Marygold Companies, Inc. - Annual Report: 2020 (Form 10-K)

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements within the meaning of the federal securities laws, which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “would,” “shall,” “might,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans, or intentions. Forward-looking statements contained in this Annual Report on Form 10-K include, but are not limited to, statements about:

We caution you that the foregoing list does not contain all of the forward-looking statements made with respect to us and our operating subsidiaries in this Annual Report on Form 10-K.

You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Annual Report on Form 10-K primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, operating results, and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors described in the section titled “Risk Factors”. Moreover, we and our subsidiaries operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Annual Report on Form 10-K. We cannot assure you that the results, events, and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements.

The forward-looking statements made in this Annual Report on Form 10-K relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Annual Report on Form 10-K to reflect events or circumstances after the date of this Annual Report on Form 10-K or to reflect new information or the occurrence of unanticipated events, except as required by law. We and our subsidiaries may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make.

PART I

General

Concierge Technologies, Inc., (the “Company” or “Concierge”), a Nevada corporation, which was incorporated on April 20, 2005, 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:

Concierge manages its operating businesses on a decentralized basis. There are no centralized or integrated operational functions such as marketing, sales, legal or other professional services and there is limited involvement by Concierge’s management in the day-to-day business affairs of its operating subsidiary businesses. Concierge’s corporate management is responsible for capital allocation decisions, investment activities and selection and retention of the Chief Executive to head each of the operating subsidiaries. Concierge's corporate management is also responsible for corporate governance practices, monitoring regulatory affairs, including those of its operating businesses and involvement in governance-related issues of its subsidiaries as needed.  Across Concierge and its subsidiaries, the Company employs 92 full-time employees.

Subsidiary Business Overview

Wainwright

On December 9, 2016, Concierge acquired all of the issued and outstanding stock in Wainwright which is controlled by our CEO and majority shareholder Nicholas Gerber and another Concierge shareholder, Scott Schoenberger, a member of our board of directors. Wainwright is the holding company for USCF and USCF Advisers, which collectively operate 10 exchange traded products (“ETPs”) and exchange traded funds (“ETFs”) listed on the NYSE Arca, Inc. ("NYSE Arca") with a total of approximately $6 billion in assets under management as of June 30, 2020. Wainwright receives revenues from its subsidiaries' which provides investment management and advisory services in exchange for management fees charged against the funds. Wainwright’s operating subsidiaries focus primarily on providing investment advisory services to funds that invest in a broad base or single commodity, particularly in oil, natural gas, gasoline and metals. Concierge acquired Wainwright in a stock-for-stock exchange for (i) 27,293,333 (as adjusted approximately for the 1 for 30 reverse stock split of our outstanding shares of common and preferred stock effective on December 15, 2017, (the "2017 Reverse Stock Split")) shares of our common stock and (ii) 311,804 (as adjusted approximately for the 2017 Reverse Stock Split) shares of our Series B Voting, Convertible, Preferred stock (which preferred shares are convertible into approximately 6,236,079 shares of Company Common Stock). 

USCF is currently the General Partner of the following Securities Act of 1933 commodity based funds and Sponsor (“Sponsor”) of the United States Commodity Index Funds Trust (“USCIF Trust”), and each series thereof,  and the USCF Funds Trust (“USCF Funds Trust”):

USCF Advisers serves as the investment adviser to the funds listed below within the Trusts and has overall responsibility for the general management and administration for the Trusts. Pursuant to the current Investment Advisory Agreements, USCF Advisers provides an investment program for the Trusts’ funds and manages the investment of the assets.

All USCF funds and the Trusts' funds are collectively referred to as the “Funds” hereafter.

As of and for the years ended June 30, 2020 and 2019 approximately 86% and 89% of Wainwright’s revenue, respectively, were attributed to its three largest funds United States Oil Fund, LP, United States Natural Gas Fund, LP and United States Commodity Index Fund.

Competition

Wainwright faces competition from other commodity fund managers, which include larger, better financed companies that offer products similar to Wainwright’s. Many of these competitors have substantially greater financial, technical, and human resources than Wainwright does, as well as greater experience in the discovery and development of products and the commercialization of those products. Our competitors’ products may be more effective, or more effectively marketed and sold, than any products we may commercialize. Wainwright will continue to develop and consider new fund opportunities identified through its research efforts and review of market needs. However, the cost of launching and seeding new funds is dependent upon existing and new capital resources. The ability to successfully launch new funds competing with much larger financial institutions with greater financial and human capital will be challenging.

Regulation

Wainwright’s operating subsidiaries, USCF and USCF Advisers, are subject to federal, state and local laws and regulations generally applicable to the investment services industry. USCF is a commodity pool operator (“CPO”) subject to regulation by the Commodity Futures Trading Commission (the "CFTC") and the National Futures Association (the “NFA”) under the Commodities Exchange Act (“CEA”). USCF Advisers is an investment adviser registered under the Investment Advisers Act of 1940, as amended and has registered as a CPO under the CEA. ETPs issued or sponsored by USCF are required to be registered with the Securities and Exchange Commission (the “SEC”) in accordance with the Securities Act of 1933. USCF Advisers advises exchange traded funds and a mutual fund (liquidated during the current fiscal year) registered with the SEC under the Investment Company Act of 1940.

Employees

Wainwright’s operating subsidiaries employ approximately 15 persons, a majority of whom are located in Walnut Creek, California. The operating subsidiaries are responsible for the retention of sub-advisers to manage the investments of each managed Funds’ assets in conformity with their respective investment policies if the operating subsidiary does not provide those services directly. Wainwright’s operating subsidiaries may also retain third-parties to provide custody, distribution, fund administration, transfer agency, and all other non-distribution related services necessary for each fund to operate. Wainwright, through its operating subsidiaries, bears all of its own costs associated with providing these advisory services and the expenses of the members of the board of directors of each fund who are affiliated with Wainwright.

Intellectual Property

Wainwright subsidiary USCF owns registered trademarks for USCF and USCF Advisers.  The funds for which USCF is a general partner or sponsor have registered trademarks owned by USCF. Additionally, USCF was granted two patents Nos. 7,739,186 and 8,019,675, for systems and methods for an exchange traded fund (ETF) that tracks the price of one or more commodities.

Gourmet Foods

Gourmet Foods, Ltd. (“Gourmet Foods”), was organized in its current form in 2005 (previously known as Pats Pantry Ltd) and acquired by Concierge in August 2015. Pats Pantry was founded in 1966 to produce and sell wholesale bakery products, meat pies and patisserie cakes and slices, in New Zealand. Gourmet Foods, located in Tauranga, New Zealand, sells substantially all of its goods to supermarkets and service station chains with stores located throughout New Zealand. Gourmet Foods also has a large number of smaller independent lunch bars, cafes and corner dairies among the customer list, however they comprise a relatively insignificant dollar volume in comparison to the primary accounts of large distributors and retailers.

Products and Customers

Concierge, through Gourmet Foods, has three major customer groups comprising the gross revenues to Gourmet Foods; 1) grocery, 2) gasoline convenience stores, and 3) independent retailers. The grocery and food 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 the relationships have been in place for sufficient time to give management reasonable confidence in their continuing business.

