The Marygold panies(US:MGLD)2023-05-15 19:53PART I. FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial statements and related disclosures for The Marygold Companies, Inc Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for the three and nine-month periods ended March 31, 2023, and March 31, 2022 Condensed Consolidated Balance Sheet Highlights (Unaudited) | Balance Sheet Items | March 31, 2023 | June 30, 2022 | | :--- | :--- | :--- | | Current Assets | | | | Cash and cash equivalents | $9.86 million | $12.92 million | | Total current assets | $25.96 million | $25.24 million | | Total Assets | $34.73 million | $35.31 million | | Current Liabilities | | | | Accounts payable and accrued expenses | $2.41 million | $2.81 million | | Total current liabilities | $3.66 million | $4.81 million | | Total Liabilities | $4.83 million | $6.27 million | | Total Stockholders' Equity | $29.91 million | $29.04 million | Condensed Consolidated Statements of Income Highlights (Unaudited) | Income Statement Items | Three Months Ended Mar 31, 2023 | Three Months Ended Mar 31, 2022 | Nine Months Ended Mar 31, 2023 | Nine Months Ended Mar 31, 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Revenue | $8.30 million | $8.79 million | $26.00 million | $27.96 million | | Gross Profit | $6.10 million | $6.73 million | $19.55 million | $20.83 million | | Income from Operations | $0.17 million | $1.04 million | $1.05 million | $0.72 million | | Net Income | $0.15 million | $0.87 million | $0.83 million | $0.01 million | | Basic EPS | $0.00 | $0.02 | $0.02 | $0.00 | | Diluted EPS | $0.00 | $0.02 | $0.02 | $0.00 | Condensed Consolidated Statements of Cash Flows Highlights (Unaudited) | Cash Flow Items | Nine Months Ended Mar 31, 2023 | Nine Months Ended Mar 31, 2022 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $0.82 million | ($1.77 million) | | Net cash (used in) investing activities | ($4.40 million) | ($1.00 million) | | Net cash (used in) provided by financing activities | ($0.02 million) | $2.97 million | | Net (Decrease) Increase in Cash | ($3.65 million) | $0.11 million | Notes to Condensed Consolidated Financial Statements This section provides detailed explanations of the company's significant accounting policies and breakdowns of financial statement items - The company operates through several wholly-owned subsidiaries in diverse industries and geographies, including USCF Investments (U.S. fund management), Gourmet Foods (New Zealand food products), Brigadier (Canadian security systems), Original Sprout (U.S. beauty products), Marygold & Co. (U.S. Fintech development), and Marygold UK (UK asset management) 32 Revenue by Segment (Unaudited) | Segment | Three Months Ended Mar 31, 2023 | Three Months Ended Mar 31, 2022 | Nine Months Ended Mar 31, 2023 | Nine Months Ended Mar 31, 2022 | | :--- | :--- | :--- | :--- | :--- | | U.S.A. : investment fund management | $5.02 million | $5.87 million | $15.71 million | $17.23 million | | U.S.A. : beauty products | $0.75 million | $0.70 million | $2.33 million | $2.72 million | | New Zealand : food industry | $1.82 million | $1.67 million | $5.70 million | $6.13 million | | Canada : security systems | $0.58 million | $0.56 million | $1.87 million | $1.89 million | | U.K.: financial services | $0.13 million | - | $0.39 million | - | - On June 20, 2022, Marygold UK acquired Tiger Financial and Asset Management Limited for £2.38 million (approx. US$2.91 million), with £0.5 million remaining payable as of March 31, 2023 132 - The company is involved in several legal proceedings through its subsidiary USCF related to the United States Oil Fund, LP (USO), including a $2.5 million settled investigation with the SEC and CFTC, a dismissed action by Optimum Strategies, and ongoing securities and derivative litigations 155156165 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the financial results for the three and nine-month periods ended March 31, 2023, covering consolidated results and segment performance Q3 FY2023 vs Q3 FY2022 Performance | Metric | Q3 2023 | Q3 2022 | Change | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $8.3M | $8.8M | ($0.5M) | -5.7% | | Operating Income | $0.2M | $1.0M | ($0.8M) | -80.0% | | Net Income | $0.2M | $0.9M | ($0.7M) | -82.0% | Nine Months FY2023 vs Nine Months FY2022 Performance | Metric | 9M 2023 | 9M 2022 | Change | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $26.0M | $28.0M | ($2.0M) | -7.1% | | Operating Income | $1.0M | $0.7M | $0.3M | +42.9% | | Net Income | $0.8M | $0.01M | $0.8M | +6,571% | - The increase in nine-month operating and net income was primarily due to a $2.5 million SEC/CFTC legal settlement incurred in the prior-year period 196200211 - The company's liquidity remains strong with $10.3 million in cash and cash equivalents and a working capital position of $22 million as of March 31, 2023, despite investments in acquisitions and Fintech development 251252 Item 3. Quantitative and Qualitative Disclosures About Market Risk As a "smaller reporting company," The Marygold Companies is not required to provide the information for this item - The company states it is not required to provide this information as it qualifies as a "smaller reporting company" 261 Item 4. Controls and Procedures Management evaluated the company's disclosure controls and procedures and concluded they were effective as of March 31, 2023 - The company's principal executive officer and principal financial officer concluded that disclosure controls and procedures were effective as of the end of the period covered by the report 263 - No significant changes were made to the company's internal control over financial reporting during the quarter 264 PART II. OTHER INFORMATION This section covers various other information, including legal proceedings, risk factors, and exhibits Item 1. Legal Proceedings This section details ongoing and resolved legal matters involving the company's subsidiary, USCF, and its fund, USO - The Optimum Strategies Action lawsuit against USO and USCF was dismissed by the court on March 15, 2023 268270 - In November 2021, USCF and USO resolved investigations with the SEC and CFTC, paying a total civil monetary penalty of $2.5 million related to disclosures during market volatility in 2020 271277 - The In re: USO Securities Litigation, a consolidated class action lawsuit, is pending against USCF, USO, and individuals, alleging violations of securities laws related to disclosures in early 2020, which the company intends to vigorously contest 278279281 - Several derivative actions related to the same 2020 market events are stayed pending the outcome of the main securities litigation, and the company also intends to vigorously contest these claims 282285289 Item 1A. Risk Factors The company highlights risks from abrupt changes in market and economic conditions, specifically noting recent banking sector instability - The company identifies significant risk from general economic conditions and financial market volatility, which can directly impact its financial services business 291 - Recent banking failures, such as Silicon Valley Bank (SVB), are cited as a risk factor, with potential indirect impacts on the company's ability to access cash if instability spreads 292 - There have been no other material changes to the risk factors previously disclosed in the company's registration statement and Annual Report on Form 10-K 294 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reports no unregistered sales of equity securities during the period - None reported for the period 295 Item 3. Defaults Upon Senior Securities The company reports no defaults upon senior securities - None reported for the period 296 Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable 297 Item 5. Other Information The company confirms it was not impacted by the failure of Silicon Valley Bank (SVB) - The company states it was not impacted by the failure of Silicon Valley Bank (SVB) and endeavors to keep deposits below the FDIC insured amount of $0.25 million 298 Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including corporate governance documents and required certifications - The report includes a list of filed exhibits, such as the Amended Articles of Incorporation, Bylaws, the 2021 Omnibus Equity Incentive Plan, and certifications from the CEO and CFO as required by the Sarbanes-Oxley Act 299