THE MARYGOLD COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| | June 30, 2022 | | | June 30, 2021 | |
| | | | | | | | |
ASSETS | |
| | | | | | | | |
CURRENT ASSETS | | | | | | | | |
Cash and cash equivalents | | $ | 12,915,620 | | | $ | 16,072,955 | |
Accounts receivable, net | | | 959,350 | | | | 1,070,541 | |
Accounts receivable - related parties | | | 2,230,874 | | | | 2,038,054 | |
Inventories | | | 2,200,742 | | | | 1,951,792 | |
Prepaid income tax and tax receivable | | | 1,166,318 | | | | 747,343 | |
Investments, at fair value | | | 5,065,931 | | | | 1,828,926 | |
Other current assets | | | 699,547 | | | | 399,524 | |
Total current assets | | | 25,238,382 | | | | 24,109,135 | |
| | | | | | | | |
Restricted cash | | | 1,013,279 | | | | 13,989 | |
Property, plant and equipment, net | | | 1,391,894 | | | | 1,573,445 | |
Operating lease right-of-use asset | | | 1,357,686 | | | | 1,058,199 | |
Goodwill | | | 2,307,202 | | | | 1,043,473 | |
Intangible assets, net | | | 2,708,896 | | | | 2,341,803 | |
Deferred tax assets, net - United States | | | 753,078 | | | | 827,476 | |
Other assets, long - term | | | 540,160 | | | | 540,160 | |
Total assets | | $ | 35,310,577 | | | $ | 31,507,680 | |
| | | | | | | | |
LIABILITIES AND STOCKHOLDERS' EQUITY | |
| | | | | | | | |
CURRENT LIABILITIES | | | | | | | | |
Accounts payable and accrued expenses | | $ | 2,805,790 | | | $ | 3,862,874 | |
Expense waivers – related parties | | | 70,199 | | | | 69,684 | |
Operating lease liabilities, current portion | | | 660,957 | | | | 513,071 | |
Purchase consideration payable | | | 1,237,207 | | | | - | |
Notes payable - related parties | | | - | | | | 603,500 | |
Loans-property and equipment, current portion | | | 33,496 | | | | 15,094 | |
Total current liabilities | | | 4,807,649 | | | | 5,064,223 | |
| | | | | | | | |
LONG-TERM LIABILITIES | | | | | | | | |
Loans-property and equipment, net of current portion | | | 459,178 | | | | 379,804 | |
Operating lease liabilities, net of current portion | | | 743,923 | | | | 607,560 | |
Deferred tax liabilities, net - foreign | | | 260,553 | | | | 169,429 | |
Total long-term liabilities | | | 1,463,654 | | | | 1,156,793 | |
Total liabilities | | | 6,271,303 | | | | 6,221,016 | |
| | | | | | | | |
STOCKHOLDERS' EQUITY | | | | | | | | |
Convertible preferred stock, $0.001 par value; 50,000,000 shares authorized | | | | | | | | |
Series B: 49,360 shares issued and outstanding at June 30, 2022 and at June 30, 2021 | | | 49 | | | | 49 | |
Common stock, $0.001 par value; 900,000,000 shares authorized; 39,383,459 shares issued and outstanding at June 30, 2022 and 37,485,959 at June 30, 2021 | | | 39,384 | | | | 37,486 | |
Additional paid-in capital | | | 12,313,205 | | | | 9,330,843 | |
Accumulated other comprehensive (loss) income | | | (234,790 | ) | | | 142,581 | |
Retained earnings | | | 16,921,426 | | | | 15,775,705 | |
Total stockholders' equity | | | 29,039,274 | | | | 25,286,664 | |
Total liabilities and stockholders' equity | | $ | 35,310,577 | | | $ | 31,507,680 | |
The accompanying notes are an integral part of these consolidated financial statements.
THE MARYGOLD COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
| | Year Ended | | | Year Ended | |
| | June 30, 2022 | | | June 30, 2021 | |
| | | | | | | | |
| | | | | | | | |
Net revenue | | | | | | | | |
Fund management - related party | | $ | 23,835,348 | | | $ | 25,169,182 | |
Food products | | | 7,930,888 | | | | 8,263,267 | |
Security systems | | | 2,533,098 | | | | 2,715,487 | |
Beauty products and other | | | 3,529,789 | | | | 3,756,512 | |
Net revenue | | | 37,829,123 | | | | 39,904,448 | |
| | | | | | | | |
Cost of revenue | | | 9,194,783 | | | | 9,290,616 | |
| | | | | | | | |
Gross profit | | | 28,634,340 | | | | 30,613,832 | |
| | | | | | | | |
| | | | | | | | |
Operating expense | | | | | | | | |
Salaries and compensation | | | 8,812,081 | | | | 8,843,618 | |
General and administrative expense | | | 6,794,645 | | | | 7,140,870 | |
Fund operations | | | 4,600,535 | | | | 3,658,593 | |
Marketing and advertising | | | 2,985,659 | | | | 2,952,295 | |
Legal settlement | | | 2,500,000 | | | | - | |
Depreciation and amortization | | | 561,019 | | | | 599,979 | |
Total operating expenses | | | 26,253,939 | | | | 23,195,355 | |
| | | | | | | | |
Income from operations | | | 2,380,401 | | | | 7,418,477 | |
| | | | | | | | |
| | | | | | | | |
Other income (expense): | | | | | | | | |
Interest and dividend income | | | 35,357 | | | | 28,823 | |
Interest expense | | | (31,512 | ) | | | (40,375 | ) |
Other (expense) income, net | | | (26,125 | ) | | | 227,976 | |
Total other (expense) income, net | | | (22,280 | ) | | | 216,424 | |
| | | | | | | | |
Income before income taxes | | | 2,358,121 | | | | 7,634,901 | |
| | | | | | | | |
Provision of income taxes | | | (1,212,400 | ) | | | (1,785,458 | ) |
| | | | | | | | |
Net income | | $ | 1,145,721 | | | $ | 5,849,443 | |
| | | | | | | | |
Weighted average shares | | | | | | | | |
Basic and diluted | | | 39,034,611 | | | | 38,473,159 | |
| | | | | | | | |
Net income per share | | | | | | | | |
Basic and diluted | | $ | 0.03 | | | $ | 0.15 | |
The accompanying notes are an integral part of these consolidated financial statements.
THE MARYGOLD COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
| | Year Ended | | | Year Ended | |
| | June 30, 2022 | | | June 30, 2021 | |
| | | | | | | | |
Net income | | $ | 1,145,721 | | | $ | 5,849,443 | |
| | | | | | | | |
Other comprehensive income: | | | | | | | | |
Foreign currency translation (loss) gain | | | (377,371 | ) | | | 287,325 | |
Comprehensive income | | $ | 768,350 | | | $ | 6,136,768 | |
The accompanying notes are an integral part of these consolidated financial statements.
THE MARYGOLD COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 2022 AND 2021
| | Convertible Preferred Stock | | | | | | | | | | | | | | | | | | | | | | | | | |
| | (Series B) | | | Common Stock | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | Accumulated | | | | | | | | | |
| | | | | | | | | | | | | | | | | | Additional | | | Other | | | | | | | Total | |
| | Number of | | | | | | | Number of | | | Par | | | Paid - in | | | Comprehensive | | | Retained | | | Stockholders' | |
| | Shares | | | Amount | | | Shares | | | Value | | | Capital | | | (Loss) Income | | | Earnings | | | Equity | |
Balance at July 1, 2020 | | | 53,032 | | | $ | 53 | | | | 37,412,519 | | | $ | 37,413 | | | $ | 9,330,912 | | | $ | (144,744 | ) | | $ | 9,926,262 | | | $ | 19,149,896 | |
Gain on currency translation | | | - | | | | - | | | | - | | | | - | | | | - | | | | 287,325 | | | | - | | | | 287,325 | |
Conversion of preferred stock to common stock | | | (3,672 | ) | | | (4 | ) | | | 73,440 | | | | 73 | | | | (69 | ) | | | - | | | | - | | | | - | |
Net income | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 5,849,443 | | | | 5,849,443 | |
Balance at June 30, 2021 | | | 49,360 | | | | 49 | | | | 37,485,959 | | | | 37,486 | | | | 9,330,843 | | | | 142,581 | | | | 15,775,705 | | | | 25,286,664 | |
Loss on currency translation | | | - | | | | - | | | | - | | | | - | | | | - | | | | (377,371 | ) | | | - | | | | (377,371 | ) |
Issuance of common stock in public offering, net of issuance costs $549,090 | | | - | | | | - | | | | 1,897,500 | | | | 1,898 | | | | 2,982,362 | | | | - | | | | - | | | | 2,984,260 | |
Net income | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | 1,145,721 | | | | 1,145,721 | |
Balance at June 30, 2022 | | | 49,360 | | | $ | 49 | | | | 39,383,459 | | | $ | 39,384 | | | $ | 12,313,205 | | | $ | (234,790 | ) | | $ | 16,921,426 | | | $ | 29,039,274 | |
The accompanying notes are an integral part of these consolidated financial statements.
