)

Overall, the net income for the six months ended December 31, 2021 as compared to the six months ended December 31, 2020 decreased by approximately $4.4 million. The decrease in profits for the six months ended December 31, 2021 was primarily attributable to the $2.5 million SEC / CFTC Wells Notice settlement in addition to lower fund management revenue from Wainwright due to lower AUM as well as higher costs within Original Sprout. Adding to the loss were expenses of $1.8 million related to our development stage subsidiary, Marygold. After giving consideration to currency translation (loss) of  ($101) thousand our comprehensive (loss) for the six months ended December 31, 2021 was ($1.0) million as compared to the six months ended December 31, 2020 where there was a currency translation gain of $370 thousand resulting in comprehensive income of $3.9 million. 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.

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Investment Fund Management - Wainwright Holdings

Wainwright 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 registered 1940 Act large cap value equity fund. 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”) and in July 2016, the USCF Mutual Funds Trust (“Mutual Funds Trust” and together with “ETF Trust” the “Trusts”) both as open-end management investment companies registered under the Investment Company Act of 1940, as amended ("the 1940 Act"). The Trusts are authorized to have multiple segregated series or portfolios. Wainwright 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.  Wainwright operates through USCF and USCF Advisers, which collectively operate ten exchange-traded products ("ETPs") and exchange traded funds (“ETFs”), each of which has its shares listed on the NYSE Arca, Inc. ("NYSE Arca"). The ETPs and ETFs managed by USCF and USCF Advisers have a total of approximately $4 billion assets under management as of December 31, 2021. Wainwright and subsidiaries USCF and USCF Advisers are collectively referred to as “Wainwright” hereafter. 

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 - each a series within the United States Commodity Index Funds Trust ("USCIF Trust")
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 ("SDCI")	Fund launched May 2018
USCF Midstream Energy Income Fund ("UMI")	Fund launched March 2021
USCF Gold Strategy Plus Income Fund ("GLDX")	Fund launced November 2021

In addition, USCF Advisers previously served as the investment adviser to the USCF SummerHaven SHPEI Index Fund, which launched in November 2017 and was liquidated in October 2020, and USCF SummerHaven SHPEN Index Fund, which launched in November 2017 and was liquidated in May 2020. 

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.

Wainwright’s revenue and expenses are primarily driven by the amount of AUM. Wainwright 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.

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For the Three Months Ended December 31, 2021, Compared to the Three Months Ended December 31, 2020

Revenue

Average AUM for the three months ended December 31, 2021 was at $4.2 billion, as compared to approximately $4.9 billion from the three months ended December 31, 2020 primarily due to a decrease in USO, BNO and USL AUM. As a result, the revenues from management and advisory fees decreased by approximately $0.4 million, or 7%, to $5.7 million for the three months ended December 31, 2021 as compared to the three months ended December 31, 2020 where revenues from management and advisory fees totaled $6.1 million.

Expenses

Wainwright’s total operating expenses for three months ended December 31, 2021 decreased by $0.2 million to $3.7 million, or approximately 4%, from $3.9 million for the three months ended December 31, 2020. Variable expenses, as described above, increased by $0.3 million due to an increase of $0.1 million in sub-advisory fees for UMI which did not exist in the prior year quarter, and increases of $0.3 million in USCI and CPER sub-advisory fees due to increases in AUM from the prior year quarter, offset by decreases in other variable expenses over the respective three-month period due to overall lower AUM which included variable marketing and distribution expenses, and fund accounting and administration expenses. General and administrative ("G&A") expenses of $0.3 million decreased $0.4 million from $0.7 million for the three months ended December 31, 2021 and December 31, 2020, respectively. G&A expenses decreased  primarily due to lower fund expense waivers as a result of eliminating expense waivers for BNO, UGA and CPER in May 2021 as well as lower legal expenses for the quarter. Total marketing expenses decreased $0.1 million to $0.6 million for the three months ended December 31, 2021 as compared to the prior year period due to a decrease in variable distribution costs as a result of lower AUM as mentioned above. Employee salaries and benefit compensation expenses were approximately $1.7 million for both three month periods ended December 31, 2021 and  December 31, 2020. Operations expenses increased by $0.3 million to $1.1 million due to sub-advisory fees for UMI offset by other lower operations expenses due to lower AUM.

