Marygold Companies Inc

NOTE 1*.* ORGANIZATION AND DESCRIPTION OF BUSINESS

The Marygold Companies, Inc., (the “Company” or “The Marygold Companies”), a Nevada corporation, is a global holding company that intends to focus on financial services. The Company is currently directing its investments towards financial services and the emerging Fintech space. The operations of the Company’s wholly-owned subsidiaries are summarized as follows:

The Company manages its operating businesses on a decentralized basis. There are no centralized or integrated operational functions such as marketing, sales, legal or other professional services and there is little involvement by The Marygold Companies’ management in the day-to-day business affairs of its operating subsidiary businesses apart from oversight. The Company’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. The Company’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.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Accounting Principles

The Company has prepared the accompanying financial statements on a consolidated basis. In the opinion of management, the accompanying consolidated balance sheets and related consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows include all adjustments, consisting only of normal recurring items, necessary for their fair presentation, prepared on an accrual basis, in conformity with generally accepted accounting principles in the United States of America (“U.S. GAAP”).

Principles of Consolidation

The accompanying consolidated financial statements, which are referred herein as the “Financial Statements”, include the accounts of The Marygold Companies and its wholly-owned subsidiaries. Intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of the Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Financial Statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Foreign Currencies

We record foreign currency translation adjustments and transaction gains and losses in accordance with Accounting Standards Codification (“ASC”) 830, Foreign Currency Matters. Assets and liabilities are translated at the exchange rate on the balance sheet date, and operating results are translated at the average exchange rates throughout the prevailing period. Translation adjustments resulting from this process are recorded to other comprehensive income (loss).

Cash and Cash Equivalents

Cash and cash equivalents includes all cash and highly liquid debt instruments with original maturities of three months or less on the date of purchase. The Company maintains its cash and cash equivalents in financial institutions in the United States, United Kingdom, Canada, and New Zealand. Accounts in the United States are insured by the Federal Deposit Insurance Corporation. Accounts in New Zealand are uninsured. The Company has, at times, held deposits in excess of insured amounts, but the Company does not expect any losses in such accounts.

Accounts Receivable

Management regularly reviews the composition of accounts receivable and analyzes customer credit worthiness, customer concentrations, current economic trends, changes in customer payment patterns and reasonable and supportable forecasts about the future to determine whether or not an account should be deemed uncollectible. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. As of June 30, 2024 and 2023, the Company had immaterial amounts reserved for credit losses.

Accounts receivable due from related parties consist of fund asset management fees receivable from the USCF Investments business. Management fees receivable generally consist of one month of management fees which are collected in the month after they are earned.

Concentration of Credit Risk

Our subsidiary USCF relies on the revenues generated through the funds it manages. The concentration of fund management revenue and related receivables were (dollars in thousands).

There are no significant concentrations for the other operating subsidiaries on a consolidated basis.

Inventories

Inventories which consist of (i) food products, printing supplies, and packaging in New Zealand; (ii) hair and skin care finished products and components in the US; (iii) security system hardware in Canada and (iv) printed debit cards and wearables in the US and all are valued at the lower of cost or net realizable value. Inventories in Canada and New Zealand are maintained on the first-in, first-out method, while inventory in the U.S is maintained using the average cost method. Inventories include product cost, inbound freight and warehousing costs where applicable. An assessment is made at the end of each fiscal quarter to determine what slow-moving inventory items, if any, should be deemed obsolete and written down to their estimated net realizable value. For the years ended June 30, 2024* and 2023,*the expense for slow moving or obsolete inventory was de minimis.

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation. Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals and leasehold improvements are capitalized. Office furniture and equipment include office fixtures, computers, printers and other office equipment plus software and applicable packaging designs. Leasehold improvements are depreciated over the shorter of the useful life of the improvement and the length of the lease. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation is computed using the straight-line method over the estimated useful life of the asset.