THE MARYGOLD COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
| | For the years ended | |
| | 2022 | | | 2021 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | | | | |
Net income | | $ | 1,145,721 | | | $ | 5,849,443 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | |
Depreciation and amortization | | | 561,019 | | | | 599,979 | |
Deferred taxes | | | 51,689 | | | | (19,092 | ) |
Bad debt expense | | | 4,350 | | | | 9,753 | |
Inventory provision | | | 10,509 | | | | 65,021 | |
Unrealized gain on investments | | | (28,474 | ) | | | (582 | ) |
(Gain) loss on disposal of equipment | | | (17,455 | ) | | | 18,813 | |
Operating lease right of use asset - non-cash lease cost | | | 764,311 | | | | 614,506 | |
| | | | | | | | |
(Increase) decrease in operating assets: | | | | | | | | |
Accounts receivable, net | | | 44,356 | | | | (306,596 | ) |
Accounts receivable - related party | | | (192,820 | ) | | | 572,863 | |
Prepaid income taxes and tax receivable | | | (431,005 | ) | | | 114,083 | |
Inventories | | | (379,905 | ) | | | (787,081 | ) |
Other current assets | | | (287,750 | ) | | | 223,590 | |
Increase (decrease) in operating liabilities: | | | | | | | | |
Accounts payable and accrued expenses | | | (1,048,279 | ) | | | 978,726 | |
Operating lease liabilities | | | (777,082 | ) | | | (361,823 | ) |
Expense waivers - related party | | | 515 | | | | (352,207 | ) |
Net cash (used in) provided by operating activities | | | (580,300 | ) | | | 7,219,396 | |
| | | | | | | | |
CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | | | | |
Cash paid for acquisition of business, net | | | (508,851 | ) | | | (1,115,545 | ) |
Purchase of property, plant and equipment | | | (44,041 | ) | | | (77,721 | ) |
Proceeds from sale of property, plant and equipment | | | 31,612 | | | | - | |
Proceeds from sale of investments | | | 508,122 | | | | - | |
Purchase of investments | | | (3,712,250 | ) | | | (7,827 | ) |
Net cash used in investing activities | | | (3,725,408 | ) | | | (1,201,093 | ) |
| | | | | | | | |
CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | | | | |
Cash received from sale of common stock, net | | | 2,984,260 | | | | - | |
Repayment of related party loans | | | (603,500 | ) | | | - | |
Repayment of property and equipment loans | | | (41,884 | ) | | | (28,434 | ) |
Net cash provided by (used in) financing activities | | | 2,338,876 | | | | (28,434 | ) |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
Effect of exchange rate change on cash, cash equivalents and restricted cash | | | (191,213 | ) | | | 271,033 | |
| | | | | | | | |
NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | | | (2,158,045 | ) | | | 6,260,902 | |
| | | | | | | | |
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING BALANCE | | | 16,086,944 | | | | 9,826,042 | |
| | | | | | | | |
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, ENDING BALANCE | | $ | 13,928,899 | | | $ | 16,086,944 | |
| | | | | | | | |
Cash and cash equivalents | | $ | 12,915,620 | | | $ | 16,072,955 | |
Restricted cash | | | 1,013,279 | | | | 13,989 | |
Total cash, cash equivalents and restricted cash shown in statement of cash flows | | $ | 13,928,899 | | | $ | 16,086,944 | |
| | | | | | | | |
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | | | | | | | | |
Cash paid during the period for: | | | | | | | | |
Interest paid | | $ | 16,401 | | | $ | 16,095 | |
Income taxes paid, net | | $ | 1,704,970 | | | $ | 1,688,781 | |
| | | | | | | | |
NON CASH INVESTING AND FINANCING ACTIVITIES | | | | | | | | |
Reclassification of business acquisition deposit | | $ | - | | | $ | 122,111 | |
Purchase consideration payable | | $ | 1,237,207 | | | $ | - | |
Fair value of warrants of common stock issued to underwriters | | $ | 132,000 | | | $ | - | |
Acquistion of equipment through finance lease liability | | $ | 150,625 | | | $ | - | |
Establishment of operating right-of-use assets through operating lease obligations | | $ | 1,057,965 | | | $ | 730,741 | |
The accompanying notes are an integral part of these consolidated financial statements.
NOTE 1. | ORGANIZATION AND DESCRIPTION OF BUSINESS |
The Marygold Companies, Inc., (the “Company” or “The Marygold Companies”), 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:
● | USCF Investments, Inc. ("USCF Investments") (f/k/a Wainwright Holdings, Inc.), 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 The Marygold Companies to explore opportunities in the financial technology ("Fintech") space, is still in the development stage as of June 30, 2022, and is estimated to launch commercial services within the current calendar year. Through June 30, 2022, expenditures have been limited to developing the business model and the associated application development. The expenses of Marygold have been included with those of the Company for purposes of segmented reporting. |
● | Marygold & Co. (UK) Limited, a newly formed U.K. limited company, together with its newly acquired UK subsidiary, Tiger Financial and Asset Management, Ltd. (collectively “Marygold UK”) is an asset manager and registered investment advisor in the UK. Operations began on June 20, 2022. |
The Marygold Companies manages its operating businesses on a decentralized basis. There are no centralized or integrated operational functions such as marketing, sales, legal or other professional services and there is little involvement by The Marygold Companies’ management in the day-to-day business affairs of its operating subsidiary businesses apart from oversight. The Marygold Companies’ corporate management is responsible for capital allocation decisions, investment activities and selection and retention of the Chief Executive to head each of the operating subsidiaries. The Marygold Companies’ corporate management is also responsible for corporate governance practices, monitoring regulatory affairs, including those of its operating businesses and involvement in governance-related issues of its subsidiaries as needed.
NOTE 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Basis of Presentation and Accounting Principles
The Company has prepared the accompanying financial statements on a consolidated basis. In the opinion of management, the accompanying consolidated balance sheets and related consolidated statements of income, comprehensive income, stockholders' equity, 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”).
Principles of Consolidation
The accompanying consolidated financial statements, which are referred herein as the “Financial Statements”, include the accounts of The Marygold Companies and its wholly-owned subsidiaries, USCF Investments, Gourmet Foods, Brigadier, Original Sprout, Marygold and Marygold UK are presented on a consolidated basis.
All inter-company transactions and accounts have been eliminated in consolidation.
Use of Estimates
The preparation of the Financial Statements in conformity with U.S. GAAP 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 includes all cash and highly liquid debt instruments with original maturities of three months or less on the date of purchase. The Company maintains its cash and cash equivalents in financial institutions in the United States, United Kingdom, Canada, and New Zealand. Accounts in the United States are insured by the Federal Deposit Insurance Corporation up to $250,000 per depositor, accounts in Canada are insured by the Canada Deposit Insurance Corporation up to CD$100,000 per depositor and accounts in the United Kingdom are insured by the Financial Services Compensation Scheme up to £85,000. 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 from 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 June 30, 2022 and June 30, 2021, the Company had $4,350 and $15,499, respectively, reserved for doubtful accounts.
Accounts receivable - related parties, consist of fund asset management fees receivable from the USCF Investments business. Management fees receivable generally consist of one month of management fees which are collected in the month after they are earned. As of June 30, 2022 and June 30, 2021, there is no allowance for doubtful accounts as all amounts are deemed collectible.
Major Customers and Suppliers – Concentration of Credit Risk
The Marygold Companies, as a holding company, operates through its wholly-owned subsidiaries and has no concentration of risk either from customers or suppliers as a stand-alone entity. Marygold, as a newly formed development stage entity, had no revenues and no significant transactions for the years ended June 30, 2022 and 2021. Any transactions that did occur were combined with those of The Marygold Companies. Marygold UK began operations through its newly acquired subsidiary, Tiger, on June 20, 2022 and had no significant transactions for the year ended June 30, 2022.