For the year ended and balance sheet date of June 30, 2020, Gourmet Foods’ largest customer in the grocery industry, who operates through a number of independently branded stores, accounted for approximately 20% of Gourmet Foods sales revenues and 15% of Gourmet Foods accounts receivable as compared to 22% and 28% for the prior year ended June 30, 2019, respectively. The second largest in the grocery industry accounted for approximately 12% of Gourmet Foods sales revenues for the year ended June 30, 2020 as compared to 12% for the year ended June 30, 2019. This same group accounted for 26% of Gourmet Foods accounts receivable as of June 30, 2020 as compared to 19% as of June 30, 2019. In the gasoline convenience store market Gourmet Foods supplies two major channels. The largest is a marketing consortium of gasoline dealers operating under the same brand who, for the year ended and balance sheet date of June 30, 2020, accounted for approximately 45% of Gourmet Foods’ gross sales revenues as compared to 43% for the year ended June 30, 2019. No single member of the consortium is responsible for a significant portion of Gourmet Foods’ accounts receivable. The third category of independent retailers and cafes accounted for the remaining balance of Gourmet Foods’ gross sales revenue, however the group members are independently owned and individually responsible for their financial obligations with no one customer accounting for a significant portion of revenues or accounts receivable.

Sources and Availability of Materials

Gourmet Foods is not dependent upon any one major supplier as many alternative sources are available in the local market place 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.

Competition

Gourmet Foods faces competition from other commercial-scale manufacturers of meat pies located in New Zealand and Australia. Competitors’ products may be more effective, or more effectively marketed and sold, than any products Gourmet Foods may commercialize. Larger competitors in New Zealand also enjoy a wider and more entrenched market share making it particularly difficult for us to penetrate certain market segments and, even if penetrated, might make it difficult to maintain. In an effort to expand its market presence and limit competitive interference, Gourmet Foods from time to time attempts to acquire other commercial-scale manufacturers of meat pies or confections. Gourmet Foods also has interest in collapsing supply chains where possible, and subsequent to the end of the current fiscal year was successful in acquiring a printer of food packaging materials. (See Note 16 – Subsequent Events)

Seasonality

The location of Gourmet Foods in the southern hemisphere provides it with a warm Christmas holiday season and some increased business as customers tend to be traveling and purchase more ready-to-eat foods. Although this increase in sales is observable, it is not deemed significant and the opposing seasons to the northern hemisphere work to offset any corresponding down turn in revenues for Brigadier, our Canadian subsidiary, during winter months. Overall, the consolidated business does not experience any material seasonality due to Gourmet Foods.

Regulation

In New Zealand our subsidiary, Gourmet Foods, is required to have certain permits from health regulatory agencies and export permits for certain products it chooses to export. Gourmet Foods is also subject to local regulations as are usual and customary for those in the food processing, manufacturing and distribution business.

Intellectual Property

Gourmet Foods, Ponsonby Pies and Pat’s Pantry are all registered trademarks of Gourmet Foods, Ltd.

Employees

Gourmet Foods employs approximately 45 persons in New Zealand.

Brigadier

On June 2, 2016, Concierge acquired all of the issued and outstanding stock in Brigadier, a Canadian corporation headquartered in Saskatoon, Saskatchewan. Brigadier sells and installs alarm monitoring and security systems to commercial and residential customers under brand names "Brigadier Security Systems" and "Elite Security" throughout the province of Saskatchewan with offices in Saskatoon and Regina.

Services, Products and Customers

Brigadier Security Systems (2000) Ltd. (“Brigadier”) was founded in 1985 and through internal growth and acquisitions the core business of Brigadier began in 1998. Today Brigadier is the largest SecurTek Monitoring Solutions Inc dealer in Saskatchewan. With offices in both major urban areas of Regina (dba Elite Security Systems (2005) Ltd.) and Saskatoon. SecurTek is owned by SaskTel which is Saskatchewan's leading Information and Communications Technology (ICT) provider with approximately 1.35 million customer connections across Canada. Brigadier is also a certified integrator for Avigilon Access Control and Video, Bosch Intrusion, Gallagher Access Control, Honeywell Access Control and Intrusion, Kantech Corporate Access Control and the largest independent security contractor in the province. Brigadier provides comprehensive security solutions including access control, IP video systems, ULC certified fire alarms, and intrusion alarms to home and business owners as well as government offices, schools and public buildings. Brigadier typically sells hardware to customers and brokers a 24/7 monitoring of their premises. The contract for monitoring the premises is typically supported by SecurTek, who pays Brigadier a monthly maintenance and support fee for each contract remaining in effect.

Concierge, through Brigadier, is partially dependent upon its contractual relationship with the alarm monitoring company who provides monitoring services to Brigadier’s customers. In the event this contract is terminated, Brigadier would be compelled to find an alternate source of alarm monitoring, or establish such a facility itself. Management believes that the contractual relationship is sustainable, and has been for many years, with alternate solutions available should the need arise. Sales to the largest customer, which includes contracts and recurring monthly support fees, totaled 49% and 46% of the total Brigadier revenues for the years ended June 30, 2020 and June 30, 2019, respectively. The same customer accounted for approximately 40% of Brigadier's accounts receivable as of the balance sheet date of June 30, 2020 as compared to 37% as of June 30, 2019. No other single customer accounted for a significant percentage of total sales or accounts receivable for the fiscal years ended June 30, 2020 or 2019.

Sources and Availability of Materials

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.

Competition

Although it holds a dominant market position in the province of Saskatchewan, Brigadier faces competition from larger, better financed companies that offer similar products and services. In addition, it is possible that Brigadier may face increasing competition as disruptive technologies enter the market. However, with respect to the market share it currently enjoys, Brigadier expects that their core customers will remain loyal and that an opportunity exists to capitalize on the deployment of new technologies. Brigadier's management will continue efforts to capture additional customers through organic growth and a focus on quality.

Seasonality

Brigadier, due to its location in the province of Saskatchewan, Canada, is far enough north that winter weather has a negative effect on its ability to complete some installations, particularly those involving new construction. For this reason, the period from November through March typically produces less revenue than comparison periods during other seasons of the year. Although this decrease in sales is observable, the downturn in sales revenues for the winter months at Brigadier are offset in large part by the increase in revenues for our subsidiary Gourmet Foods in the Southern Hemisphere. Overall, the consolidated business does not experience any material seasonality due to Brigadier Security Systems.

Employees

Brigadier employs approximately 21 persons in Canada.

Original Sprout

Kahnalytics was founded in 2015 as a wholly owned subsidiary of Concierge and is domiciled in the state of California. The dba/Original Sprout was adopted in December 2017 at the time the assets of Original Sprout LLC were acquired. Original Sprout develops and markets hair and skin products such as vegan shampoos, hair rinses, skin lotions, sun block, baby wash and related products under the brand names Original Sprout and Worry Free.

Products and Customers

Original Sprout sells its products through 3 channels to market: 1) direct sales to end users via online shopping cart, 2) 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.

Concierge, through 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. Original Sprout had 1 significant customer for the year ended June 30, 2020 accounting for 10% of total revenues and 0% of accounts receivable whereas a different customer accounted for 10% of sales for the year ended June 30, 2019 and 24% of accounts receivable. Two other customers who were not significant in total annual sales accounted for 39% and 18% of total account receivables at June 30, 2020 and 0% at June 30, 2019.

Sources and Availability of Materials

Concierge, through Original Sprout, is dependent upon its relationship with a product packaging company who, at the direction of Original Sprout, produces the products in accordance with proprietary formulas, packages them in appropriate containers, and delivers the finished goods to Original Sprout for distribution to its customers. All of Original Sprout’s products are currently produced by this packaging company, although if this relationship were to fail there are other similar packaging companies available to Original Sprout at competitive pricing. Because of the nature of the Original Sprout product ingredients, some of the ingredients may, at times, be difficult to source in timely fashion or at the expected price point. To safeguard against this possibility Original Sprout endeavors to maintain at least a 90-day supply of all products in stock. Estimating and maintaining a reserve stock account is not a guarantee that a shortage of ingredient supplies will not affect production such that Original Sprout will not exhaust its reserves or be unable to fulfill customer orders.

