Marygold Companies, Inc. 10-K

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with our consolidated financial statements and the accompanying notes thereto included in this Form 10-K and is qualified in its entirety by the foregoing and by more detailed financial information appearing elsewhere in this Form 10-K. See “Consolidated Financial Statements.” In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Some of the numbers included herein have been rounded for the convenience of presentation. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed in the “Special Note Regarding Forward Looking Statements” above. Our audited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles. Introduction The Marygold Companies, Inc., a Nevada corporation (together with its subsidiaries, “we,” “us,” “our,” “Company,” or “The Marygold Companies”) is a holding company which operates through its wholly owned subsidiaries on a multinational scale that is focused upon financial services, exchange traded funds management and certain other business activities listed below: ● U.S. Fund Management - USCF Investments, Inc., a Delaware corporation (“USCF Investments”), with corporate headquarters in Walnut Creek, California and its wholly owned subsidiaries, which provide fund management services to exchange traded fund and exchange traded products (“ETFs”): ○ United States Commodity Funds, LLC, a Delaware limited liability company (“USCF LLC”), and ○ USCF Advisers, LLC, a Delaware limited liability company (“USCF Advisers”). The principal place of business for each of USCF LLC and USCF Advisers is in Walnut Creek, California. ● Beauty Products - Kahnalytics, Inc., a California corporation, doing business as “Original Sprout,” located in San Clemente, California. ● U.S. and U.K. Financial Services: ○ Marygold & Co., a Delaware corporation whose principal business office is located in Walnut Creek, California; ■ Marygold & Co. Advisory Services, LLC, a wholly owned subsidiary of Marygold & Co., a Delaware limited liability company, was dissolved effective on February 17, 2026. ○ Marygold & Co., (UK) Limited, a private limited company incorporated and registered in England and Wales, whose registered office is in London, England, and its wholly owned subsidiaries: ■ Marygold & Co. Limited f/k/a Tiger Financial & Asset Management Limited, a company incorporated and registered in England and Wales, whose registered office is in Northampton, England; and ■ Step-By-Step Financial Planners Limited, a company incorporated and registered in England and Wales, whose registered office is in Staffordshire, England. ● Food Products – Gourmet Foods, Ltd., a registered New Zealand company located in Tauranga, New Zealand and its wholly owned subsidiary, Printstock Products Limited, a registered New Zealand company, with its principal manufacturing facility in Napier, New Zealand. As of March 31, 2026, the Company formally approved a plan to dispose of this segment and thus this segment is being presented as discontinued operations (see Note 3. Discontinued Operations to the audited consolidated financial statements). ● Security Systems – Brigadier Security Systems (2000) Ltd., a Canadian registered corporation, with locations in Regina and Saskatoon, Saskatchewan, Canada. This business was sold to a related party in July 2025 (see Note 7. Sale of Brigadier to the audited consolidated financial statements). 22 Table of Contents Critical Accounting Policies We have chosen accounting policies that we believe are appropriate to report accurately and fairly our operating results and financial position, and we apply those accounting policies in a consistent manner. Our significant policies are summarized in Note 2. to the Consolidated Financial Statements. The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“US GAAP” or “GAAP”) requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosures of contingent assets and liabilities. We base our estimates on historical experience and other factors we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may vary from those estimates. We believe the following accounting policies are the most critical in the preparation of our financial statements because they involve the most difficult, subjective or complex judgments about the effect of matters that are inherently uncertain. Business Combinations - Valuation of Intangible Assets We are a holding company whose activities involve the acquisition of operating companies through stock purchase or asset purchase transactions. We account for business combinations using the acquisition method of accounting. All the assets acquired, liabilities assumed and amounts attributable to intangible assets, including goodwill, are recorded at their respective fair values at the date of acquisition. Determination of fair value involves estimates and assumptions which can be complex, most notably with respect to intangible assets. Critical estimates used in the valuation of intangible assets include, but are not limited