Income

Operating income decreased $0.3 million to $2.0 million for the three months ended December 31, 2021 from $2.3 million for the three months ended December 31, 2020. Other  income (expense) was $38 thousand for the three months ended December 31, 2021 compared to $5 thousand for the three months ended December 31, 2020. Net income before income taxes for the three months ended December 31, 2021 decreased $0.3 million to $2.0 million compared to income of $2.3 million for three months ended December 31, 2020 due to a  $0.4 million decrease in revenue as a result of lower AUM, offset by a $0.1 million decrease in total operating expenses.

For the Six Months Ended December 31, 2021, Compared to the Six Months Ended December 31, 2020

Revenue

Average AUM for the six months ended December 31, 2021 was at $4.2 billion, as compared to approximately $5.2 billion from the six months ended December 31, 2020 primarily due to decreases in USO, BNO and USL AUM. As a result, the revenues from management and advisory fees decreased by approximately $1.8 million, or 14%, to $11.4 million for the six months ended December 31, 2021 as compared to the six months ended December 31, 2020 where revenues from management and advisory fees totaled $13.2 million.

Expenses

Wainwright’s total operating expenses, after recording the $2.5 million SEC / CFTC Wells Notice settlement, increased to $9.8 million, or approximately 27%, from $7.7 million for the six months ended December 31, 2021 compared to same prior year period. Excluding the Wells Notice settlement, total operating expenses decreased $0.5 million, or approximately 6%, to $7.2 million from $7.7 million for the six months ended December 31, 2021 compared to same prior year period. Variable expenses, as described above, increased $0.4 million over the respective six -month period due to an increase of $0.2 million in sub-advisory fees for UMI which did not exist in the prior year six month period, and increases of $0.4 million in USCI and CPER sub-advisory fees due to increases in AUM from the prior year six month period, offset by lower by other fund AUM which decreased variable marketing and distribution expenses, fund accounting and administration expenses, and other variable costs. G&A expenses, excluding new fund development cost, were $1.0 million and $1.7 million for the six months ended December 31, 2021 and December 31, 2020, respectively. G&A expenses decreased $0.7 million due to decreases in legal and professional fees as well as decreases in fund expense waivers as a result of eliminating expense waivers for BNO, UGA and CPER in May 2021. Total marketing expenses decreased $0.2 million to $1.2 million for the six months ended December 31, 2021 as compared to the prior year period due to an decrease in variable distribution costs as a result of lower AUM as mentioned above. Employee salaries and benefit compensation expenses were approximately $2.8 million and $2.7 million for the six months ended December 31, 2021 and December 31, 2020, respectively. Operations expenses increased by $0.5 million due to sub-advisory fees from UMI which did not exist in the prior year period and increases  in sub-advisory fees for USCI and CPER due to increases in AUM, partially offset by decreases in fund accounting and administration expense due to lower AUM for other funds.

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Income

Income before income taxes for the six months ended December 31, 2021 decreased $3.9 million, after recording the $2.5 million SEC / CFTC Wells Notice settlement, to $1.6 million compared to $5.5 million for six months ended December 31, 2020 due to a $1.8 million decrease in revenue as a result of lower AUM, along with a $2.1 million increase in operating expenses as a result of the settlement expense. Operating income, excluding the settlement expense, decreased $1.4 million to $4.1 million for the six months ended December 31, 2021, or approximately 25%, from $5.5 million for the six months ended December 31, 2020.  Other  income (expense) was $43 thousand for the six months ended December 31, 2021 compared to $9 thousand for the six months ended December 31, 2020. 

Food Products - Gourmet Foods, Ltd. and Printstock Products Limite

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. Located in nearby Napier, New Zealand, Printstock prints wrappers for food products, including those used by Gourmet Foods, Ltd. Printstock is a wholly 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 Concierge’s reporting currency, the US dollar, with that of Gourmet Foods, Concierge 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 Consolidated Statements of Comprehensive Income as well as accumulated other comprehensive (loss) income found on the Consolidated Balance Sheets.