Leases

The Company’s most significant operating leases are real estate leases of office, warehouse and production facilities. Operating leases are included in operating lease right-of-use assets and operating lease liabilities in the Consolidated Balance Sheets. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. In determining the present value of lease payments, the Company uses its incremental borrowing rate based on the information available at the lease commencement date. The operating lease right-of-use assets also include any lease payments made at or before the commencement date and are reduced by any lease incentives received. The Company’s lease terms may include options to extend or not terminate the lease when it is reasonably certain that it will exercise any such options. For the majority of its leases, the Company concluded that it is not reasonably certain that any renewal options would be exercised, and, therefore, the amounts are not recognized as part of operating lease right-of-use assets nor operating lease liabilities. Leases with an initial term of 12 months or less are not recorded on the balance sheet and expensed as incurred and included within rent expense under general and administrative expense. Lease expense is recognized on a straight-line basis over the expected lease term.

The Company has one finance lease wherein ownership of the underlying asset will be transferred to the Company at the end of the lease term. The underlying asset of the finance lease is a solar energy system at Gourmet Foods that is included with Property and equipment on the Consolidated Balance Sheets.

Intangible Assets

Intangible assets consist of brand names, recipes, customer relationships and the internally developed software for the Fintech app developed by Marygold. Intangible assets with finite lives are amortized over the estimated useful life and are evaluated for impairment at least on an annual basis and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. When it is determined that an intangible asset is impaired, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets. The Company recorded an impairment loss of $1.0 million during fiscal 2024 relating to intangible assets in its beauty products segment and there wasno impairment recorded during fiscal 2023*.*

Goodwill

Goodwill represents the excess of the aggregate purchase price over the fair value of the net assets acquired in a business combination transaction. Goodwill is tested for impairment on an annual basis during the fourth quarter of the Company’s fiscal year, or more frequently if events or changes in circumstances indicate that the carrying amount of goodwill may be impaired. The Company first performs a qualitative test to determine if goodwill is impaired at a reporting unit. In performing this test, the Company evaluates macroeconomic factors, industry and market considerations, cost factors such as the increase in the cost of materials or labor or other costs, overall financial performance, changes in key personnel or customers or strategy, and other entity-specific events or trends that could indicate impairment, among other items. If the results of this test indicate that it is more likely than not that the fair value of the reporting unit is below its carrying value, a quantitative test is then performed to determine the amount of the impairment. When impaired, the carrying value of goodwill is written down to fair value. The Company recorded a goodwill impairment loss of $0.4 million during fiscal 2024 relating to its beauty products segment and there wasno impairment recorded during fiscal 2023*.*

Impairment of Long-Lived Assets

The Company tests long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value. Other than as described in the intangible assets section, there wasno impairment recorded for the years ended June 30, 2024* *and 2023.

Investments and Fair Value of Financial Instruments

Equity securities included in short-term investments have readily determinable fair values and are carried at fair value. Debt securities included in short-term investments are acquired with the intent to sell in the near term and are carried at fair value. Any changes in the fair value of trading debt securities and equity securities are reflected as a component of other income (expense) in the consolidated statement of operations. The Company measures the investments at fair value at period end with any changes in fair value reflected as unrealized gains or (losses) which is included as part of other (expense) income in the Consolidated Statements of Operations. The Company values its investments in accordance with ASC 820 – Fair Value Measurements and Disclosures (“ASC 820”). ASC 820 defines fair value, establishes a framework for measuring fair value in U.S. GAAP, and expands disclosures about fair value measurement. ASC 820 establishes a fair value hierarchy that distinguishes between: (1) market participant assumptions developed based on market data obtained from sources independent of the Company (observable inputs) and (2) the Company’s own assumptions about market participant assumptions developed based on the best information available under the circumstances (unobservable inputs). The three levels defined by the ASC 820 hierarchy are as follows:

Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 assets include the following: quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market-corroborated inputs).

Level 3 – Unobservable pricing input at the measurement date for the asset or liability. Unobservable inputs shall be used to measure fair value to the extent that observable inputs are not available.

In some instances, the inputs used to measure fair value might fall within different levels of the fair value hierarchy. The level in the fair value hierarchy within which the fair value measurement in its entirety falls shall be determined based on the lowest input level that is significant to the fair value measurement in its entirety.

