The Marygold panies(MGLD) - 2023 Q4 - Annual Report

Part I Item 1. Business Marygold Companies operates as a holding company with six decentralized subsidiaries across diverse sectors - The company operates a decentralized management structure, with corporate management responsible for capital allocation and oversight, while subsidiaries handle their own daily operations[15] - The company employs 101 people across all its subsidiaries[15] USCF Investments USCF Investments manages 14 ETPs and ETFs with $3.5 billion in AUM, generating fees and subject to SEC and CFTC regulation - As of June 30, 2023, USCF Investments had approximately $3.5 billion in assets under management across 14 ETPs and ETFs[16] - For the fiscal year 2023, approximately 73% of USCF Investments' revenue came from its three largest funds: United States Oil Fund (USO), United States Natural Gas Fund (UNG), and United States Commodity Index Fund (USCI), consistent with the prior year[20] - The operating subsidiaries, USCF and USCF Advisers, are regulated by the CFTC, NFA, and SEC, reflecting the complex regulatory environment of the investment services industry[22] Gourmet Foods Gourmet Foods, a New Zealand-based manufacturer of meat pies and bakery products, faces rising raw material and labor costs impacting profit margins - Gourmet Foods' largest customer in the grocery sector accounted for 14% of baking sales revenue in FY2023, down from 22% in FY2022[29] - A marketing consortium of gasoline dealers is a major customer group, accounting for 57% of baking gross sales revenue in FY2023, up from 50% in FY2022[30] - The company has been negatively impacted by increased costs of raw ingredients, shipping, and labor shortages following the COVID-19 pandemic[34] Brigadier Brigadier, a leading electronic security company in Saskatchewan, Canada, provides security systems and experiences seasonality from winter weather - Brigadier's largest customer accounted for 42% of its total revenues in FY2023, a decrease from 52% in FY2022, indicating a high level of customer concentration[43] - The business is partially dependent on its contractual relationship with SecurTek, its alarm monitoring service provider[42][43] - Operations are subject to seasonality, with revenues typically lower from November through March due to winter weather negatively affecting installations[46] Original Sprout Original Sprout distributes vegan hair and skin care products globally, shifting to direct-to-consumer channels, impacting sales revenue - The company is shifting its distribution model away from wholesale towards direct-to-retail and direct-to-consumer online platforms to protect its brand and price points[49] - Due to the discontinuation of most domestic distribution agreements, no single customer accounted for 10% or more of total revenues in FY2023, compared to one customer accounting for 11% in FY2022[52] - The company is dependent on two main product formulating and packaging companies for its production[53] Marygold Marygold, a U.S.-based Fintech subsidiary, launched its mobile banking application in June 2023 after completing its development phase - Marygold completed its development phase and launched its mobile app in June 2023, resulting in insignificant operations during the fiscal year[59][60] Marygold UK Marygold UK acquired Tiger Financial and Asset Management Limited in June 2022, managing £32 million (US$40 million) in AUM and operating at cash flow breakeven - Marygold UK acquired Tiger Financial and Asset Management Limited on June 20, 2022[61] - As of June 30, 2023, Tiger has approximately £32 million (US$40 million) in assets under management and is operating at a cash flow breakeven level[61] Item 1A. Risk Factors The company faces diverse risks including material litigation, regulatory compliance, subsidiary dependence, commodity price volatility, and corporate governance issues - The company is subject to class action litigation involving its indirect subsidiary USCF, which could materially adversely affect its financial condition[65][66][67] - As a holding company, its principal source of cash flow is distributions from subsidiaries, which may be limited by law or contracts, posing a risk to its ability to fund new projects or acquisitions[71][73] - Approximately 60% of revenues in FY2023 were derived from the USCF Investments subsidiary, exposing the company to risks related to investor sentiment in ETPs and ETFs[85] - The company is a 'controlled company' as defined by NYSE American rules because more than 50% of voting power is held by Messrs. Gerber and Schoenberger, allowing it to be exempt from certain corporate governance requirements[63][97] - Cybersecurity threats, such as unauthorized infiltration and phishing, pose a significant risk to business operations, with no guarantee that current measures will prevent future attacks[104][105] Item 1B. Unresolved Staff Comments The company reports no unresolved staff comments - None[110] Item 2. Properties Brigadier owns its office facility in Saskatoon, Canada, while all