Competition

Original Sprout manufactures and distributes only 100% vegan, safe and non-toxic, hair and skin care products which we believe differentiate it significantly from other main-stream products. The use of organic and natural extracts is a growing trend in the U.S. and abroad, and other established brands are beginning to make products for this market. As more entrants to the high-end, vegan, hair care segment come into existence it is inevitable that some will be better financed and have more brand recognition and resources than those of Original Sprout. Original Sprout is focused on promoting its own brand name as a recognized pioneer in 100% vegan, safe, effective, hair care products through recruitment of addition distributors, nationwide retail stores, and increased social media presence with the expectation that establishing brand awareness will allow the continued growth of annual revenues and market share protection, though there can be no guarantees that such efforts will be sufficient to offset the effects of competition in the future.

Seasonality

There is no significant seasonality for sales of products for Original Sprout, though sales will fluctuate around traditional holidays, and certain products, such as sun screen, will be lower in winter months than in summer months. Overall, the consolidated business does not experience any material seasonality due to Original Sprout.

Regulation

In the U.S. our subsidiary, Original Sprout, is not required to have permits for distribution of its products, however it chooses to gain recognition from certain testing laboratories and other quasi-regulatory agencies for compliance with accepted standards for hair and skin care ingredients and lack of toxic chemicals in their formulas and processes. For export, Original Sprout is often compelled to submit its products to foreign government agencies or certified laboratories for ingredient testing prior to being accepted for import as a “safe” product. The Original Sprout products comply with all applicable regulations, both domestic and foreign, in areas where they are sold or distributed.

Intellectual Property

The formulations and ingredient percentages of the many products of Original Sprout are considered its intellectual property, though many cannot be patented, they are maintained as confidential. The names "Original Sprout", "D’Organiques Original Sprout" are registered trademarks of Original Sprout.

Employees

Original Sprout employees 9 persons on a full time basis at its location in San Clemente, California.

Available Information

We maintain a website at www.conciergetechnology.net. We make available free of charge on or through our website our Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as soon as reasonably practicable after we electronically file or furnish such materials to the SEC. The information on our website is not incorporated by reference in this annual report on Form 10-K.  In addition, the U.S. Securities and Exchange Commission ("SEC") maintains an Internet site at www.sec.gov that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC, from which investors can electronically access Concierge's SEC filings.

Concierge and its subsidiaries (referred to herein as “we,” “us,” “our” or similar expressions) are subject to certain risks and uncertainties in its business operations which are described below. The risks and uncertainties described below are not the only risks we face. Additional risks and uncertainties that are presently unknown or are currently deemed immaterial may also impair our business operations. The following risk factors should be read in connection with the other information included in this annual report on Form 10-K, including Management’s Discussion and Analysis of Financial Condition and Results of Operations and our financial statements and the related notes.

The Company’s business and operation could be negatively affected by any material litigation involving the Company or its subsidiaries.

USCF, an indirect wholly owned subsidiary of the Company, is currently subject to class action litigation. See “Item 3. Legal Proceedings” of this Annual Report on Form 10-K. 

Estimating an amount or range of possible losses resulting from litigation proceedings is inherently difficult and requires an extensive degree of judgment, particularly where the matters involve indeterminate claims for monetary damages, are in the early stages of the proceedings, and are subject to appeal. In addition, because most legal proceedings are resolved over extended periods of time, potential losses are subject to change due to, among other things, new developments, changes in legal strategy, the outcome of intermediate procedural and substantive rulings and other parties’ settlement posture and their evaluation of the strength or weakness of their case against us. For these reasons, we are currently unable to predict the ultimate timing or outcome of, or reasonably estimate the possible losses or a range of possible losses resulting from, the matters described in “Item 3. Legal Proceedings” of this Annual Report on Form 10-K. In light of the inherent uncertainties involved in such matters, an adverse outcome in this litigation could materially adversely affect the Company’s financial condition, results of operations or cash flows in any particular reporting period.

Litigation could result in substantial costs and divert management’s attention and resources from a company’s business. Additionally, litigation could give rise to perceived uncertainties as to a company’s future, adversely affect its relationships with vendors and make it more difficult to attract and retain qualified personnel. Also, a company subject to litigation may be required to incur significant legal fees and other expenses related to any litigation.

COVID-19 Risk

An outbreak of infectious respiratory illness caused by a novel coronavirus known as COVID-19 was first detected in China in December 2019 and has now been detected globally. In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic. COVID-19 has resulted in numerous deaths, travel restrictions, closed international borders, enhanced health screenings at ports of entry and elsewhere, disruption of and delays in healthcare service preparation and delivery, prolonged quarantines and the imposition of both local and more widespread “work from home” measures, cancellations, supply chain disruptions, and lower consumer demand, as well as general concern and uncertainty. The ongoing spread of COVID-19 has had, and is expected to continue to have, a material adverse impact on local economies in the affected jurisdictions and also on the global economy, as cross border commercial activity and market sentiment are increasingly impacted by the outbreak and government and other measures seeking to contain its spread. The impact of COVID-19, and other infectious illness outbreaks that may arise in the future, could adversely affect individual issuers and capital markets in ways that cannot necessarily be foreseen. In addition, actions taken by government and quasi-governmental authorities and regulators throughout the world in response to the COVID-19 outbreak, including significant fiscal and monetary policy changes, may affect the value, volatility, pricing and liquidity of some investments or other assets, including those held by or invested in by the Company. Public health crises caused by the COVID-19 outbreak may exacerbate other pre-existing political, social and economic risks in certain countries or globally. The duration of the COVID-19 outbreak and its ultimate impact on the Company and, on the global economy, cannot be determined with certainty. The COVID-19 pandemic and its effects may last for an extended period of time, and could result in significant and continued declines in global financial markets, higher default rates, and a substantial economic downturn or recession. The foregoing could disrupt the operations of the Company's service providers, adversely affect the Company's stock price, and negatively impact the Company's performance and your investment in the Company. The extent to which COVID-19 will affect the Company and its’ service providers will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of COVID-19 and the actions taken to contain COVID-19. Given the significant economic and financial market disruptions associated with the COVID-19 pandemic, the Company’s results of operations could be adversely impacted.

Additional risks and uncertainties that are presently unknown or are currently deemed immaterial may also impair our business operations. These risk factors should be read in connection with the other information included in this annual report on Form 10-K, including Management’s Discussion and Analysis of Financial Condition and Results of Operations and our financial statements and the related notes.

Risks Related to our Business and Structure

Concierge is a holding company and its only material assets are its cash in hand, equity interests in its operating subsidiaries and its other investments. As a result, Concierge’s principal source of cash flow is distributions from its subsidiaries and its subsidiaries may be limited by law and by contract in making distributions to Concierge.

As a holding company, Concierge's assets are its cash and cash equivalents, the equity interests in its subsidiaries and other investments.

The principal source of cash flow is distributions from our subsidiaries. Thus, our ability to finance future acquisitions or develop new projects is dependent on the ability of our subsidiaries to generate sufficient net income and cash flows to make upstream cash distributions to us. Our subsidiaries are separate legal entities, and although they may be wholly-owned or controlled by us, they have no obligation to make any funds available to us, whether in the form of loans, dividends, distributions or otherwise. The ability of our subsidiaries to distribute cash to us are and will remain subject to, among other things, restrictions that are contained in each subsidiaries’ financing agreements, availability of sufficient funds and applicable state laws and regulatory restrictions.

Claims of creditors of our subsidiaries generally will have priority as to the assets of such subsidiaries over our claims and claims of our creditors and stockholders. To the extent our cash flow is dependent on our subsidiaries ability to make distributions to us could materially limit our ability to grow, pursue business opportunities or make acquisitions that could be beneficial to our businesses.