to, the amount and timing of projected cash flows, useful lives, and discount rates. While management’s estimates of fair value are based on assumptions that are believed to be reasonable, these assumptions are inherently uncertain as they pertain to forward-looking views of our business and market conditions. The judgments made in this valuation process could materially impact our consolidated financial statements. Revenue Recognition Our operating subsidiaries derive revenues from a number of sources including sales of hardware, services, food items, printing, financial services, and consumer products. The company recognizes the revenue when the product or service is delivered, or the ownership of the product is deemed to have been transferred to the buyer. We carefully monitor the outgoings of product shipments and service completions to ensure revenues are properly recorded. In the case of continued support services, such as warranty or extended contracts, the company makes an assessment at each reporting period as to the significance of the cost of such support or warranty. This estimate is based on historical experience and careful monitoring of costs throughout the reporting period to determine if any reserve should be recorded for estimated expenses. We believe we have made careful and reasonable estimates, however adjustments may be required in the future if actual results vary from our estimates. Impairments Goodwill and other intangible assets are tested for impairment at the reporting unit level on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. These events or circumstances could include a significant change in the business climate, legal factors, operating performance indicators, competition, or sale or disposition of a significant portion of a reporting unit. Application of the goodwill and other intangible assets impairment test requires judgment in the determination of the fair value of each reporting unit. The fair value of each reporting unit is estimated primarily through the use of a discounted cash flow methodology. This analysis requires significant judgments, including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of growth for our business, estimation of the useful life over which cash flows will occur, and determination of our weighted average cost of capital. Changes in these estimates and assumptions could materially affect the determination of fair value and impairment for each reporting unit. Legal and Other Contingencies The outcomes of legal proceedings and claims brought against us are subject to significant uncertainty. We evaluate developments in these matters on a regular basis and a contingency loss is accrued by a charge to income when we believe it is both probable that a loss has been incurred and the amount can be reasonably estimated. In determining whether a loss should be accrued, we evaluate among other factors the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of loss. Changes in these factors could materially impact our consolidated financial statements. Income Taxes The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year, and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in an entity’s financial statements or tax returns. We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Accounting literature also provides guidance on derecognition of income tax assets and liabilities, classification of deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, and income tax disclosures. Judgment is required to assess the future tax consequences of events that have been recognized in our consolidated financial statements or tax returns. Variations in the actual outcome of these future tax consequences could materially impact our consolidated financial statements. 23 Table of Contents SUMMARY RESULTS OF OPERATIONS (in thousands, except percentages) Fiscal 2026 Fiscal 2025 Percentage Change Revenue $ 25,313 $ 23,434 8 % Cost of revenue 1,864 3,163 -41 % Gross profit 23,449 20,271 16 % Operating expenses 29,461 27,106 9 % Loss from continuing operations (6,012 ) (6,835 ) -12 % Other income (expense), net 1,207 (721 ) -267 % Loss from continuing operations before income taxes (4,805 ) (7,556 ) -36 % Benefit from income taxes 277 1,562 -82 % Net loss from continuing operations (4,528 ) (5,994 ) -24 % Net income from discontinued operations 157 174 -10 % Net loss $ (4,371 ) $ (5,820 ) -25 % Fiscal Year 2026 Compared with Fiscal Year 2025 Revenue increased by $1.9 million or 8% for fiscal 2026 driven by increased revenue of $4.0 million at our fund management segment resulting from higher average Assets Under Management (“AUM”). This increase was partially offset by a $2.5 million reduction in revenue from our security systems segment following the sale of Brigadier to a related party on July 1, 2025. During fiscal 2026, a trading error occurred in the execution of oil futures trades on behalf of the United States Oil Fund, LP (“USO”), one of the funds managed by our subsidiary USCF LLC, resulting in