other subsidiaries lease their respective office, warehouse, and manufacturing facilities - Brigadier owns its office facility and land in Saskatoon, purchased in July 2019[110] - All other subsidiaries lease their facilities, including administrative offices in California, manufacturing facilities in New Zealand, and offices in California, Colorado, and England[111] Item 3. Legal Proceedings The company's subsidiary USCF has been involved in significant legal and regulatory matters, including a $2.5 million settlement with the SEC and CFTC, and ongoing class action and derivative lawsuits - In November 2021, USCF and USO settled with the SEC and CFTC regarding investigations into disclosures made in 2020, agreeing to pay aggregate civil monetary penalties of $2.5 million[113][118] - USCF and related parties are defendants in a consolidated class action lawsuit alleging violations of the 1933 and 1934 Acts related to registration statements and public statements made in early 2020[119][120] - Multiple derivative actions have been filed on behalf of USO against USCF and individual defendants, alleging breaches of fiduciary duties and other claims related to the same 2020 market events. These proceedings are currently stayed[124][127][129] - The Optimum Strategies Action, filed in April 2022, was dismissed with prejudice in March 2023 regarding federal claims, and the court declined jurisdiction over state law claims[131][133] Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities The company's common stock trades on NYSE American, with 354 registered holders as of September 20, 2023, and no dividends declared or anticipated Common Stock Trading Prices | Quarter | High ($) | Low ($) | | :--- | :--- | :--- | | Calendar 2022 | | | | 1st Quarter | 7.11 | 1.77 | | 2nd Quarter | 2.30 | 0.97 | | 3rd Quarter | 1.85 | 1.10 | | 4th Quarter | 1.57 | 1.08 | | Calendar 2023 | | | | 1st Quarter | 2.03 | 1.26 | | 2nd Quarter | 1.90 | 1.03 | - As of September 20, 2023, there were approximately 354 registered holders of the company's common stock[138] - The company has declared no dividends for the current year and does not expect to in the foreseeable future, with dividend payments subject to Nevada law and board discretion[139] Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations For FY2023, consolidated revenues decreased by 8% to $34.9 million due to lower AUM, operating income fell to $1.4 million, but net income remained stable at $1.2 million Results of Operations For FY2023, consolidated revenues decreased by 8% to $34.9 million, operating expenses fell, operating income decreased to $1.4 million, and net income remained stable at $1.2 million Consolidated Financial Performance | Metric | FY 2023 | FY 2022 | Change | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Consolidated Revenues | $34.9M | $37.8M | -$3.0M | -8% | | Operating Expenses | $33.5M | $35.5M | -$2.0M | -5.6% | | Operating Income | $1.4M | $2.4M | -$1.0M | -41.7% | | Net Income | $1.2M | $1.15M | +$0.05M | +4.3% | - The decrease in consolidated revenues is primarily attributed to a $3.0 million decrease in annual revenues of USCF Investments due to lower average Assets Under Management (AUM)[155] - The decrease in operating expenses was mainly due to a $2.5 million legal settlement incurred by USCF Investments in the prior year[156] - Comprehensive income for FY2023 was $1.3 million, including a currency translation gain of $0.1 million, compared to $0.8 million in FY2022, which included a currency translation loss of $0.4 million[161] Liquidity and Capital Resources Cash and cash equivalents decreased to $8.2 million due to fintech investments, but the company maintains strong working capital of $22.6 million and low third-party indebtedness - Cash and cash equivalents decreased to $8.2 million as of June 30, 2023, from $12.9 million a year prior, mainly due to investment in the Marygold mobile fintech app[192] - The company has invested approximately $9.4 million in the development of its Fintech applications through its subsidiary, Marygold[193] - Working capital remains strong at approximately $22.6 million as of June 30, 2023[193] - Consolidated third-party debt was $0.3 million as of June 30, 2023, primarily related to a loan secured by Brigadier's property[196] Item 8. Financial Statements and Supplementary Data This section presents the company's consolidated financial statements for FY2023 and FY2022, along with the independent auditor's report, covering key financial statements Consolidated Financial Statements The consolidated financial statements show total assets of $35.3 million and total liabilities of $4.9 million, with net revenue of $34.9 million and net income of $1.17 million Consolidated Balance Sheet | Balance Sheet (June 30, 2023) | Amount ($) | | :--- | :--- | | Total Current Assets | 26,818,342 | | Total Assets | 35,280,827 | | Total Current Liabilities | 4,191,717 | | Total Liabilities | 4,903,057 | | Total Stockholders' Equity | 30,377,770 | Consolidated Income Statement | Income Statement (Year Ended