We are dependent on certain key personnel, the loss of which may adversely affect our financial condition or results of operations.

Major capital allocation decisions and investment decisions are made by Chief Executive Officer and Chairman of the Board of Directors, Nicholas Gerber, with consultation from key personnel, from our management team and the executive management team from our subsidiaries. The executive management teams that lead the Company and our subsidiaries are also highly experienced and possess extensive skills in their industry. If Mr. Gerber were to become unavailable, there could be a material adverse impact on our operations. However, the Company’s Board of Directors have the power and authority to fill a vacancy left by Mr. Gerber. The ability to retain key personnel is important to our success and future growth. Competition for these professionals can be intense, and we may not be able to retain and motivate our existing officers and senior employees, and continue to compensate such individuals competitively. The unexpected loss of the services of one or more of these individuals could have a detrimental effect on our operations and negatively impact our financial condition or results of operations of our businesses, and could hinder the ability of our business and our subsidiaries to effectively compete in the various industries in which we operate.

We need qualified personnel to manage and operate our subsidiaries.

Our decentralized business model requires that we retain qualified and competent managers to continue day-to-day operations of our subsidiaries and continue business operations in a changing political, business or regulatory environment. Our subsidiaries require qualified and competent personnel to execute their business plans and continue servicing their clients, suppliers and other stakeholders. Our inability to attract and retain qualified personnel to operate our business subsidiaries could negatively impact our operating results and our overall financial condition that is important to our success and future growth.

Cyber Security Risks

The efficient operation of our businesses is dependent on computer hardware and software systems. Unauthorized computer infiltration, denial-of-service attacks, phishing efforts, unauthorized access, malicious software codes, computer viruses or other such harmful computer campaigns may negatively impact our business causing significant disruptions to our business operations. We expect that we may be subject to a cyber-attack in some form or fashion in the future as such attacks become more sophisticated and frequent to all industries and all businesses of every size. There can be no assurance that our cyber-security measures and technology will adequately protect us from these and other risks, including external risks such as natural disasters and power outages and internal risks such as insecure coding and human error.

Although we have undertaken steps to prevent and mitigate cyber risks, there is no guarantee that our efforts will prevent cyber-attacks perpetrated against our information systems which could result in loss of assets and critical information, theft of intellectual property or inappropriate disclosure of confidential information and could expose us to remediation costs and reputational damage which could adversely affect our business in ways that cannot be predicted at this time. Any of these risks could materially affect our results of operations and consolidated financial results.

Future acquisitions or business opportunities could involve unknown risks that could harm our business and adversely affect our financial condition and results of operations.

We are a holding company that owns interests in a number of different businesses. We have in the past, and intend in the future, to acquire businesses that involve unknown risks, some of which will be particular to the industry in which the investment or acquisition targets operate, including risks in industries with which we are not familiar or experienced. There can be no assurance our due diligence investigations will identify every matter that could have a material adverse effect on us or the entities that we may acquire. We may be unable to adequately address the financial, legal and operational risks raised by such investments or acquisitions, especially if we are unfamiliar with the relevant industry, which can lead to significant losses on material investments. The realization of any unknown risks could expose us to unanticipated costs and liabilities and prevent or limit us from realizing the projected benefits of the investments or acquisitions, which could adversely affect our financial condition and liquidity. In addition, our financial condition, results of operations and the ability to service our debt may be adversely impacted depending on the specific risks applicable to any business we invest in or acquire and our ability to address those risks.

We could consume resources in researching acquisitions, business opportunities or financings and capital market transactions that are not consummated, which could materially adversely affect subsequent attempts to locate and acquire or invest in another business.

We are a holding company in the business of owning diverse and profitable businesses. Our business model also encompasses researching and investigating new acquisitions and business opportunities to support the growth of our Company. With each new contemplated acquisition or business opportunity, there are resources that must be allocated towards acquisition or engaging in a new business opportunity such as, the negotiation, drafting and execution of relevant agreements, disclosure documents and other instruments with respect to such transaction and may require substantial management time and attention and substantial costs for financial advisors, accountants, attorneys and other advisors. If a decision is made not to consummate a specific acquisition, business opportunity or financing and capital market transaction, the costs incurred up to that point for the proposed transaction likely would not be recoverable. Furthermore, even if an agreement is reached relating to a specific acquisition, investment target or financing, we may fail to consummate the investment or acquisition for any number of reasons, including those beyond our control. Any such event could consume significant management time and result in a loss to us of the related costs incurred, which could adversely affect our financial position and our ability to consummate other acquisitions and investments.

Not applicable.

As of June 30, 2019 the Company did not own any plants or real property.  However, on July 2, 2019, Brigadier finalized the purchase of its office facility and land located in Saskatoon for CAN $750,000 (Approximately US$572,858), funded by a bank loan of CAN$525,000 (approximately US$401,000) and CAN$225,000 (approximately US$171,858) in cash. The bank loan matures in 4 years and bears interest at the annual rate of 4.14%.

Facilities

Administrative offices are co-located in the facility leased by our subsidiary, Original Sprout, whose mailing address is 1202 Puerta Del Sol, San Clemente, California 92673. Our wholly-owned subsidiary, Brigadier, rents facilities in Saskatoon and Regina, Canada. Our wholly-owned subsidiary, Gourmet Foods, rents facilities in Tauranga, New Zealand. Wainwright leases office space in Walnut Creek, California. We believe that the facilities described herein are adequate for our current and immediately foreseeable operating needs.

From time to time, the Company and its subsidiaries may be involved in legal proceedings arising primarily from the ordinary course of its business. Except as described below there are no pending legal proceedings against the Company or its subsidiaries, including USCF, an indirect wholly owned subsidiary of the Company.

Lucas Class Action

On June 19, 2020, USCF, USO, John P. Love and Stuart P. Crumbaugh were named as defendants in a purported stockholder class action initiated by Robert Lucas, individually and on behalf of others similarly situated (the “Lucas Class Action”). The Lucas Class Action is pending in the U.S. District Court for the Southern District of New York as Civil Action No. 1:20-cv-04740.

The Lucas Class Action complaint alleges that, beginning in March 2020, in connection with USO’s registration and issuance of additional USO shares, USCF, USO, and the other defendants in the Lucas Class Action failed to disclose to investors in USO 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. Plaintiff alleges that USCF, USO, and the other defendants in the Lucas Class Action possessed inside knowledge about the consequences of these converging adverse events on USO and did not sufficiently acknowledge them until late April and May 2020, after USO suffered losses and was allegedly forced to abandon its investment strategy. The complaint seeks to certify a class and award the class compensatory damages at an amount to be determined at trial.

On August 18, 2020, pursuant to the Private Securities Litigation Reform Act (“PSLRA”), 15 U.S.C. § 78u-4, motions were filed seeking to consolidate the Lucas Class Action with (i) a purported stockholder class action initiated on June 31, 2020 by Moshe Ephrati, individually and on behalf of others similarly situated, that is currently pending in the U.S. District Court for the Southern District of New York as Civil Action No. 1:20-cv-06010 and in which the same defendants named in the Lucas Class Action were also named as defendants (the “Ephrati Class Action”), and (iii) a purported stockholder class action initiated on August 13, 2020 by Danny Palacios, individually and on behalf of others similarly situated, that is currently pending in the U.S. District Court for the Southern District of New York as Civil Action No. 1:20-cv-06442 and also named the same defendants as in the Lucas Class Action and the Ephrati Class Action (the “Palacios Class Action” and, together with the Lucas Class Action and the Ephrati Class Action, the “Class Actions”). Each of the complainants in the Ephrati Class Action and the Palacios Class Action seeks to certify a class and award the class compensatory damages at an amount to be determined at trial.