Revenue Recognition

Revenue consists of fees earned through management of investment funds in the United States and in the United Kingdom primarily based on assets under management (“AUM”), sales of gourmet meat pies and printing of food wrappers in New Zealand, sales of security alarm system installation and maintenance services in Canada, and sales of hair and skin care products in the United States and internationally. Revenue is accounted for net of sales taxes, sales returns, and trade discounts. The performance obligation is satisfied when the product has been shipped and title, risk of loss and rewards of ownership have been transferred. For most of the Company’s product sales or services, the revenue recognition criteria described below are met at the time the product is shipped, the subscription period commences, or the management services are provided. For our Brigadier subsidiary in Canada, the Company operates under contract with an alarm monitoring company that pays a percentage of its recurring monitoring fee to Brigadier in exchange for continued customer service and support functions with respect to each customer maintained under contract by the monitoring company. The Company has no costs of contracts which require capitalization. The Company’s only contract assets are accounts receivable. The Company has no contract liabilities other than deposits received periodically which are insignificant to the consolidated financial statements. The Company generates revenue, in part, through contractual monthly recurring fees received for providing ongoing customer support services to monitoring company clientele.

The five-step process governing contract revenue reporting includes:

1. Identifying the contract(s) with customers

2. Identifying the performance obligations in the contract

3. Determining the transaction price

4. Allocating the transaction price to the performance obligations in the contract

5. Recognizing revenue when or as the performance obligation is satisfied

For Brigadier, transactions involve security systems that are sold outright to the customer where the Company’s performance obligations include customer support services and the sale and installation of the security systems. For such arrangements, the Company allocates a portion of the transaction price to each performance obligation based on a relative stand-alone selling price. Revenue associated with the sale and installation of security systems is recognized once installation is complete and is reflected as security system revenue in the Consolidated Statements of Operations. Revenue associated with customer support services is recognized as those services are provided, and is included as a component of security system revenue in the Consolidated Statements of Operations. None of the other subsidiaries of the Company generates revenue from long-term contracts.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. A valuation allowance is provided for deferred tax assets if it is more likely than not that these items will either expire before the Company is able to realize their benefits or if future deductibility is uncertain.

When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Applicable interest and penalties associated with unrecognized tax benefits are classified as additional income taxes in the statements of operations.

Advertising Costs

The Company expenses the cost of advertising as incurred. Marketing and advertising costs for the years ended June 30*,2024 *and 2023 were $3.2 million and $2.6 million, respectively.

Segment Reporting

The Company defines operating segments as components about which separate financial information is available that is evaluated regularly by the chief operating decision maker, which is our Chief Executive Officer, in deciding how to allocate resources and in assessing performances.

Business Combinations

We allocate the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired customers, acquired trade names from a market participant perspective, useful lives and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, which is one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed.

Recent Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Improvements to Reportable Segment Disclosures (Topic 280). The guidance expands the disclosures required for reportable segments in our annual and interim consolidated financial statements, primarily through enhanced disclosures about significant segment expenses. The standard will be effective for us beginning with our annual reporting for fiscal year 2025 and interim periods thereafter, with early adoption permitted. We are currently evaluating the impact of this standard on our segment disclosures.

In December 2023, the FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures (Topic 740). The guidance requires disclosure of disaggregated income taxes paid, prescribes standardized categories for the components of the effective tax rate reconciliation, and modifies other income tax-related disclosures. The standard will be effective for us beginning with our annual reporting for fiscal year 2026, with early adoption permitted. We are currently evaluating the impact of this standard on our income tax disclosures.

The Company adopted the accounting standard ASU 2016-13, Financial Instruments – Credit Losses on Financial Instruments at the beginning of its fiscal 2024. The guidance replaced the existing incurred loss impairment model with an expected credit loss model and requires a financial asset measured at amortized cost to be presented at the net amount expected to be collected. The adoption of the new standard did not have a material impact on the recognition of losses on its receivables.