For our subsidiary, USCF Investments, the concentration of risk and the relative reliance on major customers are found within the various funds it manages and the associated 12 month revenues and accounts receivable – related parties as of June 30, 2022 and June 30, 2021 as depicted below.
| | Year ended June 30, 2022 | | | Year ended June 30, 2021 | |
| | Revenue | | | Revenue | |
Fund | | | | | | | | | | | | | | | | |
USO | | $ | 12,634,794 | | | | 53 | % | | $ | 16,361,870 | | | | 65 | % |
BNO | | | 2,074,177 | | | | 9 | % | | | 2,665,589 | | | | 11 | % |
UNG | | | 2,380,912 | | | | 10 | % | | | 2,054,047 | | | | 8 | % |
USCI | | | 2,266,692 | | | | 10 | % | | | 1,176,094 | | | | 5 | % |
All Others | | | 4,478,773 | | | | 18 | % | | | 2,911,582 | | | | 11 | % |
Total | | $ | 23,835,348 | | | | 100 | % | | $ | 25,169,182 | | | | 100 | % |
| | June 30, 2022 | | | June 30, 2021 | |
| | Accounts Receivable | | | Accounts Receivable | |
Fund | | | | | | | | | | | | | | | | |
USO | | $ | 1,101,495 | | | | 49 | % | | $ | 1,156,691 | | | | 57 | % |
BNO | | | 192,208 | | | | 9 | % | | | 196,713 | | | | 10 | % |
USCI | | | 270,796 | | | | 12 | % | | | 141,346 | | | | 7 | % |
UNG | | | 249,638 | | | | 11 | % | | | 130,543 | | | | 6 | % |
All Others | | | 416,737 | | | | 19 | % | | | 412,761 | | | | 20 | % |
Total | | $ | 2,230,874 | | | | 100 | % | | $ | 2,038,054 | | | | 100 | % |
The Marygold Companies, 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. While these major groups are comprised of different customers and supply chains, we consider the consolidation of Gourmet Foods with Printstock to be within the food industry as Printstock only supplies the food industry manufacturers, some of which are competitors to Gourmet Foods, and the inclusion of Printstock to the Gourmet Foods operations does not extend its presence beyond the food industry. Therefore, for the purpose of segment reporting (Note 15), both revenue streams are considered part of the same "food industry" segment.
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 year ended June 30, 2022, Gourmet Foods’ largest customer in the grocery and food industry, who operates through a number of independently branded stores, accounted for approximately 22% of baking sales revenues as compared to 18% for the year ended June 30, 2021. This customer accounted for 25% of the baking accounts receivable at June 30, 2022 as compared to 19% as of June 30, 2021. The second largest customer in the grocery and food industry did not account for significant sales during the years ended June 30, 2022 and 2021. However, this customer did account for 26% and 27% of baking accounts receivable as of June 30, 2022 and 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 years ended June 30, 2022 and 2021 accounted for approximately 50% and 49%, respectively, of baking gross sales revenues. No single member of the consortium is responsible for a significant portion of Gourmet Foods’ baking accounts receivable, however as a group they collectively accounted for 21% and 22% of baking accounts receivable as of June 30, 2022 and 2021, respectively. A second consortium of gasoline convenience stores accounted for 23% of baking accounts receivable as of June 30, 2022 and June 30, 2021. No single member of this consortium was a significant contributor to Gourmet Foods' sales revenues, but as a group they contributed 8% and 9% of the baking sales revenues for the years ended June 30, 2022 and 2021, respectively.
The third major customer group is independent retailers and cafes, which accounted for the balance of baking gross sales revenue, however no single customer in this group was a significant contributor of baking sales revenues or baking accounts receivable as of and for the years ended June 30, 2022 and 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 37% of the printing sector revenues and 39% of the printing sector accounts receivable as of and for the year ended June 30, 2022 as compared to 33% of printing sector revenues and 40% of printing sector accounts receivable as of and for the year ended June 30, 2021. No other customers comprised a significant contribution to printing sector sales revenues or accounts receivable as of and for the years ended June 30, 2022 and 2021.
Consolidated: With respect to Gourmet Foods’ consolidated risk, the largest three customers accounted for 32%, 14% and 13% as compared to 32%, 12% and 12% of Gourmet Foods' consolidated gross revenues for the years ended June 30, 2022 and 2021, respectively. These same customers accounted for 7%, 8% and 26%, respectively, of the consolidated accounts receivable of Gourmet Foods as of June 30, 2022 as compared to 8%, 7%, 26%, respectively, as of June 30, 2021.
Gourmet Foods, including Printstock, is not dependent upon any one major supplier as many alternative sources are available in the local marketplace should the need arise. However, the unavailability of, or increase in price in, any of the ingredients on which Gourmet Foods relies to produce its products could harm its operating results for such period.
The Marygold Companies, through Brigadier, is partially dependent upon its contractual relationship with the alarm monitoring company that 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 52% and 49% of the total Brigadier revenues for the years ended June 30, 2022 and June 30, 2021, respectively. The same customer accounted for approximately 31% of Brigadier's accounts receivable as of the balance sheet date of June 30, 2022 and 2021. No other customers were significant for the year ended June 30, 2022, however another customer accounted for 12% of total Brigadier revenues and 39% of accounts receivable as of and for the year ended 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.
The Marygold Companies, through Original Sprout, sells its products through 3 channels to market: 1) direct sales to end users via online shopping carts, 2) sales through international wholesale distributors who, in turn, sell to other retailers or wholesalers, and 3) to retail stores selling to end users either from the shelf or online.
Original Sprout has thousands of customers and, from time to time, certain of them become significant during specific reporting periods, but may not be significant during other periods. Due to the increase in online sales channels and the discontinuation of most domestic distribution agreements, Original Sprout had 1 significant international distributor for the year ended June 30, 2022 which accounted for 11% of Original Sprout's total revenues as compared to 4% of total revenues for the year ended June 30, 2021. A different domestic customer, who was insignificant for the year ended June 30, 2022, accounted for 12% of sales for the year ended June 30, 2021. Six different customers, none of whom contributed significant sales levels, accounted for 19%, 16%, 15%, 13%, 12%, and 11% of total accounts receivable as of June 30, 2022 as compared to 15%, 30%, 6%, 7%, 17%, and 11%, respectively, as of June 30, 2021.
The Marygold Companies, 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., (iii) security system hardware in Canada, and (iv) printed debit cards and wearables at Marygold are valued at the lower of cost or net realizable value. Inventories in Canada and New Zealand are maintained on the first-in, first-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 years ended June 30, 2022 and June 30, 2021, the expense for slow moving or obsolete inventory was $10,509 and $65,021, respectively.
Property, Plant and Equipment
Property, plant and equipment are stated at cost, net of accumulated depreciation. Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals and leasehold improvements are capitalized. Office furniture and equipment include office fixtures, computers, printers and other office equipment plus software and applicable packaging designs. Leasehold improvements, which are included in plant and equipment, are depreciated over the shorter of the useful life of the improvement and the length of the lease. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation is computed using the straight line method over the estimated useful life of the asset (see Note 5 to the 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 | |
Intangible Assets
Intangible assets consist of brand names, domain names, recipes, non-compete agreements and customer lists along with the internally developed software in process for the business applications of Marygold to be launched during the coming fiscal year, and the U.K. regulatory certification acquired by Marygold UK in the Tiger purchase transaction. Intangible assets with finite lives are amortized over the estimated useful life and are evaluated for impairment at least on an annual basis and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. When it is determined that an indefinite intangible asset is impaired, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets. There was no impairment recorded for the years ended June 30, 2022 and 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 no impairment recorded for the years ended June 30, 2022 and 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 no impairment recorded for the years ended June 30, 2022 and 2021.
Investments and Fair Value of Financial Instruments
Equity securities included in short-term investments are classified as available-for-sale securities and debt securities are classified as trading securities. The Company measures the investments at fair value at period end with any changes in fair value reflected as unrealized gains or (losses) which is included as part of other (expense) income. 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 U.S. GAAP, and expands disclosures about fair value measurement. The changes to past practice resulting from the application of ASC 820 relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurement. ASC 820 establishes a fair value hierarchy that distinguishes between: (1) 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.
Revenue Recognition
Revenue consists of fees earned through management of investment funds in the United States and in the United Kingdom, sales of gourmet meat pies and printing of food wrappers in New Zealand, sales of security alarm system installation and maintenance services in Canada, and sales of hair and skin care products internationally. Revenue is accounted for net of sales taxes, sales returns, and trade discounts. The performance obligation is satisfied when the product has been shipped and title, risk of loss and rewards of ownership have been transferred. For most of the Company’s product sales or services, the revenue recognition criteria described below are met at the time the product is shipped, the subscription period commences, or the management services are provided. For our Brigadier subsidiary in Canada, the Company operates under contract with an alarm monitoring company that pays a percentage of its recurring monitoring fee to Brigadier in exchange for continued customer service and support functions with respect to each customer maintained under contract by the monitoring company. The Company has no costs of contracts which require capitalization.