a $2.5 million loss to the fund. The error was identified on the day of execution. USCF reimbursed USO in full for the $2.5 million loss, and as a result, there was no impact to USO’s Net Asset Value. The reimbursement is reflected as a reduction in revenue. Following the event, USCF reviewed and enhanced its trade execution oversight procedures to reduce the risk of similar errors in the future. Average AUM in our U.S. fund management business was $4.1 billion in fiscal 2026, compared with $2.9 billion in fiscal 2025, and increase of $1.2 billion. The increase in average AUM in fiscal 2026 was due to higher oil and other commodity prices associated with geopolitical conflicts in the Middle East and Eastern Europe, as well as other geopolitical and economic factors. Gross profit increased by $3.2 million or 16% as a result of an increase from our fund management segment due to the increased average AUM described above and an increase of $0.5 million from our beauty products segment; offset by a reduction of $1.3 million due to the sale of our security systems segment to a related party on July 1, 2025 and a $0.1 million decrease from our food products segment. Operating expenses increased by $2.4 million, or 9%, primarily as a result of the following: During fiscal 2026, we recorded total impairment charges of $3.6 million, of which $2.7 million related to goodwill and other intangible assets in our U.K. financial services unit due to increased losses from the wealth management business, and $0.9 million related to an investment in a private bank that had been reporting losses. Higher average AUM in our fund management business also increased fund operations expense through higher third-party fees. Partially offsetting these increases were decreases in operating expenses of $4.6 million associated with the pause of further development of the U.S. Fintech app in April 2025 and $1.2 million associated with the sale of Brigadier on July 1, 2025. The loss from continuing operations decreased by $0.8 million, or 12%, from fiscal 2025 to fiscal 2026. The $1.5 million improvement in the financial services segment reflected a $4.6 million reduction in losses following the pause of the U.S. Fintech app, partially offset by a $3.2 million increase in losses in the U.K. financial services business, including the $2.7 million impairment charge related to goodwill and other intangible assets. Other favorable changes included a $0.7 million increase in profit from the beauty products segment. These changes were partially offset by a $0.2 million decrease in profit from the fund management segment, primarily due to the USO trading-error reimbursement described below, a $0.3 million decrease in profit from the security systems segment following the sale of Brigadier, and a $0.8 million increase in the corporate headquarters loss, driven in part by the $0.9 million impairment charge relating to the investment in a private bank. Other income (expense), net changed from $0.7 million of net other expense in fiscal 2025 to $1.2 million net other income in fiscal 2026, a favorable change of $1.9 million. The change primarily reflected the $1.2 million of interest expense incurred in fiscal 2025 on the $4.4 million note payable which was paid in full in September 2025, and the $0.6 million gain on sale of Brigadier in July 2025. Benefit from income taxes decreased by $1.3 million or 82% from fiscal 2025 to fiscal 2026 as a result of the decreased loss from continuing operations before income taxes as described above. Net income from discontinued operations was flat at $0.2 million for both fiscal 2026 and 2025. Net loss of $4.4 million in fiscal 2026 decreased by $1.4 million or 25% compared to $5.8 million in fiscal 2025 as a net result of the explanations described above. 24 Table of Contents SEGMENT RESULTS OF OPERATIONS (in thousands, except percentages) Fiscal 2026 Fiscal 2025 Percentage Change Revenue Fund management - related party $ 21,126 $ 17,135 23 % Beauty products 3,367 2,974 13 % Security systems - 2,471 -100 % Financial services 820 854 -4 % Total revenue $ 25,313 $ 23,434 8 % Income (Loss) from Continuing Operations Fund management - related party $ 2,912 $ 3,274 -11 % Beauty products 293 (395 ) -174 % Security systems - 250 -100 % Financial services (4,079 ) (5,621 ) -27 % Corporate headquarters (5,138 ) (4,343 ) 18 % Total loss from continuing operations $ (6,012 ) $ (6,835 ) -12 % Reportable Segments Fiscal Year 2026 Compared with Fiscal Year 2025 U.S. Fund Management - USCF Investments Revenue increased by $4.0 million or 23% driven by higher average Assets Under Management (“AUM”) in our fund management business. Average AUM for fiscal 2026 was $4.1 billion, compared with $2.9 billion for fiscal 2025, an increase of $1.2 billion, or 41%. The increase in average AUM in fiscal 2026 was due to commodity price fluctuations, including energy price volatility associated with geopolitical events in the Middle East and Eastern Europe, as well as other geopolitical and