For the Three Months Ended December 31, 2021, Compared to the Three Months Ended December 31, 2020

Revenue

Net revenues for the three months ended December 31, 2021 were $2.1 million with cost of goods sold of $1.5 million resulting in a gross profit of $0.6 million, or approximately 27% gross margin, as compared to the three month period ended December 31, 2020 where net revenues were $2.1 million and cost of goods sold were $1.4 million producing a gross profit of $0.7 million, or approximately 29%.

Expenses

Operating expenses, including wages and marketing, for the three month periods ended December 31, 2021 and December 31, 2020 were $0.4 million and $0.4 million producing operating income of $0.2 million and $0.3 million, respectively, or approximately 8% net operating profit for the three months ended December 31, 2021 and 15% for the three months ended December 31, 2020. Other income totaled $9,190 for three months ended December 31, 2021 as compared to $2,004 for the three months ended December 31, 2020. 

Income

Income for the three months ended December 31, 2021 was approximately $176 thousand before income tax provision of approximately $41 thousand resulted in a net income of approximately $135 thousand as compared to a net income of $238 thousand for the three months ended December 31, 2020. 

For the Six Months Ended December 31, 2021, Compared to the Six Months Ended December 31, 2020

Revenue

Net revenues for the six months ended December 31, 2021 were $4.5 million with cost of goods sold of $3.3 million resulting in a gross profit of $1.2 million, or approximately 27% gross margin, as compared to the six month period ended December 31, 2020 where net revenues were $4.2 million and cost of goods sold were $3.0 million producing a gross profit of $1.2 million, or approximately 29%. The increase in cost of goods sold is attributed to the increase in shipping costs as well as raw materials due, in large part, to the continuing effects of the COVID-19 pandemic in New Zealand.

Expenses

General, administrative and selling expenses, including wages and marketing, for the six month periods ended December 31, 2021 and 2020 were $0.8 million and $0.7 million producing operating income of $0.4 million and $0.5 million, respectively, or approximately 8% net operating profit for the six months ended December 31, 2021 and 13% for the six months ended December 31, 2020. Other income for the six month periods ended December 31, 2021 and 2020 were $10 thousand and $0.1 million, respectively.

Income

Income for the six months ended December 31, 2021, after income tax provision of approximately $89 thousand, resulted in a net income of approximately $289 thousand, as compared to $330 thousand for the six months ended December 31, 2020 where the income tax provision was approximately $105 thousand. Contributing to the lower net income percentage for the six months ended December 31, 2021 were the expenses associated with staffing of the Printstock subsidiary as well as the continuing negative effects of the COVID-19 pandemic on the New Zealand economy in general.

Security Systems - Brigadier Security Systems (2000) Ltd.

Brigadier, founded in 1985, is a leading electronic security company in the province of Saskatchewan.  Brigadier 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 135 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 is an authorized SecurTek dealer. SecurTek is owned by SaskTel which is Saskatchewan'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 Concierge’s reporting currency, the U.S. dollar, with that of Brigadier, Concierge 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.

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For the Three Months Ended December 31, 2021 Compared to the Three Months Ended December 31, 2020

Revenue

Net revenues for the three months ended December 31, 2021 were $0.6 million with cost of goods sold recorded as approximately $0.3 million, resulting in a gross profit of approximately $0.3 million with a gross margin of approximately 52% as compared to the three months ended December 31, 2020 where net revenues were approximately $0.6 million with cost of goods sold of $0.3 million and a gross profit of $0.3 million, or approximately 50%.

Expenses

Operating expenses for the three months ended December 31, 2021 were $0.3 million producing an operating profit of $0.1 million or approximately 11% as compared to the three months ended December 31, 2020 where operating profits were $37 thousand, or approximately 6%, with operating expenses of $0.3 million.

Income

Other income comprised of interest income and commission income totaled approximately $6 thousand for the three months ended December 31, 2021, and provision for income tax expense was ($12) thousand, resulting in net income after income taxes of approximately $66 thousand as compared to income after income taxes of approximately $32 thousand for the three months ended December 31, 2020 where government subsidies due to COVID-19 totaled approximately $57 thousand. No government subsidies were received for the three month period ended December 31, 2021.