The Company 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
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 Consolidated Statements of Income, which for the years ended June 30, 2022 and 2021, were approximately $399,322 and $723,456, or approximately 16% and 27%, respectively, of the total security system revenues. These revenues for the year ended June 30, 2022 account for approximately 1% of total consolidated revenues as compared to 2% for the year ended June 30, 2021. 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; therefore, no deferred revenues or contingent liability reserves have been established with respect to these contracts. The services are deemed delivered as the obligation is acknowledged on a monthly basis.
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 years ended June 30, 2022 and 2021 were approximately $3.0 million and $3.0 million, respectively.
Other Comprehensive Income (Loss)
Foreign Currency Translation
We record foreign currency translation adjustments and transaction gains and losses in accordance with ASC 830, Foreign Currency Matters. The accounts of Gourmet Foods use the New Zealand dollar as the functional currency. The accounts of Brigadier Security System use the Canadian dollar as the functional currency, and the accounts of Marygold UK use the Great Britain pound as the functional currency. Assets and liabilities are translated at the exchange rate on the balance sheet date, and operating results are translated at the weighted average exchange rate throughout the period. Foreign currency transaction gains and (losses) can also occur if a transaction is settled in a currency other than the entity'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 about 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 the geographic locations of its subsidiaries (Refer to Note 16 of the 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 years ended June 30, 2022 and 2021 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 condensed 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 condensed 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 includes the weighted average number of Series B Convertible Preferred shares outstanding also, as they are deemed to be substantially similar to the common shares and shareholders are entitled to the same liquidation and dividend rights. 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.
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 year ended June 30, 2022 | |
| | Net Income | | | Shares | | | Per Share | |
Basic and diluted income per share: | | | | | | | | | | | | |
Net income available to common shareholders | | $ | 1,116,745 | | | | 38,047,411 | | | $ | 0.03 | |
Net income available to preferred shareholders | | | 28,976 | | | | 987,200 | | | $ | 0.03 | |
Basic and diluted income per share | | $ | 1,145,721 | | | | 39,034,611 | | | $ | 0.03 | |
| | For the year ended June 30, 2021 | |
| | Net Income | | | Shares | | | Per Share | |
Basic and diluted income per share: | | | | | | | | | | | | |
Net income available to common shareholders | | $ | 5,693,262 | | | | 37,445,919 | | | $ | 0.15 | |
Net income available to preferred shareholders | | | 156,181 | | | | 1,027,240 | | | $ | 0.15 | |
Basic and diluted income per share | | $ | 5,849,443 | | | | 38,473,159 | | | $ | 0.15 | |
Inventories for Marygold, Gourmet Foods, Brigadier and Original Sprout consisted of the following totals:
| | June 30, 2022 | | | June 30, 2021 | |
Raw materials | | $ | 1,273,581 | | | $ | 942,911 | |
Supplies and packing materials | | | 195,207 | | | | 193,322 | |
Finished goods | | | 731,954 | | | | 815,559 | |
Total inventories | | $ | 2,200,742 | | | $ | 1,951,792 | |
NOTE 5. | PROPERTY, PLANT AND EQUIPMENT |
Property, plant and equipment consisted of the following as of June 30, 2022 and 2021:
| | June 30, 2022 | | | June 30, 2021 | |
Plant and equipment | | $ | 1,905,921 | | | $ | 2,147,617 | |
Furniture and office equipment | | | 254,616 | | | | 246,697 | |
Land and buildings | | | 590,662 | | | | 613,891 | |
Vehicles | | | 363,295 | | | | 412,681 | |
Solar energy system | | | 138,030 | | | | - | |
Total property and equipment, gross | | | 3,252,524 | | | | 3,420,886 | |
Accumulated depreciation | | | (1,860,630 | ) | | | (1,847,441 | ) |
Total property and equipment, net | | $ | 1,391,894 | | | $ | 1,573,445 | |
For the years ended June 30, 2022 and 2021, depreciation expense for property, plant and equipment totaled $243,295 and $265,531, respectively.
NOTE 6. | INTANGIBLE ASSETS |
Intangible assets consisted of the following as of June 30, 2022 and June 30, 2021:
| | June 30, 2022 | | | June 30, 2021 | |
Customer relationships | | $ | 1,363,935 | | | $ | 777,375 | |
Brand name | | | 1,297,789 | | | | 1,199,965 | |
Domain name | | | 36,913 | | | | 36,913 | |
Recipes | | | 1,221,601 | | | | 1,221,601 | |
Internally developed software | | | 217,990 | | | | 217,990 | |
Non-compete agreement | | | 274,982 | | | | 274,982 | |
Total | | | 4,413,210 | | | | 3,728,826 | |
Less : accumulated amortization | | | (1,704,314 | ) | | | (1,387,023 | ) |
Net intangibles | | $ | 2,708,896 | | | $ | 2,341,803 | |
CUSTOMER RELATIONSHIP
On August 11, 2015, the Company acquired Gourmet Foods. 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 Security Systems. 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, 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. On June 20, 2022 our wholly-owned subsidiary, Marygold UK, acquired Tiger Financial and Asset Management Limited. The fair value of the acquired customer relationships was estimated to be $587,328 and is amortized over a useful life of 7 years.
| | June 30, 2022 | | | June 30, 2021 | |
Customer relationships | | $ | 1,363,935 | | | $ | 777,375 | |
Less: accumulated amortization | | | (458,550 | ) | | | (369,471 | ) |
Total customer relationships, net | | $ | 905,385 | | | $ | 407,904 | |
BRAND NAME
On August 11, 2015, the Company acquired Gourmet Foods. 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 Security Systems. 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 continue to 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, 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. On June 20, 2022 our wholly-owned subsidiary, Marygold UK, acquired Tiger Financial and Asset Management Limited. The fair value of the acquired trade name, $24,456, together with is regulatory business certification, $73,368, totaled $97,824 and, like those of Printstock and Original Sprout, would continue to stay in use for an indefinite period of time. Therefore, the Company will test for impairment at each reporting interval with no amortization recognized.
| | June 30, 2022 | | | June 30, 2021 | |
Brand name | | $ | 1,297,789 | | | $ | 1,199,965 | |
Less: accumulated amortization | | | (249,831 | ) | | | (209,620 | ) |
Total brand name, net | | $ | 1,047,958 | | | $ | 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 Security Systems. 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.
| | June 30, 2022 | | | June 30, 2021 | |
Domain name | | $ | 36,913 | | | $ | 36,913 | |
Less: accumulated amortization | | | (36,913 | ) | | | (36,913 | ) |
Total brand name, net | | $ | - | | | $ | - | |
RECIPES AND FORMULAS
On August 11, 2015, the Company acquired Gourmet Foods. 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.
| | June 30, 2022 | | | June 30, 2021 | |
Recipes and formulas | | $ | 1,221,601 | | | $ | 1,221,601 | |
Less: accumulated amortization | | | (701,736 | ) | | | (551,737 | ) |
Total recipes and formulas, net | | $ | 519,865 | | | $ | 669,864 | |
NON-COMPETE AGREEMENT
On June 2, 2016, the Company acquired Brigadier Security Systems. 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.
| | June 30, 2022 | | | June 30, 2021 | |
Non-compete agreement | | $ | 274,982 | | | $ | 274,982 | |
Less: accumulated amortization | | | (257,284 | ) | | | (219,282 | ) |
Total non-compete agreement, net | | $ | 17,698 | | | $ | 55,700 | |
INTERNALLY DEVELOPED SOFTWARE
During the first quarter of 2020, Marygold began incurring expenses in connection with the internal development of software applications that are planned for eventual integration to its consumer Fintech offering. Certain of these expenses, totaling $217,990 as of June 30, 2022 and June 30, 2021, have been capitalized as intangible assets. Once development has been completed and the product is commercially viable, these capitalized costs will be amortized over their useful lives. As of June 30, 2022, no amortization expense has been recorded for these intangible assets.
AMORTIZATION EXPENSE
The total amortization expense for intangible assets for the years ended June 30, 2022 and June 30, 2021 was $317,675 and $334,448, respectively.