June 30, 2023) | Amount ($) | | :--- | :--- | | Net Revenue | 34,876,734 | | Gross Profit | 26,126,188 | | Income from Operations | 1,420,339 | | Net Income | 1,165,029 | | Diluted EPS | $0.03 | Consolidated Cash Flow Statement | Cash Flow (Year Ended June 30, 2023) | Amount ($) | | :--- | :--- | | Net cash provided by operating activities | 1,851,389 | | Net cash used in investing activities | (7,292,183) | | Net cash used in financing activities | (20,305) | | Net Decrease in Cash | (5,342,689) | Item 9A. Controls and Procedures Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of June 30, 2023, with no material changes - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2023[392] - Management concluded that the company's internal control over financial reporting was effective as of June 30, 2023, based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)[395] - No changes in internal control over financial reporting that materially affected, or are reasonably likely to materially affect, the controls occurred during the fiscal year ended June 30, 2023[398] Part III Item 10. Directors, Executive Officers, and Corporate Governance This section details the company's leadership, including CEO Nicholas D. Gerber, and highlights its 'controlled company' status, exempting it from certain NYSE American governance requirements - The company's executive team includes Nicholas D. Gerber (CEO), David W. Neibert (COO), Stuart P. Crumbaugh (CFO), and Carolyn M. Yu (Chief Legal Officer)[403] - The company is a 'controlled company' under NYSE American rules, which exempts it from requirements for a majority-independent board and fully independent compensation and nominating committees[422] - The Board of Directors has three standing committees: Audit, Compensation, and Nominating and Corporate Governance[431][433][435] Item 11. Executive Compensation For FY2023, base salaries for COO, CFO, and CLO were $425,000 each, while the CEO's salary was $400,000, with independent directors receiving annual retainers and stock awards Executive Compensation Summary | Name and Principal Position | Year | Salary ($) | Bonus ($) | Total ($) | | :--- | :--- | :--- | :--- | :--- | | David W. Neibert, COO | 2023 | 425,000 | 0 | 425,000 | | Nicholas D. Gerber, CEO | 2023 | 400,000 | 0 | 400,000 | | Stuart P. Crumbaugh, CFO | 2023 | 425,000 | 0 | 425,000 | | Carolyn Yu, CLO | 2023 | 425,000 | 0 | 425,000 | - Independent directors receive compensation in the form of cash fees and stock awards. For FY2023, several independent directors received $18,918 in cash fees and a $5,000 stock award[446] Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters As of September 27, 2022, Nicholas D. Gerber (45.21%) and Scott Schoenberger (11.64%) are key beneficial owners, collectively controlling 56.84% of voting stock Beneficial Ownership Summary | Name of Beneficial Owner | Amount Owned | Percent of Class | | :--- | :--- | :--- | | Nicholas D. Gerber | 18,250,015 | 45.21% | | Scott Schoenberger | 4,697,993 | 11.64% | | Sheila Gerber | 3,183,929 | 7.89% | | Gerber Family Trust | 5,623,543 | 13.93% | | Officers and Directors as a Group | 23,234,856 | 57.55% | - Messrs. Gerber and Schoenberger have a voting agreement, representing 56.84% of the Voting Stock, to vote for each other's election to the Board[456] Item 13. Certain Relationships and Related Transactions, and Director Independence The company's 'controlled company' status impacts director independence, with key related party transactions from a 2015 Securities Purchase Agreement and 2016 convertible promissory notes, now repaid - The company applies NYSE American Section 803 definitions for director independence but is exempt from certain requirements due to its 'controlled company' status[457] - In 2015, Nicholas Gerber and Scott Schoenberger acquired a controlling interest (approx. 70% of voting control) in the company for $3 million through a Securities Purchase Agreement[461] - In 2016, trusts affiliated with Mr. Gerber and Mr. Schoenberger provided $600,000 in promissory notes to the company, which were subsequently repaid in full with interest[462] Item 14. Principal Accountant Fees and Services For FY2023, the company incurred total fees of $587,306 from its principal independent accountant for audit, tax, and other services, all pre-approved Principal Accountant Fees | Fee Category | FY 2023 ($) | FY 2022 ($) | | :--- | :--- | :--- | | Audit Fees | 390,816 | 309,802 | | Tax Fees | 164,390 | 171,753 | | All Other Fees | 32,100 | 213,918 | | Total | 587,306 | 695,473 | - All audit and non-audit services provided by the principal accountant are pre-approved by the Audit Committee[467] Part IV Item 15. Exhibits, Financial Statement Schedules This section lists the exhibits filed as part of the Form 10-K, including corporate governance documents, employment agreements, and SOX certifications - The exhibits include the company's Amended Articles of Incorporation, Bylaws, the 2021 Omnibus Equity Incentive Plan, various employment agreements, and CEO/CFO certifications[470]