The claims made in the Ephrati Class Action and the Palacios Class Action are substantively identical to the Lucas Class Action, except that the putative class period in each of the Ephrati Class Action and Lucas Class Action begins on March 19, 2020, whereas the putative class period in the Palacios Class Action begins on February 25, 2020. The Class Actions have been designated as related, and have been assigned to the same Judge and consolidated into a single case.

USCF, USO and the other defendants in the Class Actions intend to vigorously contest the claims made therein and move for their dismissal.

Mehan Complaint

USO was named as a defendant in a complaint dated August 10, 2020 (docketed August 19, 2020), filed by purported shareholder Darshan Mehan, asserted derivatively on behalf of 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, Malcolm R. Fobes III, and USO as a nominal defendant (the “Mehan Complaint”). The complaint is pending in the Superior Court of the State of California for the County of Alameda as Case No. RG20070732. 

The complaint alleges that the defendants breached their fiduciary duties to USO and that USCF failed to act in good faith in connection with a March 19, 2020 offering and 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 plaintiff alleges that the defendants possessed inside knowledge about the consequences of these converging adverse events on USO and did not sufficiently acknowledge them until after USO suffered losses and was allegedly forced to abandon its investment strategy. The complaint seeks compensatory damages at an amount be determined at trial, restitution, equitable relief, attorney’s fees and costs.

USCF, USO and the other defendants intend to vigorously contest such claims and move for their dismissal.

SEC and CFTC Wells Notices

On August 17, 2020, USCF, USO, and John Love received a “Wells Notice” from the staff of the SEC (the “SEC Wells Notice”). The SEC Wells Notice relates to USO’s disclosures in late April and early May regarding constraints imposed on USO’s ability to invest in Oil Futures Contracts. The SEC Wells Notice states that the SEC staff has made a preliminary determination to recommend that the SEC file an enforcement action against USCF, USO, and Mr. Love alleging violations of Sections 17(a)(1) and 17(a)(3) of the Securities Act of 1933, as amended, and Section 10(b) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 thereunder, in each case with respect to its disclosures and USO’s actions during that period.

On August 19, 2020, USCF, USO and John Love received a Wells Notice from the staff of the CFTC (the “CFTC Wells Notice”). The CFTC Wells Notice states that the CFTC staff has made a preliminary determination to recommend that the CFTC file an enforcement action against USCF, USO, and Mr. Love alleging violations of Sections 4o(1)(A) and (B) and 6(c)(1) of the Commodity Exchange Act, 7 U.S.C. §§ 6o(1)(A), (B), 9(1) (2018), and CFTC Regulations 4.26, 4.41, and 180.1(a), 17 C.F.R. §§ 4.26, 4.41, 180.1(a) (2019), in each case with respect to its disclosures and USO’s actions.

A Wells Notice is neither a formal charge of wrongdoing nor a final determination that the recipient has violated any law. USCF, USO, and Mr. Love maintain that USO’s disclosures and their actions were appropriate. They intend to vigorously contest the allegations made by the SEC staff in the SEC Wells Notice and the CFTC staff in the CFTC Wells Notice and expect to engage in a dialogue with the SEC staff and CFTC staff regarding these matters. 

Cantrell and AML Pharm. Inc., Complaints

On August 27, 2020, USCF was named as a defendant in two actions filed by purported shareholders Michael Cantrell (the “Cantrell Complaint”) and AML Pharm. Inc. DBA Golden International (the “AML Complaint”). Both the Cantrell Complaint and the AML Complaint are asserted derivatively on behalf of USO, against defendants USCF, John P. Love and Stuart P. Crumbaugh, as well as USO directors Andrew F Ngim, Gordon L. Ellis, Malcolm R. Fobes III, Nicholas D. Gerber, Robert L. Nguyen, and Peter M. Robinson, as well as USO as a nominal defendant. The Cantrell Complaint is pending in the U.S. District Court for the Southern District of New York as Civil Action No. 1:20-cv-06974. The AML Complaint is pending in the U.S. District Court for the Southern District of New York as Civil Action No. 1:20-cv-06981.

The Cantrell Complaint and AML Complaint are nearly identical. They allege violations of Sections 10(b), 20(a) and 21D of the Exchange Act, SEC 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 performance, and defendants’ actions in respect thereof, 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 complainants seek, on behalf of USO, compensatory damages at an amount to be determined at trial, restitution, equitable relief, attorney’s fees and costs. The plaintiffs in the Cantrell Complaint and AML Complaint have marked their actions as related to the Lucas Class Action.

USCF, USO and the other defendants in the Cantrell Complaint and AML Complaint intend to vigorously contest such claims and move for their dismissal.

Not applicable.

PART II

Our Common Stock presently trades on the OTC Markets QB Exchange. The high and low bid prices, as reported by OTC Markets, are as follows for fiscal years ended June 30, 2019 and 2020. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.

Holders

On September 28, 2020, there were approximately 365 registered holders of record of our common stock.

Dividends

We have declared no dividends for the current year nor do we expect to in the foreseeable future. Our ability to pay dividends is subject to limitations imposed by Nevada law. Under Nevada law, dividends may be paid to the extent that a corporation’s assets exceed its liabilities and it is able to pay its debts as they become due in the usual course of business. Under Nevada law, a company - such as our company - can pay dividends only

Our strategy on dividends is to declare and pay dividends only from retained earnings and only when our Board of Directors deems it prudent and in the best interests of the company to declare and pay dividends.

Penny Stock Regulations

Our common stock trades on the OTC Markets QB Exchange at a price less than $5 a share and therefore is subject to the rules governing "penny stocks."

A "penny stock" is any stock that:

There are statutes and regulations of the Commission that impose a strict regimen on brokers that recommend penny stocks.

The Penny Stock Suitability Rule

Before a broker-dealer can recommend and sell a penny stock to a new customer who is not an institutional accredited investor, the broker-dealer must obtain from the customer information concerning the person's financial situation, investment experience and investment objectives. Then, the broker-dealer must "reasonably determine" (1) that transactions in penny stocks are suitable for the person and (2) that the person, or his advisor, is capable of evaluating the risks in penny stocks.

After making this determination, the broker-dealer must furnish the customer with a written statement setting forth the basis for this suitability determination. The customer must sign and date a copy of the written statement and return it to the broker-dealer.

Finally, the broker-dealer must also obtain from the customer a written agreement to purchase the penny stock, identifying the stock and the number of shares to be purchased.

The above exercise delays a proposed transaction. It causes many broker-dealer firms to adopt a policy of not allowing their representatives to recommend penny stocks to their customers.

The Penny Stock Suitability Rule, described above, and the Penny Stock Disclosure Rule, described below, do not apply to the following:

The Penny Stock Disclosure Rule

Another Commission rule - the Penny Stock Disclosure Rule - requires a broker-dealer, who recommends the sale of a penny stock to a customer in a transaction not exempt from the suitability rule described above, to furnish the customer with a "risk disclosure document." This document is set forth in a federal regulation and contains the following information:

Finally, the customer must be furnished with a monthly statement including prescribed information relating to market and price information concerning the penny stocks held in the customer's account.

Effects of the Rule

The above penny stock regulatory scheme is a response by the Congress and the Commission to known abuses in the telemarketing of low-priced securities by "boiler shop" operators. The scheme imposes market impediments on the sale and trading of penny stocks. It has a limiting effect on a stockholder's ability to resell a penny stock.

Our shares likely will trade below $5 a share on the OTC Markets exchange and be, for some time at least, shares of a "penny stock" subject to the trading market impediments described above.