Estimated amortization expenses of intangible assets for the next five years ending June 30, are as follows:
Years Ending June 30, | | Expense | |
2023 | | $ | 378,543 | |
2024 | | | 361,226 | |
2025 | | | 345,962 | |
2026 | | | 234,194 | |
2027 | | | 92,417 | |
Thereafter | | | 1,296,554 | |
Total | | $ | 2,708,896 | |
Other Current Assets
Other current assets totaling $699,547 as of June 30, 2022 and $399,524 as of June 30, 2021 are comprised of various components as listed below.
| | As of June 30, 2022 | | | As of June 30, 2021 | |
Prepaid expenses | | $ | 630,285 | | | $ | 373,381 | |
Other current assets | | | 69,262 | | | | 26,143 | |
Total | | $ | 699,547 | | | $ | 399,524 | |
Investments
USCF Investments, from time to time, provides initial seed capital in connection with the creation of ETPs or ETFs that are managed by USCF or USCF Advisers. USCF Investments classifies these investments as current assets as these investments are generally sold within one year of the balance sheet date. Investments in which no controlling financial interest or significant influence exists are recorded at fair value with the change included in earnings on the Consolidated Statements of Income. Investments in which no controlling financial interest exists, but significant influence exists are recorded per the equity method of investment accounting unless the fair value option is elected under Accounting Standards Codification ("ASC") 825, Fair Value Option. As of June 30, 2022 and 2021, the Company owned $1.3 million and $0, respectively, of the USCF Gold Strategy Plus Income Fund ("GLDX"), a related party managed by USCF Advisers, which is included in other equities in the below table. The Company elected the fair value option related to this investment as the shares were purchased and will be sold on the market and this accounting treatment is deemed to be most informative. The Company recognized unrealized gains of $33 thousand and $0 during the years ended June 30, 2022 and 2021, respectively. In addition to the holdings in GLDX, the Company also invests in marketable securities. As of June 30, 2022 and 2021, the aggregate of such investments were approximately $5.1 million and $1.8 million, respectively.
All of the Company's short-term investments are classified as Level 1 assets as of June 30, 2022 and June 30, 2021. Investments measured at estimated fair value consist of the following as of June 30, 2022 and June 30, 2021:
| | As of June 30, 2022 | |
| | | | | | Gross | | | Gross | | | Estimated | |
| | | | | | Unrealized | | | Unrealized | | | Fair | |
| | Cost | | | Gains | | | Losses | | | Value | |
Money market funds | | $ | 1,051,017 | | | $ | - | | | $ | - | | | $ | 1,051,017 | |
Other short-term investments | | | 271,346 | | | | - | | | | (1,919 | ) | | | 269,427 | |
Short-term treasury bills | | | 2,470,020 | | | | - | | | | (4,156 | ) | | | 2,465,864 | |
Other equities | | | 1,246,926 | | | | 32,697 | | | | - | | | | 1,279,623 | |
Total short-term investments | | $ | 5,039,309 | | | $ | 32,697 | | | $ | (6,075 | ) | | $ | 5,065,931 | |
| | As of June 30, 2021 | |
| | | | | | Gross | | | Gross | | | Estimated | |
| | | | | | Unrealized | | | Unrealized | | | Fair | |
| | Cost | | | Gains | | | Losses | | | Value | |
Money market funds | | $ | 1,044,748 | | | $ | 5,378 | | | $ | - | | | $ | 1,050,126 | |
Other short-term investments | | | 772,981 | | | | 4,568 | | | | - | | | | 777,549 | |
Other equities | | | 1,421 | | | | - | | | | (170 | ) | | | 1,251 | |
Total short-term investments | | $ | 1,819,150 | | | $ | 9,946 | | | $ | (170 | ) | | $ | 1,828,926 | |
During the years ended June 30, 2022 and 2021, there were no transfers between Level 1 and Level 2.
Restricted Cash
At June 30, 2022 and 2021, Gourmet Foods had on deposit approximately NZ$20,000 (approximately US$12,486 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.
At June 30, 2022, Marygold UK had on deposit £823,768 (approximately US$1,000,793) securing deferred purchase price payments due the seller of Tiger. The cash deposit is restricted by covenant from access or withdrawal prior to payment of the remaining deferred purchase price. The Company had no similar deposits at June 30, 2021.
Long - Term Assets
Other long-term assets totaling $540,160 at June 30, 2022 and $540,160 at June 30, 2021, were attributed to USCF Investments and Original Sprout and consisted of
| (i) | $500,000 as of June 30, 2022 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 no impairment recorded for the years ended June 30, 2022 and June 30, 2021; |
| (ii) | and $40,160 as of June 30, 2022 and $40,160 at June 30, 2021 representing deposits and prepayments of rent. |
Goodwill represents the excess of the aggregate purchase price over the fair value of the net assets acquired in business combinations. The amounts recorded in goodwill for June 30, 2022 and 2021 were $2,307,202 and $1,043,473, respectively.
Goodwill is comprised of the following amounts:
| | As of June 30, 2022 | | | As of June 30, 2021 | |
| | | | | | | | |
Goodwill – Original Sprout | | $ | 416,817 | | | $ | 416,817 | |
Goodwill – Gourmet Foods (1) | | | 275,311 | | | | 275,311 | |
Goodwill - Brigadier | | | 351,345 | | | | 351,345 | |
Goodwill - Marygold & Co. (UK) (1) | | | 1,263,729 | | | | - | |
Total | | $ | 2,307,202 | | | $ | 1,043,473 | |
(1) Refer to Note 13, Business Combinations, regarding increase in goodwill during the years ended June 30, 2022 and 2021.
The Company tests for goodwill impairment at each reporting unit. There was no goodwill impairment for the years ended June 30, 2022 and June 30, 2021.
NOTE 9. | ACCOUNTS PAYABLE AND ACCRUED EXPENSES |
Accounts payable and accrued expenses consisted of the following:
| | June 30, 2022 | | | June 30, 2021 | |
Accounts payable | | $ | 2,001,978 | | | $ | 1,672,647 | |
Accrued interest | | | - | | | | 129,596 | |
Taxes payable | | | 196,473 | | | | 238,020 | |
Accrued payroll, vacation and bonus payable | | | 331,644 | | | | 1,049,359 | |
Accrued operating expenses | | | 275,695 | | | | 773,252 | |
Total | | $ | 2,805,790 | | | $ | 3,862,874 | |
NOTE 10. | RELATED PARTY TRANSACTIONS |
Notes Payable - Related Parties
Notes payable totaling $600,000 in principal plus $144,000 in accrued interest were repaid to two shareholders as of June 30, 2022, and the Company currently has no notes payable outstanding to related parties. Interest expense for all related party notes for the years ended June 30, 2022 and 2021 was $19,798 and $24,281, respectively. Total accrued interest due related parties was $0 and $129,596 as of June 30, 2022 and 2021, respectively.
USCF Investments - Related Party Transactions
The Funds managed by USCF and USCF Advisers are deemed by management to be related parties. The Company’s USCF Investments revenues, totaling $23.8 million and $25.2 million for the years ended June 30, 2022 and 2021, respectively, were earned from these related parties. Accounts receivable, totaling $2.2 million and $2.0 million as of June 30, 2022 and June 30, 2021, respectively, were owed from the Funds that are related parties. Fund expense waivers, totaling $0.1 million and $0.9 million and fund expense limitation amounts, totaling $0.1 million and $0.1 million, for the years ended June 30, 2022 and 2021, respectively, were incurred on behalf of these related parties. Waivers payable, totaling $0.1 million and $0.1 million as of June 30, 2022 and June 30, 2021, respectively, were owed to these related parties. Fund expense waivers and fund expense limitation obligations are defined under Note 15 to the Consolidated Financial Statements. USCF Investments, from time to time, provides initial investments in the creation of ETP and ETF funds that USCF manages. Such investments included GLDX, a related party fund managed by USCF Advisers, and as of June 30, 2022 and June 30, 2021, the investment total was $1.3 million and $0, respectively. The Company owns approximately 40% and 0% of the outstanding shares of this investment as of June 30, 2022 and June 30, 2021, respectively.
NOTE 11. | LOANS - PROPERTY AND EQUIPMENT |
As of June 30, 2022, Brigadier had an outstanding principal balance of CD$471,015 (approx. US$365,429 translated as of June 30, 2022) due to Bank of Montreal related to the purchase of its Saskatoon office land and building. The Consolidated Balance Sheets as of June 30, 2022 and June 30, 2021 reflect the amount of the principal balance which is due within twelve months as a current liability of US$15,135 and a long-term liability of US$350,293. Interest on the mortgage loan for the year ended June 30, 2022 and 2021 was US$15,742 and US$16,078, respectively.