For the Six Months Ended December 31, 2021 Compared to the Six Months Ended December 31, 2020

Revenue

Net revenues for the six months ended December 31, 2021 were $1.3 million with cost of goods sold recorded as approximately $0.6 million, resulting in a gross profit of approximately $0.7 million with a gross margin of approximately 52% as compared to the six months ended December 31, 2020 where net revenues were approximately $1.3 million with cost of goods sold of $0.6 million and a gross profit of $0.7 million, or approximately 52%. 

Expenses

Operating expenses for the six months ended December 31, 2021 were $0.5 million producing an operating profit of $0.2 million or approximately 12% as compared to the six months ended December 31, 2020 where operating profits were $0.2 million, or approximately 13%, with operating expenses of $0.5 million.

Income

Other income (expense) totaled approximately $14 thousand for the six months ended December 31, 2021 resulting in income after income taxes of approximately $141 thousand as compared to income after income taxes of approximately $201 thousand for the six months ended December 31, 2020 where other income totaled approximately $150 thousand, most of which was government subsidies related to the COVID-19 pandemic. There were no government subsidies received for the six month period ended December 31, 2021.

Beauty Products - Original Sprout 

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'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, Original Sprout has made adjustments to its primary channels to market. 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 in the current environment 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 directly to consumers via ecommerce that to sell wholesale to resellers. The result was a dramatic downturn 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 be evident during the summer months of 2022, while the negative effects of the COVID-19 pandemic on the wholesale distribution business continues to disrupt the global marketplace. The result is that sales overall have been relatively stable during the pandemic, though derived from different sources, however profit margins have temporarily decreased as changes are implemented.

For the Three Months Ended December 31, 2021 Compared to the Three Months Ended December 31, 2020

Revenue

Net revenues for the three months ended December 31, 2021 were $1.0 million as compared to $1.1 million for the three months ended December 31, 2020. Cost of goods sold for the three months ended December 31, 2021 and December 31, 2020 were $0.6 million and $0.6 million, respectively, resulting in a gross profit of approximately $0.4 million and $0.5 million, respectively, or 43% as compared to 40% gross margin. 

Expenses

Operating expenses were approximately $0.4 million resulting in an operating (loss) of ($16) thousand, as compared to $0.4 million of operating expenses resulting in operating loss of ($68) thousand for the three months ended December 31, 2020.

Income (Loss)

After consideration given to other income of $3 thousand, the net (loss) for the three months ended December 31, 2021 was approximately ($13) thousand as compared to ($61) thousand net income for the three months ended December 31, 2020.

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For the Six Months Ended December 31, 2021 Compared to the Six Months Ended December 31, 2020

Revenue

Net revenues for the six months ended December 31, 2021 were $2.0 million as compared to $2.0 million for the six months ended December 31, 2020. Cost of goods sold for the six months ended December 31, 2021 and 2020 were $1.2 million, resulting in a gross profit of approximately $0.8 million for each period.

Expenses

Operating expenses for the six months ended December 31, 2021 were approximately $0.9 million resulting in an operating (loss) of approximately ($12) thousand, as compared to $0.8 million of operating expenses resulting in an operating income of approximately $0.1 million for the six months ended December 31, 2020.

Income (Loss)

After consideration given to other income (expense) of $4 thousand, the net (loss) for the six months ended December 31, 2021 was approximately ($8) thousand as compared to $4 thousand net income for the six months ended December 31, 2020 where the other income totaled approximately $8 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 in the initial stages of transitioning from a largely boutique offering distributed through specialty wholesalers to a more mainstream product available at traditional outlets and online and as such we anticipate measurable growth in revenues for the coming years, though there may be one-time initial expenses associated with the launch of new sales channels. Additionally, we are expecting moderate growth in Brigadier through focused management initiatives and consolidation within the security industry coupled with expanded product offerings. Similarly, we expect Gourmet Foods to be operating more efficiently under current management and continue to increase market share through additional product offerings and channels to market, including the printing and sale of food wrappers by their newly acquired subsidiary, Printstock. Wainwright will continue to develop 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. 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 services 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 wholly owned subsidiaries’ areas of operation,

● increase our gross revenues and realize net operating profits,

● lower our operating costs by unburdening certain selling expenses to third party distributors,

● have sufficient cash reserves to pay down accrued expenses and losses,

● 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

● explore opportunities as may present themselves in the Fintech space, including the launch of services by Marygold and Marygold Advisory Services, and the creation of new corporate entities as focused subsidiary holdings.