economic uncertainty affecting inventory and demand. During the quarter ended June 30, 2026, a trading error occurred in the execution of oil futures contracts on behalf of USO, resulting in adverse execution of $2.5 million relative to the expected benchmark execution price. The error was identified on the day of execution and USCF reimbursed USO in full for the $2.5 million loss, resulting in no impact to USO’s Net Asset Value. The Company recognized the $2.5 million reimbursement as a reduction to revenue in the Fund Management segment. Management has reviewed the circumstances of the error, determined it was an isolated event, and has implemented enhanced controls over its trade execution processes. Operating income decreased by $0.4 million as a result of the $2.5 million reimbursement which reduced revenue as described above and increased variable operating expenses due to the increase in average AUM including marketing and distribution costs, fund accounting and administration and sub-adviser fees. New fund costs also contributed to an increase in operating expenses. Beauty Products – Original Sprout Original Sprout derives its revenues from the sale of proprietary hair and skin care products marketed to domestic and international distributors, grocery stores, hair salons and direct-to-consumers via online platforms. Revenue for fiscal 2026 was $3.4 million as compared to $3.0 million for the comparable prior year period, an increase of $0.4 million or 13% driven by (1) continued success in controlling its brand and pricing on e-commerce platforms and (2) an increase in international distribution channels to include more countries in Asia. Operating income increased to $0.3 million for fiscal 2026, as compared to an operating loss of $0.4 million for the prior year, or an improvement of 174%, as a result of increased revenue, the reduction of certain expenses including the elimination of third-party marketing consultants, and a reduction of unused warehouse space. Security Systems - Brigadier Brigadier was sold to a related party on July 1, 2025 (see Note 7. Sale of Brigadier in the audited consolidated financial statements). 25 Table of Contents U.S. and U.K. Financial Services – Marygold US and Marygold UK Our U.S. and U.K. Financial Services segment is comprised of Marygold US and Marygold UK, which are distinct operating entities with differing revenue streams. Marygold US Marygold US developed and launched a mobile banking fintech app which earned revenue in the form of management fees based on a percentage of the amount of account holder funds invested in various curated ETF portfolios offered on the app (“Money Pools”), and from transaction fees when account holders used a debit card. The app was soft-launched in June 2023 as a proof of concept. Since that time, the app earned only de minimis revenues. As a result, the offering of the app in the US was paused by Marygold US effective March 31, 2025. For fiscal 2026, Marygold US had no revenue and minimal expenses as compared with an operating loss of $4.7 million for the prior year. Marygold UK Marygold UK is a U.K. holding company which operates through its two wholly-owned subsidiaries Marygold & Co. Limited f/k/a Tiger Financial and Asset Management Limited and Step-By-Step Financial Planners, both of which are registered investment advisors which earn revenues based on the amount of AUM and from the sale of financial products, including insurance, to customers in the U.K. Our total Financial Services revenue, derived entirely from Marygold UK, was $0.8 million in both fiscal 2026 and fiscal 2025. Marygold UK had developed a fintech app designed specifically for use by Marygold UK clients. The app was launched in the U.K. in March 2025, earned only de minimis revenue, was removed from the market in April 2026, its offering, development and marketing were paused effective June 30, 2026. As Marygold UK generated increasing losses due to the development and marketing of the app and further impacted by the departure of the former head of one of its operating subsidiaries, the Company recorded a $2.7 million impairment charge relating to goodwill and other intangible assets. The consolidated operating loss for financial services was $4.1 million in fiscal 2026, compared with a loss of $5.6 million in fiscal 2025. Corporate Headquarters As a holding company, The Marygold Companies has no significant revenue but has operating expenses including salaries, audit and legal fees, NYSE American listing fees and expenses, expenses related to compliance with its SEC periodic reporting requirements, insurance, and investor relations, which result in operating losses. Operating loss at the corporate headquarters increased to $5.1 million in fiscal 2026 from $4.3 million in fiscal 2025, an increase of $0.8 million, or 18%, driven in part by a $0.9 million impairment charge relating to an investment in a private bank. Liquidity and Capital Resources We are a multinational holding company that conducts our individual