NOTE 12. | STOCKHOLDERS' EQUITY |
Common Stock Issued in Underwritten Offering
On March 9, 2022, the Company entered into an underwriting agreement (the “Underwriting Agreement”) between the Company and Maxim Group LLC (the “Underwriter”), relating to the Company’s upsized underwritten public offering (the “Offering”) of 1,650,000 shares (the “Shares”) of the Company’s common stock, par value $0.001 per share (the “Common Stock”). The Offering was made pursuant to the Company’s registration statement on Form S-1 (File No. 333-261522), previously filed with Securities Exchange Commission (SEC) and subsequently declared effective by the SEC on March 9, 2022.
Pursuant to the Underwriting Agreement, the public offering price was $2.00 per Share (the "Offering Price"), and the Underwriter purchased the Shares at a 7.0% discount to the public Offering Price. The Company granted the Underwriter the option to purchase, within 45 days from the date of the Underwriting Agreement, an additional 247,500 shares of Common Stock at the same price per share as the Shares (the “Over-Allotment Option”), which the Underwriter exercised in full on March 11, 2022. Maxim Group LLC acted as sole book-running manager for the Offering.
The Underwriting Agreement includes customary representations, warranties and agreements by the Company, customary conditions to closing, indemnification obligations of the Company and the Underwriter, including liabilities under the Securities Act of 1933, as amended, other obligations of the parties and termination provisions. In addition, pursuant to the terms of the Underwriting Agreement and related “lock-up” agreements, the Company, each director and executive officer of the Company and certain significant stockholders of the Company have agreed not to sell, transfer or otherwise dispose of securities of the Company, without the prior written consent of the Underwriter, for a 180-day period, subject to certain limitations therein.
In exchange for the Underwriter’s services, the Company agreed to (i) sell the Common Stock to the Underwriter at a purchase price of $1.86 per share of Common Stock, reflecting the underwriting discount of 7%, and (ii) issue the Underwriter (or its designees) the Warrants to purchase shares of Common Stock equal to 5.0% of the aggregate number of shares of Common Stock sold in the Offering, along with associated registration rights (the “Underwriter’s Warrants”).
On March 14, 2022, the Offering closed resulting in the Company selling a total of 1,897,500 shares of common stock, including 247,500 shares sold pursuant to the full exercise of the underwriter’s over-allotment option. Gross proceeds from the offering were approximately $3,795,000 before underwriting discounts and other estimated offering expenses which totaled $265,650 and $545,090, respectively. There has been no material change in the planned use of proceeds as described in our final prospectus filed with the SEC on March 9, 2022 pursuant to Rule 424(b)(4).
Underwriter's Warrants
On March 14, 2022, pursuant to the Underwriting Agreement, the Company issued the Underwriter’s Warrants to purchase up to an aggregate of 82,500 shares of Common Stock as compensation for their services related to this issuance. The Underwriter’s Warrants may be exercised beginning on September 14, 2022, until March 14, 2027. The initial exercise price of each Warrant is $2.40 per share, which represents 120% of the Offering Price. The total fair value of the warrants granted to the Underwriter was $132,000. The Company estimated the fair value of the warrants using the Black-Scholes option pricing model using the following assumptions: Risk-free interest rate of 2.10%, expected life of 5 years, dividend yield of 0% and volatility of 117%. As the warrant issuance was for services rendered related to an equity issuance, no expense was recognized during the year ended June 30, 2022 related to the issuance.
Convertible Preferred Stock
The Company has 50,000,000 shares authorized to issue as Preferred Stock. The Preferred Stock is designated into two series, 5,000,000 designated as Series A, and 45,000,000 designated as Series B. As of June 30, 2022 there are no issued or outstanding shares of Series A 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 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 June 30, 2022.
Stock-based Awards - Employees and Vendor Compensation
For the year ending June 30, 2022 the Company's 2021 Omnibus Equity Incentive Plan did not issue any awards and had no awards outstanding. Subsequent to year end the Company issued awards. Refer to Note 17 for details.
There were no shares issued for services during the year ended June 30, 2022 and June 30, 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 September 30, 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 | |
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 | |
On August 17, 2021, our wholly-owned subsidiary Marygold UK entered into a Stock Purchase Agreement (“SPA”) to acquire all the issued and outstanding shares of Tiger Financial and Asset Management Limited (“Tiger”), a company incorporated and registered in England and Wales and located in Northampton, England. Tiger is an asset manager and investment advisor operating pursuant to certification by the Financial Conduct Authority of the United Kingdom with approximately £42 million in assets under management as of June 20, 2022. The transaction closed on June 20, 2022 with an agreed purchase price of £2,382,372 (translated to US$2,913,164), subject to adjustment as provided for in the SPA. As of June 30, 2022 approximately£1,018,935 remained payable, £18,935 of which is payable within 20 business days of closing, followed by subsequent equal payments of £500,000 due on December 31, 2022 and December 31, 2023, subject to downward adjustment per the terms of the SPA for an amount up to £500,000 should existing clientele close their accounts prior to December 31, 2023. There is no provision for any upward adjustments. As a result, management was able to complete its preliminary purchase price allocation as follows, under the assumption no downward adjustment will take place on December 31, 2023. Included in the allocation are estimated income tax liabilities of approximately US$86,277 pertaining to the operations prior to acquisition, and $113,833 of deferred income tax liabities associated with the value of the acquired intangible assets. The amounts have been translated to US currency as of the acquisition date. Tiger will be operated as a subsidiary of Marygold UK and is expected to be initially cash flow neutral. In addition to growing the business through increasing assets under management, Marygold UK intends to project the fintech mobile app services to be offered by Marygold in the U.S. into the U.K. through the established contacts and certifications held by Tiger.
Item | | Amount | |
Cash in bank | | $ | 1,159,020 | |
Prepayments/deposits | | | 17,962 | |
Property and equipment | | | 2,922 | |
Intangible assets | | | 684,768 | |
Goodwill | | | 1,263,729 | |
Tax liability | | | (86,277 | ) |
Deferred tax liability | | | (113,833 | ) |
Accounts payable and accrued expenses | | | (15,127 | ) |
Total Purchase Price | | $ | 2,913,164 | |
Supplemental Pro Forma Information (Unaudited)
The following unaudited supplemental pro forma information for the year ended June 30, 2022, assumes the acquisition of Tiger had occurred as of July 1, 2021, giving effect on a pro forma basis to purchase accounting adjustments such as depreciation of property and equipment, amortization of intangible assets, and acquisition related costs. The pro forma data is for informational purposes only and may not necessarily reflect the actual results of operations had Tiger been operated as part of the Company since July 1, 2021. Furthermore, the pro forma results do not intend to predict the future results of operations of the Company.
| | Year Ended June 30, 2022 | | | Year Ended June 30, 2022 | |
| | Actual | | | Pro Forma | |
Net revenues | | $ | 37,829,123 | | | $ | 38,475,091 | |
Net income | | $ | 1,145,721 | | | $ | 1,464,172 | |
Basic and diluted earnings per share | | $ | 0.03 | | | $ | 0.04 | |
The following table summarizes income before income taxes:
| | Years Ended June 30, | |
| | 2022 | | | 2021 | |
U.S. | | $ | 2,067,224 | | | $ | 6,983,223 | |
Foreign | | | 290,897 | | | | 651,678 | |
Income before income taxes | | $ | 2,358,121 | | | $ | 7,634,901 | |
Income Tax Provision
Provision for income tax as listed on the Consolidated Statements of Income for the years ended June 30, 2022 and 2021 are $1,212,400 and $1,785,458, respectively.