● Additionally, in December 2021, we filed a registration statement on Form S-1 with the U.S. Securities and Exchange Commission for the sale of our Common Stock and potential uplisting of our Common Stock on the NYSE American. We can give no assurance that we will be able to sell any shares of our Common Stock or that our Common Stock will be approved for trading on the NYSE American.

Liquidity and Capital Resources 

Concierge 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' 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 December 31, 2021, we had $13.3 million of cash and cash equivalents on a consolidated basis as compared to $16.1 million as of June 30, 2021.

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During the past five fiscal years combined, Concierge has invested approximately $8.2 million in cash towards purchasing and assimilating Gourmet Foods and its Printstock subsidiary, Brigadier Security Systems and the Original Sprout assets into the Concierge Technologies group of companies as well as the acquisition through a stock-for-stock exchange of Wainwright, which provides a significant revenue stream and value. We have also invested approximately $5.1 million in the development of Fintech applications through our newly organized subsidiary, Marygold. Despite these cash investments, our working capital position remains strong at $13.3 million. While Concierge intends to maintain and improve its revenue stream from wholly owned subsidiaries, Concierge continues to pursue acquisitions of other profitable companies which meet its target profile. Provided Concierge’s subsidiaries continue to operate as they are presently, and are projected to operate, Concierge 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, the Company’s results of operations could be adversely impacted.

Borrowings

As of December 31, 2021, we had $1.0 million of related-party and third-party indebtedness on a consolidated basis as compared to $1.0 million as of June 30, 2021. Approximately $377,193 is owed by Brigadier and secured with the land and building in Saskatoon purchased in July 2019. The initial principal balance was approximately $401,000 (CAD$525,000 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 December 31, 2021 is approximately $14,199 and the long-term principal amount due is approximately $362,194. Interest on the loan is expensed or accrued as it becomes due. Interest expense on the loan for the three and six months ended December 31, 2021 was $4,026 and $8,014, respectively, as compared to $4,013 and $7,977 for the three and six month periods ended December 31, 2020, respectively. Concierge, without inclusion of its subsidiary companies, as of December 31, 2021 and June 30,2021, had $0.6 million of related-party indebtedness. We are not required to make interest payments on our related party notes until the maturity date. 

Current related party notes payable consist of the following:

	December 31,		June 30,
	2021		2021
Notes payable to shareholder, interest rate of 8%, unsecured and payable on December 31, 2012 (past due)		3,500		3,500
Notes payable to shareholder, interest rate of 4%, unsecured and payable on May 25, 2022		250,000		250,000
Notes payable to shareholder, interest rate of 4%, unsecured and payable on April 8, 2022		350,000		350,000
	$	603,500	$	603,500

Investments

Wainwright, from time to time, provides initial investments in the creation of ETP and ETF funds that Wainwright manages. Wainwright classifies these investments as current assets as these investments are generally sold within one year from the balance sheet date. As of December 31, 2021 and June 30, 2021, Wainwright did not hold any initial investment positions. These 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 have paid no dividends and we do not expect to pay any dividends over the next fiscal year.

Off Balance Sheet Arrangements

As of December 31, 2021, we did not have any off-balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

As a "smaller reporting company", we are not required to provide the information required by this Item.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

Concierge maintains disclosure controls and procedures that are designed to provide reasonable assurances that the information required to be disclosed in Concierge’s periodic reports filed or submitted under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time period specified in the SEC’s rules and forms.