Recent Sales of Unregistered Securities; Shares Issued for Services; Outstanding Stock Options

On August 15, 2019, the Company issued 175,000 shares of restricted common stock to Maxim Partners LLC in exchange for investment banking services. On February 7, 2019, the Company also issued 7,678,380 of unregistered common stock in the conversion of 383,919 shares of our Series B Voting, Convertible, Preferred Stock. The conversion of the preferred stock was non-dilutive as total voting shares remained unchanged. The Company neither sold or issued any other shares of any class of stock within the last two years up to and including June 30, 2020. The Company has no stock option plan nor any outstanding stock warrants.

Not applicable.

The following discussion and analysis should be read in conjunction with the financial statements and the accompanying notes thereto and is qualified in its entirety by the foregoing and by more detailed financial information appearing elsewhere in this annual report on Form 10-K. See "Consolidated Financial Statements."

Introduction

Concierge Technologies, Inc. (“Concierge”) or the (“Company”) conducts business through its wholly-owned operating subsidiaries operating in the U.S., New Zealand and Canada. The operations of the Company’s wholly-owned subsidiaries are more particularly described herein but are summarized as follows:

Because the Company conducts its businesses through its wholly-owned operating subsidiaries, the risks related to our wholly-owned subsidiaries are also risks that impact the Company's financial condition and results of operations.  See, "Note 2. Summary of Significant Accounting Policies / Major Customers and Suppliers - Concentration of Credit Risk" in the consolidated financial statements for more information. The emergence of a novel coronavirus on a global scale, known as COVID-19, during the current year has had a nominal impact on our operations which varied from company to company. Overall, the effects of dealing with COVID-19 realized through social isolation, stay-at-home orders, shuttering of non-essential businesses and similar initiatives took effect on our areas of operation at such a late date in the fiscal year that the consolidated revenues were not significantly impacted. The financial risk to future operations is largely unknown, (refer to Part I, Item 1A, for further details.)

Critical Accounting Policies

A summary of our significant accounting policies is described in detail in Note 2 to our Consolidated Financial Statements.

Plan of Operation for the Next Twelve Months

Our plan of operation for the next twelve months is to apply necessary resources, which may include experienced personnel, cash, or synergistic acquisitions made with cash, equity or debt, into growing each of our business units to their potential. Original Sprout is in the initial stages of transitioning from a largely boutique offering to a more mainstream product and as such we anticipate measurable growth in revenues for the coming years. Additionally, we are expecting moderate growth in Brigadier through focused management initiatives and consolidation within the security industry coupled with expanded product offerings. Similarly, we expect Gourmet Foods to be operating more efficiently under current management and continue to increase market share through additional product offerings and channels to market, including operation of its newly acquired subsidiary, Printstock Products Ltd., in New Zealand (see Note 16 – Subsequent Events). Wainwright will continue to develop innovative and new fund products to grow its portfolio. In addition to our long-term mission that is an acquisition strategy based upon identifying and acquiring profitable, mature, companies of a diverse nature and with in-place management that produces increased revenue streams, the Company is also focused upon building expertise and developing Fintech opportunities in the financial services sector. In a more general sense, the Company is characterizing its business in three categories; 1) financial services, 2) other operating units, and 3) corporate. The corporate category includes the expenses incurred for maintaining our public reporting status and management as well as the expenditures towards developing newly formed ventures such as Marygold. The purpose is to isolate the cyclical nature of the financial services business from our other industry segments. As revenues from financial services fluctuate over time due to varying performance of the commodities markets, our other operations are expected to be stable and sustainable by comparison. By these initiatives we seek to:

Results of Operations

Concierge and Subsidiaries

For the Year Ended June 30, 2020 Compared to the Year Ended June 30, 2019

Financial Summary

The table below summarizes each of Concierges subsidiaries into one of two categories. The Wainwright business is included in the Financial Services columns and all other subsidiaries, including Gourmet, Brigadier, and Original Sprout in the Other Operating Units columns. Corporate expenses are included in the Concierge Corporate columns, including the losses in the development stage of Marygold.

Revenue and Operating Income

Consolidated revenue for the year ended June 30, 2020 was $26.7 million representing a $0.2 million decrease from the prior year revenue of $26.9 million. While net revenues overall remained relatively unchanged, there were significant differences in the fourth quarter revenues of Wainwright and Brigadier. While Wainwright’s revenues in the fourth quarter exceeded prior year comparison revenues due to the effects of historical price drops in global oil prices on AUM, Brigadier had corresponding lower revenues due to the lockdowns imposed by the COVID-19 response. Concierge produced an operating income for the year ended June 30, 2020 of $1.9 million as compared to $0.8 million for the year ended June 30, 2019. This represents an increase in operating income of $1.2 million for the year ended June 30, 2020 when compared to the year ended June 30, 2019 or approximately 154%. The increase in operating income was primarily attributable to higher fund management revenue from Wainwright due to higher AUM.

Other Income (Expenses) 

Other income (expense) for the years ended June 30, 2020 and 2019 were $0.4 million and ($0.1) million, respectively, resulting in a net income before income tax of $2.3 million and $0.6 million, respectively. After giving consideration to currency translation gain of $31 thousand our comprehensive income for the year ended June 30, 2020 was $1.8 million as compared to the year ended June 30, 2019 where there was a currency translation loss of $45 thousand resulted in comprehensive income of $0.2 million. Comprehensive gain and loss are comprised of fluctuations in foreign currency exchange rates and effects in the valuation of our holdings in New Zealand and Canada.

Income Tax

Provision for income tax for the years ended June 30, 2020 and 2019 are $0.6 million and $0.3 million, respectively, primarily attributable to our United States operations through our Wainwright subsidiary. The Company files income taxes as a combined group and records most income taxes at the Concierge level. Income tax expense recorded at the Concierge level totaled $0.4 million for the year ended June 30, 2020, while a tax benefit of $15 thousand was recorded for the year ended June 30, 2019.

Net Income

Overall, the net income between the year ended June 30, 2020 as compared to the year ended June 30, 2019 increased by approximately $1.5 million or approximately 577% to approximately $1.8 million. The increase in profits for the year ended June 30, 2020 was primarily attributable to higher fund management revenue from Wainwright due to a higher amount of AUM.

Wainwright Holdings

Wainwright was founded as a holding company in March 2004 as a Delaware corporation with one subsidiary, Ameristock Corporation, which was an investment adviser to Ameristock Mutual Fund, Inc., a registered 1940 Act large cap value equity fund. In January 2010, Ameristock Corporation was spun off as a standalone company. In May 2005, USCF was formed as a single member limited liability company in the state of Delaware. In June 2013, USCF Advisers was formed as a Delaware limited liability company and in July 2014, was registered as an investment adviser under the Investment Advisers Act of 1940, as amended. In November 2013, the Advisers board of managers formed USCF ETF Trust (“ETF Trust”) and in July 2016, the USCF Mutual Funds Trust (“Mutual Funds Trust” and together with “ETF Trust” the “Trusts”) both as open-end management investment companies registered under the Investment Company Act of 1940, as amended ("the 1940 Act"). The Trusts are authorized to have multiple segregated series or portfolios. Wainwright owns all of the issued and outstanding limited liability company membership interests of its subsidiaries, USCF and USCF Advisers, each a Delaware limited liability company and are affiliated companies.  USCF serves as the general partner (“General Partner”) for various limited partnerships (“LP”) and sponsor (“Sponsor”) as noted below. USCF and USCF Advisers are subject to federal, state and local laws and regulations generally applicable to the investment services industry. USCF is a commodity pool operator (“CPO”) subject to regulation by the Commodity Futures Trading Commission (the "CFTC") and the National Futures Association (the “NFA”) under the Commodities Exchange Act (“CEA”). USCF Advisers is an investment adviser registered under the Investment Advisers Act of 1940, as amended and has registered as a CPO under the CEA. Exchange traded products (“ETPs”) issued or sponsored by USCF are required to be registered with the Securities and Exchange Commission (the “SEC”) in accordance with the Securities Act of 1933. Wainwright is the holding company for USCF and USCF Advisers, which collectively operate ten exchange traded products ("ETPs") and exchange traded funds ("ETFs") listed on the NYSE Arca Inc. ("NYSE Arca") with a total of approximately $6 billion in assets under management ("AUM") as of June 30, 2020. Wainwright, together with its subsidiaries USCF and USCF Advisers, are collectively referred to as “Wainwright” hereafter. 