Provision for taxes consisted of the following:
| | Years Ended June 30, | |
| | 2022 | | | 2021 | |
U.S. operations | | $ | 1,062,895 | | | $ | 1,488,351 | |
Foreign operations | | | 149,505 | | | | 297,107 | |
Total | | $ | 1,212,400 | | | $ | 1,785,458 | |
Provisions for income tax consisted of the following as of the years ended:
For the year ended: | | June 30, 2022 | | | June 30, 2021 | |
| | | | | | | | |
Current: | | | | | | | | |
Federal | | $ | 741,200 | | | $ | 1,426,303 | |
States | | | 242,393 | | | | 122,052 | |
Foreign | | | 177,118 | | | | 256,195 | |
Total current | | | 1,160,711 | | | | 1,804,550 | |
Deferred: | | | | | | | | |
Federal | | | 69,422 | | | | (56,397 | ) |
States | | | 9,880 | | | | (3,607 | ) |
Foreign | | | (27,613 | ) | | | 40,912 | |
Total deferred | | | 51,689 | | | | (19,092 | ) |
Total | | $ | 1,212,400 | | | $ | 1,785,458 | |
Tax effects of temporary differences that give rise to significant portions of the Company’s deferred tax assets for the years ended June 30, 2022 and 2021 are presented below:
For the year ended: | | June 30, 2022 | | | June 30, 2021 | |
| | | | | | | | |
Deferred tax assets: | | | | | | | | |
Property and equipment and intangible assets - U.S. | | $ | 445,629 | | | $ | 469,403 | |
Net operating loss | | | 4,904 | | | | 14,220 | |
Accruals, reserves and other - U.S. | | | 297,521 | | | | 336,823 | |
Leasing assets | | | 137,756 | | | | 245,819 | |
Leasing liabilities | | | (132,732 | ) | | | (238,789 | ) |
Gross deferred tax assets | | | 753,078 | | | | 827,476 | |
Less valuation allowance | | | - | | | | - | |
Total deferred tax assets | | $ | 753,078 | | | $ | 827,476 | |
| | | | | | | | |
Deferred tax liabilities: | | | | | | | | |
Intangible assets - foreign | | $ | (237,844 | ) | | $ | (150,878 | ) |
Accruals, reserves and other - foreign | | | (22,709 | ) | | | (18,551 | ) |
Total deferred tax liabilities | | $ | (260,553 | ) | | $ | (169,429 | ) |
Total net deferred tax assets | | $ | 492,525 | | | $ | 658,047 | |
The Company’s accounting for deferred taxes involves the evaluation of a number of factors concerning the realizability of the Company’s net deferred tax assets. The Company primarily considered such factors as the Company’s history of operating losses; the nature of the Company’s deferred tax assets and the timing, likelihood and amount, if any, of future taxable income during the periods in which those temporary differences and carryforwards become deductible. At present, the Company does believe that it is more likely than not that the deferred tax assets will be realized. The valuation allowance was unchanged during the year ended June 30, 2022.
On March 27, 2020 the U.S. enacted the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act). The Company has evaluated the provisions of the CARES Act and determined that it did not result in a significant impact on the Company’s tax provision.
Income tax expense (benefit) for the years ended June 30, 2022 and June 30, 2021 differed from the amounts computed by applying the statutory federal income tax rate of 21.00% to pretax income (loss) as a result of the following:
For the year ended: | | June 30, 2022 | | | June 30, 2021 | |
| | | | | | | | |
Federal tax expense (benefit) at statutory rate | | $ | 495,287 | | | $ | 1,603,764 | |
State income taxes | | | 201,369 | | | | 92,813 | |
Permanent differences | | | 371,987 | | | | 17,737 | |
Foreign tax credit | | | (58,413 | ) | | | (88,648 | ) |
Change in valuation allowance | | | - | | | | - | |
Foreign rate differential | | | 202,170 | | | | 159,792 | |
Total tax expense | | $ | 1,212,400 | | | $ | 1,785,458 | |
For the year ended: | | June 30, 2022 | | | June 30, 2021 | |
| | | | | | | | |
Federal tax expense (benefit) at statutory rate | | | 21.00 | % | | | 21.00 | % |
State income taxes | | | 8.54 | % | | | 1.22 | % |
Permanent differences * | | | 20.60 | % | | | 0.23 | % |
Foreign rate differential | | | 8.57 | % | | | 2.09 | % |
Foreign tax credit | | | (2.48 | )% | | | (1.16 | )% |
Change in valuation allowance | | | 0 | % | | | 0 | % |
Total tax expense | | | 56.23 | % | | | 23.38 | % |
* Substantially all of the permanent differences in during the year ended June 30, 2022 related to the $2,500,000 legal settlement being permanently nondeductible for income taxes.
Tax positions are evaluated in a two-step process. The Company first determines whether it is more likely than not that a tax position will be sustained upon examination. If a tax position meets the more-likely-than-not recognition threshold it is then measured to determine the amount of benefit to recognize in the financial statements. The tax position is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. The aggregate changes in the balance of gross unrecognized tax benefits, which includes interest and penalties, for the years ended June 30, 2022 and 2021 are as follows:
Balance at June 30, 2021 | | $ | 302,335 | |
Additions based on tax positions taken during a prior period | | | 12,597 | |
Reductions based on tax positions taken during a prior period | | | - | |
Additions based on tax positions taken during the current period | | | - | |
Reductions based on tax positions taken during the current period | | | - | |
Reductions related to settlement of tax matters | | | - | |
Reductions related to a lapse of applicable statute of limitations | | | - | |
Balance at June 30, 2022 | | $ | 314,932 | |
The Company files income tax returns in the United States, and various state and foreign jurisdictions. The federal, state and foreign income tax returns are subject to tax examinations for the tax years 2018 through 2021 as of year ended June 30, 2022. To the extent the Company has tax attribute carry forwards, the tax years in which the attribute was generated may still be adjusted upon examination by the U.S. Internal Revenue Service, state or foreign tax authorities to the extent utilized in a future period. There were no ongoing examinations by taxing authorities as of June 30, 2022.
The Company had $0.3 million of unrecognized tax benefits as of June 30, 2022 and 2021 that if recognized would affect the effective tax rate. The Company does not anticipate a significant change to its unrecognized tax benefits in the year ended June 30, 2023.
The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. As of June 30, 2022, and 2021, the Company accrued and recognized as a liability $62,987 and $50,389, respectively, of interest and penalties related to uncertain tax positions.
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 are not recorded on the balance sheet and expensed as incurred and included within rent expense under general and administrative expense. Lease expense is recognized on a straight-line basis over the expected lease term.
The Company’s most significant operating leases are real estate leases of office, warehouse and production facilities. The remaining operating leases are primarily comprised of leases of printers and other equipment which are deemed insignificant. For all operating leases, the Company has elected the practical expedient permitted under Topic 842 to combine lease and non-lease components. As a result, non-lease components, such as common area or equipment maintenance charges, are accounted for as a single lease element.
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 $21,507 (GST not included) translated to U.S. currency as of June 30, 2022. Additionally, Gourmet Foods has one finance lease for its solar energy system that ends in December 2031 at the monthly rate (GST not included) of approximately US$1,637 translated as of June 30, 2022. Brigadier leases office and storage facilities in Regina, Saskatchewan. The minimum lease obligations for the Regina facility require monthly payments of approximately US$2,558 translated to U.S. currency as of June 30, 2022. 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. USCF Investments 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 years ended June 30, 2022 and 2021, the combined lease payments of the Company and its subsidiaries totaled $824,196 and $763,304, respectively, and recorded under general and administrative expense in the Consolidated Statements of Income. As of June 30, 2022 the Consolidated Balance Sheets included operating lease right-of-use assets totaling $1,357,686, recorded net of $47,195 in deferred rent, and $1,404,880 in total operating lease liabilities.
Future minimum consolidated lease payments for The Marygold Companies and its subsidiaries are as follows:
Year Ended June 30, | | Operating Leases | | | Finance Lease | |
2023 | | $ | 714,701 | | | $ | 19,644 | |
2024 | | | 457,865 | | | | 19,644 | |
2025 | | | 165,331 | | | | 19,644 | |
2026 | | | 152,324 | | | | 19,644 | |
2027 | | | 63,468 | | | | 19,644 | |
Thereafter | | | - | | | | 86,759 | |
Total minimum lease payments | | | 1,553,689 | | | | 184,979 | |
Less: Present value discount | | | (148,809 | ) | | | (54,170 | ) |
Total operating lease liabilities | | $ | 1,404,880 | | | $ | 130,809 | |
The weighted average remaining lease term for the Company's operating leases was 3.01 years as of June 30, 2022 and a weighted-average discount rate of 5.6% was used to determine the total operating lease liabilities.
Additionally, Gourmet Foods entered into a General Security Agreement in favor of the Gerald O’Leary Family Trust and registered on the Personal Property Securities Register for a priority sum of NZ$110,000 (approximately US$68,675) to secure the lease of its primary facility. In addition, a NZ$20,000 (approximately US$12,486) bond has been posted through ANZ Bank and secured with a cash deposit of equal amount to secure a separate facilities lease. The General Security Agreement and the cash deposit will remain until such time as the respective leases are satisfactorily terminated in accordance with their terms. Interest from the cash deposit securing the lease accumulates to the benefit of Gourmet Foods and is listed as a component of interest income/expense on the accompanying 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 reimbursed 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 June 30, 2022 and 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 June 30, 2022, Marygold has future payment commitments with its primary service vendors totaling $0.8 million including approximately $0.5 million due in fiscal 2023 and $0.3 million due in fiscal 2024.