The duly appointed officers of Concierge, 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 Concierge, have evaluated the effectiveness of Concierge’s disclosure controls and procedures and have concluded that the disclosure controls and procedures of Concierge were effective as of the end of the period covered by this quarterly report on Form 10-Q.

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Change in Internal Control Over Financial Reporting

There were no significant changes in the Company's internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect our internal controls over financial reporting.

PART II - OTHER INFORMATION

Item 1.  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 owned subsidiary of the Company.  USCF, as the general partner of 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.

SEC and CFTC Wells Notices

On November 8, 2021, one of Concierge Technologies, 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, announced a resolution with each of the U.S. Securities and Exchange Commission (the “SEC”) and the U.S. Commodity Futures Trading Commission (the “CFTC”) relating to matters set forth in certain Wells Notices issued by the staffs of each of the SEC and CFTC, as detailed 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 relates to USO's disclosures in late April 2020 and early May 2020 regarding constraints imposed on USO's ability to invest in Oil Futures Contracts. The SEC Wells Notice states that the SEC staff has 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 1933 Act and Section 10(b) of the 1934 Act and Rule 10b-5 thereunder, in each case with respect to its disclosures and USO’s actions.

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 states that the CFTC staff has 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, 7 U.S.C. §§ 6o(1)(A), (B), 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), in each case with respect to its disclosures and USO’s actions.

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”). 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 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.

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 1934 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 has moved for their dismissal.

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 1934 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 In re United States Oil Fund, LP Derivative Litigation.

Item 1A. Risk Factors

Concierge 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 December 7, 2021 and the September 22, 2021 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.

There have been no material changes to the risk factors discussed in “Risk Factors” in our registration statement, as amended, filed on December 7, 2021 and the September 22, 2021 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.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None. 

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

As more fully detailed in Item 1 Legal Proceedings of this Form 10-Q and in the Company’s Current Report on Form 8-K, filed with the U.S. Securities and Exchange Commission on November 9, 2021,  on November 8, 2021, one of the "Company’s indirect subsidiaries, the United States Commodity Funds LLC (“USCF”), together with United States Oil Fund, LP (“USO”), for which USCF is the general partner, announced a resolution with each of the U.S. Securities and Exchange Commission (the “SEC”) and the U.S. Commodity Futures Trading Commission (the “CFTC”) relating to matters set forth in certain Wells Notices issued by the staffs of each of the SEC and CFTC.

Item 6. Exhibits

The following exhibits are filed or incorporated by reference as part of this Form 10-Q:

3.1	Amended Articles of Incorporation of Concierge Technologies, Inc. (incorporated by reference to Exhibit A to the Definitive Proxy Materials on Schedule 14A filed on February 28, 2017)
3.2	Certificate of Designation (Series of Preferred Stock) (incorporated by reference to Exhibit 3.1 to the Company's Annual Report on Form 10-K filed on October 8, 2010).
3.3	Amendment to Certificate of Designation filed with the Secretary of State of the State of Nevada on January 31, 2013.*
3.4	Amendment to Certificate of Designation filed with the Secretary of State of the State of Nevada on January 5, 2015.*
3.5	Amended Bylaws of Concierge Technologies, Inc. effective on March 20, 2017 (incorporated by reference to Exhibit B of the Definitive Proxy Materials on Schedule 14A filed on February 28, 2017)
10.1	Concierge Technologies, Inc. 2021 Omnibus Equity Incentive Plan (incorporated by reference to Appendix C of the Information Statement filed pursuant to Section 14C on September 13, 2021).+

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31.1(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(1)	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1(1)	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2(1)	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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)

*	Filed herewith.
+	Management contract or compensatory plan or arrangement.
**	This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any filing, except to the extent the Company specifically incorporates it by reference.

SIGNATURES

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.

	CONCIERGE TECHNOLOGIES, INC.
Dated: February 14, 2022	By:	/s/ Nicholas Gerber
		Nicholas Gerber
		Principal Executive Officer
	By:	/s/ Stuart Crumbaugh
		Stuart Crumbaugh
		Principal Financial and Accounting Officer

A signed original of this written statement required by Section 906 has been provided to Concierge Technologies, Inc. and will be retained by Concierge Technologies, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

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