USCF is currently the General Partner of the following Securities Act of 1933 commodity based funds and Sponsor (“Sponsor”) of the United States Commodity Index Funds Trust (“USCIF Trust”), and each series thereof, and the USCF Funds Trust (“USCF Funds Trust”):

USCF Advisers serves as the investment adviser to the fund(s) listed below within the Trusts and has overall responsibility for the general management and administration for the Trusts. Pursuant to the current Investment Advisory Agreements, USCF Advisers provides an investment program for the Trusts’ fund(s) and manages the investment of the assets.

All USCF funds and the Trusts' funds are collectively referred to as the “Funds” hereafter.

Wainwright’s revenue and expenses are primarily driven by the amount of AUM. Wainwright earns monthly management and advisory fees based on agreements with each Fund as determined by the contractual basis point management fee structure in each agreement multiplied by the average AUM over the given period. Many of the company’s expenses are dependent upon the amount of AUM. These variable expenses include Fund administration, custody, accounting, transfer agency, marketing and distribution, and sub-adviser fees and are primarily determined by multiplying contractual fee rates by AUM. Total Operating Expenses are grouped into the following financial statement line items: General and Administrative, Marketing, Operations and Salaries and Compensation.

For the Year Ended June 30, 2020, Compared to the Year Ended June 30, 2019

Revenue

Average AUM for the year ended June 30, 2020 was at $3.0 billion, as compared to approximately $2.7 billion from the year ended June 30, 2019 primarily due to an increase in USO, BNO and USL AUM. As a result, the revenues from management and advisory fees increased by approximately $0.4 million, or 3%, to $15.4 million for the year ended June 30, 2020 as compared to the year ended June 30, 2019 where revenues from management and advisory fees totaled $15.0 million.

Expenses

Wainwright’s total operating expenses for year ended June 30, 2020 decreased by $1.3 million to $12.8 million, or approximately 9%, from $14.1 million for the year ended June 30, 2019. Variable expenses, as described above, decreased by $1.2 million over the respective twelve-month period due to due to lower AUM for the first three quarters of the fiscal year which reduced variable marketing and distribution expenses, sub-advisory fees and other variable costs. General and Administrative expenses increased $0.3 million to $2.4 million for the year ended June 30, 2020 from $2.1 million for the year ended June 30, 2019 due to increases in expense waiver and legal and professional expenses. Total marketing expenses decreased $0.3 million to $2.1 million for the year ended June 30, 2020 as compared to the prior year period due to a decrease of in advertising and marketing conferences. Other Operating expenses decreased by $0.3 million primarily due to lower license fees. Employee Salaries and Compensation expenses were approximately $4.9 million and $4.8 million, an increase of $0.1 million, for the years ended June 30, 2020 and June 30, 2019, respectively, due to accrued bonuses and small increases in annual compensation.

Income

Income before income taxes for the year ended June 30, 2020 increased $2.1 million to $2.9 million from $0.8 million for year ended June 30, 2019 due to $0.4 million increase in revenue as a result of higher AUM, in addition to a $1.4 million  reduction in operating expenses along with a decrease of $0.3 million in other expenses.

Gourmet Foods, Ltd.

Gourmet Foods Limited (“Gourmet Foods”), was organized in its current form in 2005 (previously known as Pats Pantry Ltd). Pats Pantry was founded in 1966 to produce and sell wholesale bakery products, meat pies and patisserie cakes and slices, in New Zealand. Gourmet Foods, located in Tauranga, New Zealand, sells substantially all of its goods to supermarkets and service station chains with stores located throughout New Zealand. Gourmet Foods also has a large number of smaller independent lunch bars, cafes and corner dairies among the customer list, however they comprise a relatively insignificant dollar volume in comparison to the primary accounts of large distributors and retailers.

Gourmet Foods operates exclusively in New Zealand and thus the New Zealand dollar is its functional currency. In order to consolidate Concierge’s reporting currency, the US dollar, with that of Gourmet Foods, Concierge records foreign currency translation adjustments and transaction gains and losses in accordance with ASC 830-30. The translation of New Zealand currency into U.S. dollars is performed for balance sheet accounts using the exchange rates in effect at the balance sheet date and for revenue and expense accounts using a weighted average exchange rate during the period. Gains and losses resulting from foreign currency translations are included in foreign currency translation (loss) gain on the Consolidated Statements of Comprehensive Income as well as accumulated other comprehensive (loss) income found on the Consolidated Balance Sheets.

For the Year Ended June 30, 2020, Compared to the Year Ended June 30, 2019

Revenue

Net revenues for the year ended June 30, 2020 were $4.7 million with cost of goods sold of $3.2 million resulting in a gross profit of $1.5 million as compared to the year ended June 30, 2019 where net revenues were $4.7 million; cost of goods sold were $3.3 million; and gross profit was $1.4 million.

Expenses

General, administrative and selling expenses, including wages and marketing, for the years ended June 30, 2020 and 2019 were $1.1 million and $1 million producing operating income of $0.4 million and $0.4 million, respectively, or approximately 8% net operating profit for 2020, 9% for 2019. The depreciation expense and other income (expense) totaled approximately $38 thousand for the year ended June 30, 2020 as compared to $0.4 million for the year ended June 30, 2019. 

Income

Income for the year ended June 30, 2020, after depreciation expense of $0.2 million and other income of $0.2 million, resulted in approximately $0.4 million before income tax provision of approximately $28 thousand resulted in a net income of approximately $0.3 million as compared to a net loss of $13 thousand for the year ended June 30, 2019. Contributing to the net income was a tax-free government wage subsidy of approximately NZ$0.2 million (US$0.1 million) in support of the COVID-19 lockdowns imposed on employees. Overall, net profit margins for the comparative periods are consistent and differences are attributed to depreciation expense, varying income tax provisions and the fluctuation of currency exchange rates with the New Zealand dollar.

Brigadier Security Systems (2000) Ltd.

Brigadier Security Systems (2000) Ltd. (“Brigadier”) was founded in 1985 and through internal growth and acquisitions the core business of Brigadier began in 1998. Today Brigadier is the largest SecurTek Monitoring Solutions Inc dealer in Saskatchewan. With offices in both major urban areas of Regina (dba Elite Security Systems (2005) Ltd.) and Saskatoon. SecurTek is owned by SaskTel which is Saskatchewan's leading Information and Communications Technology (ICT) provider with approximately 1.35 million customer connections across Canada. Brigadier is also a certified integrator for Avigilon Access Control and Video, Bosch Intrusion, Gallagher Access Control, Honeywell Access Control and Intrusion, Kantech Corporate Access Control and the largest independent security contractor in the province. Brigadier provides comprehensive security solutions including access control, IP video systems, ULC certified fire alarms, and intrusion alarms to home and business owners as well as government offices, schools and public buildings. Brigadier typically sells hardware to customers and brokers a 24/7 monitoring of their premises. The contract for monitoring the premises is typically supported by SecurTek, who pays Brigadier a monthly maintenance and support fee for each contract remaining in effect.

