The Marygold panies(MGLD) - 2023 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides the company's unaudited condensed consolidated financial statements, management's discussion and analysis, market risk disclosures, and internal controls assessment Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for the three and six-month periods ended December 31, 2022, including balance sheets, income statements, cash flows, and detailed notes Condensed Consolidated Balance Sheets This section presents the company's financial position at specific dates, detailing assets, liabilities, and equity | Metric | Dec 31, 2022 | June 30, 2022 | | :--- | :--- | :--- | | Total Current Assets | $26,165,190 | $25,238,382 | | Total Assets | $35,216,847 | $35,310,577 | | Total Current Liabilities | $4,204,784 | $4,807,649 | | Total Liabilities | $5,462,017 | $6,271,303 | | Total Stockholders' Equity | $29,754,830 | $29,039,274 | Condensed Consolidated Statements of Income (Loss) This section details the company's financial performance over specific periods, including net revenue, gross profit, and net income or loss | Metric | Three Months Ended Dec 31, 2022 | Three Months Ended Dec 31, 2021 | | :--- | :--- | :--- | | Net Revenue | $8,772,248 | $9,445,116 | | Gross Profit | $6,541,294 | $7,027,318 | | Income from Operations | $100,114 | $1,326,565 | | Net Income | $181,794 | $1,023,335 | | Basic and Diluted EPS | $0.00 | $0.03 | | Metric | Six Months Ended Dec 31, 2022 | Six Months Ended Dec 31, 2021 | | :--- | :--- | :--- | | Net Revenue | $17,696,534 | $19,173,990 | | Gross Profit | $13,440,565 | $14,105,452 | | Income (Loss) from Operations | $876,991 | ($320,887) | | Net Income (Loss) | $678,962 | ($857,658) | | Basic and Diluted EPS | $0.02 | ($0.02) | - The significant improvement in income from operations for the six-month period is primarily due to a $2.5 million legal settlement expense recorded in the prior year period (ended Dec 31, 2021), which was absent in the current period[17] Condensed Consolidated Statements of Cash Flows This section outlines the company's cash inflows and outflows from operating, investing, and financing activities over specific periods | Cash Flow Activity (Six Months Ended) | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $1,017,595 | ($1,447,862) | | Net cash provided by (used in) investing activities | $64,650 | ($1,030,881) | | Net cash used in financing activities | ($12,672) | ($258,681) | | Net Increase (Decrease) in Cash | $1,057,181 | ($2,787,828) | | Cash, Cash Equivalents and Restricted Cash, Ending Balance | $14,986,080 | $13,299,116 | Notes to Condensed Consolidated Financial Statements These notes provide detailed explanations of the company's business structure, accounting policies, financial statement breakdowns, and segment-level data - The company operates through several wholly-owned subsidiaries in diverse sectors: USCF Investments (investment services), Gourmet Foods (food manufacturing in New Zealand), Brigadier (security systems in Canada), Original Sprout (hair/skin care products), Marygold (Fintech development), and Marygold UK (asset management in the UK)[24][28] - On June 20, 2022, the company's subsidiary Marygold UK acquired Tiger Financial and Asset Management Limited, a UK-based asset manager, for a purchase price of £2,382,372 (approx. US$2.9 million). This acquisition added a new financial services segment in the U.K.[125] - The company's subsidiary USCF and its fund USO are involved in several ongoing legal proceedings, including a putative class action and derivative lawsuits, stemming from market events in 2020. The company intends to vigorously contest these claims[145][156][160] | Segment | Revenue (Six Months Ended Dec 31, 2022) | Net Income (Loss) (Six Months Ended Dec 31, 2022) | | :--- | :--- | :--- | | U.S.A. : investment fund management | $10,685,606 | $3,567,038 | | U.S.A. : beauty products | $1,588,541 | ($61,102) | | New Zealand : food industry | $3,869,752 | $218,078 | | Canada : security systems | $1,294,860 | $180,408 | | U.K.: financial services | $257,775 | $23,056 | | Corporate headquarters | - | ($3,248,516) | | Consolidated Total | $17,696,534 | $678,962 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial results for the three and six-month periods ended December 31, 2022, highlighting revenue changes, net income turnaround, segment performance, and liquidity - For the three months ended Dec 31, 2022, consolidated revenue decreased by $0.6 million YoY to $8.8 million. Operating income fell sharply from $1.3 million to $0.1 million, and net income decreased by 81% to $0.2 million[183][186] - For the six months ended Dec 31, 2022, consolidated revenue decreased by $1.5 million YoY to $17.7 million. However, the company reported a net income of $0.7 million compared to a net loss of ($1.0) million in the prior year, primarily because the prior period included a $2.5 million legal settlement expense[188][189][192] - As of December 31, 2022, the company had $14.6 million in cash and cash equivalents and a working capital position of $22 million, which management believes is sufficient to fund operations and pursue business objectives for the coming year[243][244] Segment Analysis This sub-section provides a detailed operational and financial review of each business segment, comparing performance for the three and six-month periods - USCF Investments: Revenue for the six months ended Dec 31, 2022, decreased by $0.7 million (6%) to $10.7 million due to lower average Assets Under Management (AUM)[202] - Gourmet Foods: Net revenues for the six months decreased from $4.5 million to $3.9 million, attributed to a changing product mix in response to rising raw ingredient costs[211] - Brigadier Security: Showed stable performance with net revenues remaining flat at $1.3 million for the six-month period, and net income increasing from $141 thousand to $181 thousand[221][223] - Original Sprout: Net revenues for the six months decreased from $2.0 million to $1.6 million due to restructuring of domestic distribution channels and increased online competition[229] - Marygold & Co. (UK): This new segment, following the acquisition of Tiger Financial, generated $258 thousand in revenue and $23 thousand in net income for the six months ended Dec 31, 2022[232][237][239] Quantitative and Qualitative Disclosures About Market Risk The company is exempt from providing quantitative and qualitative disclosures about market risk due to its status as a "smaller reporting company" - The company is exempt from providing quantitative and qualitative disclosures about market risk due to its status as a "smaller reporting company"[253] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of December 31, 2022, with no material changes in internal control over financial reporting - The company's Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures were effective as of the end of the reporting period[255] - No significant changes were made to the company's internal control over financial reporting during the quarter[256] PART II. OTHER INFORMATION This section provides information on legal proceedings, risk factors, unregistered equity sales, and a list of filed exhibits Legal Proceedings This section details ongoing litigation involving USCF and its fund USO, including class action and derivative lawsuits, which the company intends to vigorously defend - The company's subsidiary, USCF, and its fund, USO, are defendants in multiple ongoing lawsuits, including the Optimum Strategies Action, a consolidated class action, and derivative actions, all related to market events in 2020[260][269][276] - The company intends to vigorously contest all pending claims and has moved for their dismissal. No accrual for potential losses from these matters has been recorded as of December 31, 2022[262][272][280] - In November 2021, USCF and USO reached a settlement with the SEC and CFTC, paying aggregate civil monetary penalties of $2.5 million[263][268] Risk Factors There have been no material changes to the risk factors previously disclosed in the company's registration statement and Annual Report on Form 10-K - There have been no material changes to the risk factors previously disclosed by the company[282] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None[283] Exhibits This section lists the exhibits filed as part of the Form 10-Q, including corporate governance documents, employment agreements, and SEC certifications - A list of filed exhibits is provided, including Articles of Incorporation, Bylaws, the 2021 Omnibus Equity Incentive Plan, various employment agreements, and CEO/CFO certifications[288]