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 the United States Oil Fund, LP ("USO") and the general partner and sponsor of the related public funds may, from time to time, be involved in litigation arising out of its operations in the ordinary course of business. Except as described herein, USO and USCF are not currently party to any material legal proceedings.
Optimum Strategies Action
On April 6, 2022, USO and USCF were named as defendants in an action filed by Optimum Strategies Fund I, LP, a purported investor in call option contracts on USO (the “Optimum Strategies Action”). The action is pending in the U.S. District Court for the District of Connecticut at Civil Action No. 3:22-cv-00511.
The Optimum Strategies Action asserts claims under the Securities Exchange Act of 1934, as amended (the “1934 Act”), Rule 10b-5 thereunder, and the Connecticut Uniform Securities Act. It purports to challenge statements in registration statements that became effective in February 2020, March 2020, and on April 20, 2020, as well as public statements between February 2020 and May 2020, in connection with certain extraordinary market conditions and the attendant risks that caused the demand for oil to fall precipitously, including the COVID-19 global pandemic and the Saudi Arabia-Russia oil price war. The complaint seeks damages, interest, costs, attorney’s fees, and equitable relief.
USCF and USO intend to vigorously contest such claims and have moved for their dismissal.
Settlement of SEC and CFTC Investigations
On November 8, 2021, one of The Marygold Companies, Inc.’s (the “Company”) indirect subsidiaries, the United States Commodity Funds LLC (“USCF”), together with United States Oil Fund, LP (“USO”), for which USCF is the general partner, 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 stated that the SEC staff made a preliminary determination to recommend that the SEC file an enforcement action against USCF, USO, and Mr. Love alleging violations of Sections 17(a)(1) and 17(a)(3) of the Securities Act of 1933, as amended (the “1933 Act”), and Section 10(b) of the 1934 Act, and Rule 10b-5 thereunder.
Subsequently, on August 19, 2020, USCF, USO, and Mr. Love received a Wells Notice from the staff of the CFTC (the “CFTC Wells Notice”). The CFTC Wells Notice stated that the CFTC staff made a preliminary determination to recommend that the CFTC file an enforcement action against USCF, USO, and Mr. Love alleging violations of Sections 4o(1)(A) and (B) and 6(c)(1) of the CEA, 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).
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.
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.
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. No accrual has been recorded with respect to the above legal matters as of June 30, 2022 and 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 Annual Report on Form 10-K filing, Marygold estimates that approximately 80 end-customer accounts were opened fraudulently that resulted in approximately $103,000 being misappropriated. Upon learning of this activity, Marygold removed its app from all App Stores including, Apple and Android, to prevent any fraudulent activity through opening of new accounts created on its platform. Marygold further believes that no personal identifiable information was compromised. Marygold continues to monitor the security measures of its Fintech platform while continuing development. The accrual of approximately $250,000 was recorded through other income (expense) during the quarter ended December 31, 2021, and was reduced by approximately $147,000 during the year ended June 30, 2022 as the total amount of the estimated loss decreased.
Retirement Plan
The Marygold Companies, through its wholly owned subsidiary USCF, has a 401(k) Profit Sharing Plan ("401K Plan") covering U.S. employees, including Original Sprout and Marygold, who are over 21 years of age and who have completed a minimum of 1,000 hours of service and have worked for the respective Marygold Companies subsidiary for at least three months. Participants may make contributions pursuant to a salary reduction agreement. In addition, the 401K Plan makes a safe harbor matching contribution. Quarterly profit-sharing contributions paid totaled approximately $169 thousand and $159 thousand for each of the years ended June 30, 2022 and 2021, respectively.
NOTE 16. | SEGMENT REPORTING |
With the acquisition of USCF Investments, Gourmet Foods, Brigadier, and the launch of the Original Sprout business unit of Kahnalytics, the Company has identified four 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, The Marygold Companies, and is not yet identified as a separate segment. Similarly, our recently acquired indirect subsidiary, Tiger, has had only 9 days of operations during the year ended June 30, 2022 and operating results were nil. 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 USCF Investments. 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 their 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. Our recently formed subsidiary in the U.K., Marygold UK, will earn managment fees through its wholly-owned subsidiary, Tiger, as an investment advisor and asset manager. Separate management of each segment is required because each business unit is subject to different operational issues and strategies due to their particular regional location. The Company accounts for intra-company sales and expenses as if the sales or expenses were to third parties and eliminates them in the consolidation. Amounts are adjusted for currency translation as of the balance sheet date and presented in US dollars.
The following table presents a summary of identifiable assets as of June 30, 2022 and June 30, 2021:
| | As of June 30, 2022 | | | As of June 30, 2021 | |
| | | | | | | | |
Identifiable assets: | | | | | | | | |
Corporate headquarters - including Marygold and Marygold UK | | $ | 7,243,332 | | | $ | 3,513,008 | |
U.S.A. : investment fund management | | | 18,006,771 | | | | 17,467,044 | |
U.S.A. : beauty products | | | 3,484,315 | | | | 4,024,803 | |
New Zealand: food industry | | | 3,983,381 | | | | 3,831,539 | |
Canada: security systems | | | 2,592,778 | | | | 2,671,286 | |
Consolidated | | $ | 35,310,577 | | | $ | 31,507,680 | |
The following table presents a summary of operating information for the years ended June 30, 2022 and June 30, 2021:
| | Year Ended June 30, 2022 | | | Year Ended June 30, 2021 | |
Revenues: | | | | | | | | |
U.S.A. : investment fund management - related party | | $ | 23,835,348 | | | $ | 25,169,182 | |
U.S.A. : beauty products | | | 3,529,789 | | | | 3,756,512 | |
New Zealand : food industry | | | 7,930,888 | | | | 8,263,267 | |
Canada : security systems | | | 2,533,098 | | | | 2,715,487 | |
Consolidated | | $ | 37,829,123 | | | $ | 39,904,448 | |
| | | | | | | | |
| | | | | | | | |
Net income (loss): | | | | | | | | |
U.S.A. : investment fund management - related party | | $ | 7,053,050 | | | $ | 9,983,156 | |
U.S.A. : beauty products | | | (187,968 | ) | | | (191,857 | ) |
New Zealand : food industry | | | 323,621 | | | | 469,028 | |
Canada : security systems | | | 246,086 | | | | 284,151 | |
Corporate headquarters - including Marygold and Marygold UK | | | (6,289,068 | ) | | | (4,695,035 | ) |
Consolidated | | $ | 1,145,721 | | | $ | 5,849,443 | |
The following table presents a summary of capital expenditures for the year ended June 30,:
| | 2022 | | | 2021 | |
Capital expenditures: | | | | | | | | |
U.S.A. : beauty products | | $ | 1,717 | | | $ | 41,974 | |
New Zealand: food industry (1) | | | 3,153 | | | | 436,775 | |
U.S.A. : corporate headquarters - including Marygold | | | 2,685 | | | | 653 | |
Consolidated | | $ | 7,555 | | | $ | 479,402 | |
(1) Includes $401,681 related to the acquisition of Printstock. See Note 13, Business Combinations
The following table represents property, plant and equipment in use at each of the Company's locations as of June 30,:
| | 2022 | | | 2021 | |
Asset location: | | | | | | | | |
U.S.A.: investment fund management | | $ | - | | | $ | - | |
U.S.A. : beauty products | | | 60,678 | | | | 58,961 | |
New Zealand: food industry | | | 2,235,896 | | | | 2,345,569 | |
Canada: security systems | | | 916,054 | | | | 998,612 | |
U.S.A. : corporate headquarters - including Marygold | | | 20,429 | | | | 17,744 | |
U.K: investment fund management | | | 19,467 | | | | - | |
Total all locations | | | 3,252,524 | | | | 3,420,886 | |
Less accumulated depreciation | | | (1,860,630 | ) | | | (1,847,441 | ) |
Net property, plant and equipment | | $ | 1,391,894 | | | $ | 1,573,445 | |
NOTE 17. | SUBSEQUENT EVENTS |
The Company evaluated subsequent events for recognition and disclosure through the date the consolidated financial statements were issued or filed. Nothing has occurred outside normal operations since that required recognition or disclosure in these financial statements other than the items noted below.
On July 25, 2022 the Company granted an aggregate of 277,037 restricted stock awards (“RSA”) to two employees from its 2021 Omnibus Equity Incentive Plan. The fair value at the date of grant was $374,000 or $1.35 per share with the awards vesting over periods between 2023 and 2027.
ITEM 9. |
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
There were no disagreements or disputes with our independent accountants.