Brigadier operates exclusively in Canada and thus the Canadian dollar is its functional currency. In order to consolidate Concierge’s reporting currency, the U.S. dollar, with that of Brigadier, Concierge records foreign currency translation adjustments and transaction gains and losses in accordance with ASC 830-30. The translation of Canadian currency into U.S. dollars is performed for balance sheet accounts using the exchange rates in effect at the balance sheet date and for revenue and expense accounts using a weighted average exchange rate during the period.

Gains and losses resulting from foreign currency translations are included in foreign currency translation (loss) gain on the Consolidated Statements of Comprehensive Income as well as accumulated other comprehensive (loss) income found on the Consolidated Balance Sheets.

For the Year Ended June 30, 2020, Compared to the Year Ended June 30, 2019

Revenue

Net revenues for the year ended June 30, 2020 were $2.7 million with cost of goods sold recorded as approximately $1.2 million, resulting in a gross profit of approximately $1.5 million with a gross margin of approximately 56% as compared to the year ended June 30, 2019 where net revenues were approximately $3.6 million with cost of goods sold of $1.6 million and a gross profit of $1.9 million, or approximately 54%.

Expenses

General, administrative and selling expenses for the year ended June 30, 2020 were $1.2 million producing an operating profit of $0.3 million or approximately 12% as compared to the year ended June 30, 2019 where operating profits were $0.6 million, or approximately 15%, with general, administrative and selling expenses of $1.4 million.

Income

Other expense comprised of depreciation, income tax, interest income, other income, and gain on sale of assets totaled approximately $12 thousand for the year ended June 30, 2020 resulting in income after income taxes of approximately $0.3 million as compared to income after income taxes of approximately $0.4 million for the year ended June 30, 2019 where other expense totaled $145 thousand. Contributing to the net income were wage subsidies in the amount of approximately $0.1 million received by Brigadier from the Canada government.

Original Sprout

Kahnalytics was founded in 2015 and adopted the dba/Original Sprout in December 2017. Original Sprout formulates and packages various hair and skin care products that are 100% vegan, tested safe and non-toxic, and marketed globally through distribution networks to salons, resorts, grocery stores, health food stores, e-tail sites and on the company's website. The company operates from warehouse and sales offices located in San Clemente, CA, USA.

For the Year Ended June 30, 2020, Compared to the Year Ended June 30, 2019

Revenue

Net revenues for the year ended June 30, 2020 were $3.9 million with cost of goods sold recorded as approximately $2.1 million resulting in a gross profit of approximately $1.8 million and a gross margin of approximately 46% compared to the year ended June 30, 2019 were net revenues totaled $3.6 million with cost of goods sold recorded as approximately $2 million resulting in a gross profit of approximately $1.6 million and a gross margin of approximately 46%.

Expenses

General, administrative and selling expenses for the years ended June 30, 2020 and 2019 were approximately $1.2 million and $0.9 million, respectively, resulting in an operating income of approximately $0.5 million and $0.7 million or approximately 13% and 20%, respectively.

Income

After consideration given to income tax provision, other income, and depreciation expense, the net income for the years ended June 30, 2020 and 2019 were approximately $0.2 million and $0.4 million, respectively.

Liquidity and Capital Resources

Concierge is a holding company that conducts its operations through its subsidiaries. At its holding-company level, its liquidity needs relate to operational expense, the funding of additional business acquisitions and new investment opportunities. Our operating subsidiaries' principal liquidity requirements arise from cash used in operating activities, debt service, and capital expenditures, including purchases of equipment and services, operating costs and expenses, and income taxes.

As of June 30, 2020, we had $9.8 million of cash and cash equivalents on a consolidated basis as compared to $6.5 million as of June 30, 2019. The increase in cash was due to an increase in net income.

During the past five fiscal years combined, Concierge has invested approximately $7 million in cash towards purchasing and assimilating Gourmet Foods, Brigadier Security Systems and the Original Sprout assets into the Concierge Technologies group of companies as well as the acquisition through a stock-for-stock exchange of Wainwright, which provides a significant revenue stream and value. We have also invested approximately $0.5 million in the development of Fintech applications through our newly organized subsidiary, Marygold. Despite these cash investments, our working capital position remains strong at $14 million and our position has strengthened year-to-year. Management forecasts Wainwright, Gourmet Foods, Brigadier and Original Sprout to all produce a profit during the coming fiscal year and the realization of those profits by Concierge is not expected to be significantly impacted by foreign currency fluctuations against the U.S. dollar during the period. While Concierge intends to maintain and improve its revenue stream from wholly owned subsidiaries, Concierge continues to pursue acquisitions of other profitable companies which meet its target profile, including recently acquired Printstock Products Ltd. in New Zealand. Provided Concierge’s subsidiaries continue to operate as they are presently, and are projected to operate, Concierge has sufficient capital to pay its general and administrative expenses for the coming fiscal year and to adequately pursue its long term business objectives.

In relation to the adoption of ASC 842 (see Note 2), the Company recognized $1,150,916 of operating lease liabilities on July 1, 2019. The total amount due under these obligations was $770,457 and $0 as of June 30, 2020 and June 30, 2019, respectively. The obligations will amortize over the passage of time through the recognition of periodic rent expense. See Note 14 for further analysis of this obligation.

As of June 30, 2020, we had $1 million of related-party and third-party indebtedness on a consolidated basis as compared to $0.7 million as of June 30, 2019. Concierge, without inclusion of its subsidiary companies, as of June 30, 2020 and June 30, 2019, had $0.6 million of indebtedness. We are not required to make interest payments on our notes until the maturity date.

Current related party notes payable consist of the following:

As of June 30, 2020, Brigadier had an outstanding principal balance of CD$507,732 (approx. US$373,041 translated as of June 30, 2020) related to the purchase of its Saskatoon office land and building. The Consolidated Balance Sheet as of June 30, 2020 reflect the amount of the principal balance which is due within twelve months as a current liability of US$13,196 and a long term liability of US$359,845. As of June 30, 2019, the loan liability consisted of principal balances outstanding for vehicle purchases. The principal amounts under the loans which were due within twelve months were recorded in short term liabilities as US$26,241, and after twelve months as US$61,057. These loans were paid in full as of June 30, 2020, whereas there was no liability for the loan related to the property purchase as of June 30, 2019. For further details, see Note 11 to our Financial Statements.

Investments

Wainwright, from time to time, provides initial investments in the creation of ETP funds that Wainwright manages. Wainwright classifies these investments as current assets as these investments are generally sold within one year from the balance sheet date. As of June 30, 2020 Wainwright did not hold any initial investment positions. These investments, as applicable, are described further in Note 7 to our Financial Statements.

Dividends

Our strategy on dividends is to declare and pay dividends only from retained earnings and only when our Board of Directors deems it prudent and in the best interests of the company to declare and pay dividends. We have paid no dividends and we do not expect to pay any dividends over the next fiscal year.

Off-Balance Sheet Arrangements

At June 30, 2020, and as of September 27, 2020, we have not entered into any transaction, agreement or other contractual arrangement with an entity unconsolidated with us under which we have:

Not applicable.

Our financial statements appear as follows:

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and
Stockholders of Concierge Technologies, Inc. and Subsidiaries

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Concierge Technologies, Inc. and its subsidiaries (the "Company") as of June 30, 2020 and 2019, the related consolidated statements of operations, comprehensive income, convertible preferred stock and stockholders’ equity, and cash flows for each of the two years in the period ended June 30, 2019, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2020 and 2019, and the results of its operations and its cash flows for each of the two years in the period ended June 30, 2020, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ BPM LLP

San Francisco, California

September 28, 2020

We have served as the Company's auditor since 2017.

CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

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

CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

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

CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

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

CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF  CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY

FOR THE YEARS ENDED JUNE 30, 2020 AND 2019

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

CONCIERGE TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

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