diversified business operations through our wholly-owned subsidiaries. At the holding-company level, our liquidity needs relate to operational expenses, the funding of additional business acquisitions and new investment opportunities including the investment by our fund management business in the development of new exchange traded funds or products. Our operating subsidiaries’ principal liquidity requirements arise from cash used in operating activities, and capital expenditures, including purchases of equipment and services, operating costs and expenses, and income taxes. Cash is managed at the holding company and the subsidiary level. There are generally no legal limitations or constraints on the movement of funds between the entities, however there are potential tax consequences for funds moved from foreign subsidiaries to the parent company. Additionally, our registered investment advisor subsidiaries are required to maintain certain minimum capital requirements. As of June 30, 2026, we had $2.9 million of cash and cash equivalents on a consolidated basis, compared with $5.0 million as of June 30, 2025, a decrease of $2.1 million or 42%. Our cash used in operating activities for fiscal 2026 was $2.3 million. During fiscal 2026, we made principal payments of $1.3 million to pay off our Streeterville note payable and received net proceeds of $1.1 million from the sale of Brigadier. During fiscal 2026, the Company spent money on the development and marketing of the mobile Fintech app at Marygold UK; however, effective June 30, 2026 we paused the offering, development and marketing of the mobile Fintech app in the U.K. We have invested a total of $19.5 million in the Fintech app since the project was implemented in 2019. Over the coming 12 months we currently expect to generate proceeds from the sale of our Food Products segment and plan to further curtail funding for our fintech-based subsidiary operations. Our working capital position remains strong at $12.3 million as of June 30, 2026. 26 Table of Contents Equity Distribution Agreement On March 7, 2025, we entered into an Equity Distribution Agreement (“EDA”) with Maxim Group, LLC (“Maxim”) pursuant to which we may sell from time-to-time shares of our common stock having an aggregate offering price of up to $4.65 million through or to Maxim, as sales agent or principal. We have agreed to pay Maxim a commission equal to three percent (3%) of the aggregate gross proceeds from the sale of any shares through Maxim under the EDA, reimburse Maxim for certain legal fees and disbursements, and have agreed to indemnify Maxim against certain liabilities under the Securities Act. We have not sold any shares pursuant to the EDA and, pursuant to the terms of the agreement, the EDA terminated effective March 7, 2026. Lease Liability The Company has various operating leases for offices, warehouses and manufacturing facilities. The total amount due under these obligations was $0.5 million as of June 30, 2026. The obligations will reduce over the passage of time through periodic lease payments. See Note 15 to our Consolidated Financial Statements for further analysis of this obligation. Investments USCF Investments, from time to time, provides initial investments in the creation of ETF funds that USCF Investments manages. USCF Investments classifies these investments as current assets as the intention is for these investments to generally be sold within one year from the balance sheet date; however on occasion these investments have been held for over one year. As of June 30, 2026, USCF Investments held investment positions in three of its exchange traded funds registered under the Investment Company Act of 1940, as amended, ZSB, USE and ZSC of $0.2 million, $0.5 million, and $0.6 million, respectively. These investment positions along with other investments, as applicable, are described further in Note 6 to our Consolidated 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 paid no dividends during fiscal 2026 and 2025. Off-Balance Sheet Arrangements At June 30, 2026, and through September 18, 2026, the filing date of this Annual Report on Form 10-K, we have not entered into any transaction, agreement or other contractual arrangement with an entity unconsolidated with us under which we have: ● An obligation under a guarantee contract, ● A retained or contingent interest in assets transferred to the unconsolidated entity or similar arrangement that serves as credit, liquidity or market risk support to such entity for such assets, ● An obligation, including a contingent obligation, arising out of a variable interest in an unconsolidated entity that is held by, and material to, us where such entity provides financing, liquidity, market risk or credit risk support to, or engages in leasing, hedging, or research and development services with us. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As a “smaller reporting company”, we are not required to provide the information required by this Item. 27 Table of Contents