NOTE 3. NET INCOME (LOSS) PER SHARE

Basic net (loss) income per share is based upon the weighted average number of common shares outstanding. This calculation includes the weighted average number of Series B Convertible Preferred shares outstanding also as they are deemed to be substantially similar to the common shares and shareholders are entitled to the same liquidation and dividend rights. Diluted net (loss) income per share is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. For the years ended June 30, 2024 and 2023, the Company excluded 135,567 and 281,696 common stock equivalents, respectively, from the diluted net (loss) income per share calculation as their effect would be anti-dilutive. Since the Company generated a net loss in fiscal 2024, basic and diluted net (loss) income per share were the same.

The components of basic and diluted net (loss) income per share were as follows (in thousands, except per share data):

NOTE 4. CERTAIN BALANCE SHEET DETAILS

The components of certain balance sheet line items are as follows (in thousands).

Included in the other current assets balance as of June 30, 2024 was a deposit of $1.8 million made in connection with the potential acquisition of a 9.9% equity interest in a domestic financial institution that is currently seeking certain regulatory approval. If the regulatory approval is obtained, the deposit will convert to an equity interest in the financial institution and if the regulatory approval is not obtained the deposit will be refunded to the Company.

For the years ended June 30, 2024* *and 2023, depreciation expense for property and equipment totaled $0.1 million and $0.2 million, respectively.

The $0.5 million investment represents a 10% equity interest in a registered investment advisor accounted for on a cost basis which we believe approximates fair value.

**NOTE 5. INVESTMENTS **

USCF Investments, from time to time, provides initial seed capital in connection with the creation of ETPs or ETFs that are managed by USCF or USCF Advisers. USCF Investments classifies these investments as current assets as these investments are generally sold within one year of the balance sheet date. Investments in which no controlling financial interest or significant influence exists are recorded at fair value with the change included in earnings on the Consolidated Statements of Operations. As of June 30, 2024 and 2023, the Company invested a total of $7.5 million and $5.8 million, respectively, of funds managed by USCF Advisers which are related parties and are included in other equities in the below table. The Company elected the fair value option related to this investment as the shares were purchased and will be sold on the market and this accounting treatment is deemed to be most informative. In addition to the holdings in these funds, the Company also invests in marketable securities. The Company recognized unrealized gains (losses) of $0.1 million and ($0.1 million) for the years ended June 30, 2024 and 2023, respectively.

All of the Company’s short-term investments are classified as Level 1 assets as of June 30, 2024 and 2023. Investments measured at estimated fair value consist of the following as of June 30, 2024 and 2023 (in thousands):

During the years ended June 30, 2024* *and 2023, there were no transfers between Level 1 and Level 2.

NOTE 6. BUSINESS COMBINATIONS

Step-By-Step

On January 31, 2024, Marygold UK entered into a Share Purchase Agreement (“SPA”) to acquire all the issued and outstanding shares of Step-By-Step Financial Planners Limited (“Step-By-Step”), subject to certain closing conditions and regulatory approval. The transaction closed on April 30, 2024 with an agreed purchase price of $1.2 million, subject to adjustment as provided for in the SPA. Marygold UK paid $0.7 million upon the closing and the remaining $0.5 million owed will be payable in two subsequent payments as provided in the SPA. Step-By-Step is an asset manager and investment advisor based in Staffordshire, England with approximately $37 million in assets under management as of June 30, 2024. Step-By-Step will be operated as a subsidiary of Marygold UK. In addition to growing the business through increasing assets under management, Marygold UK intends to project the fintech mobile app services offered in the U.S. into the U.K. through the established contacts and certifications held by Step-By-Step.

The assets and liabilities to which the Company has preliminarily allocated the purchase price was as follows (in thousands):

From the date of acquisition through June 30, 2024, Step-By-Step revenue of $57,000 and operating loss of a de minimis amount was included in the Company’s consolidated statement of operations.

The following are the supplemental consolidated financial results of the Company on unaudited pro forma basis as if the acquisition of Step-By-Step had occurred on July 1, 2022*,giving effect on a pro forma basis to purchase accounting adjustments such as amortization of intangible assets and acquisition related costs. The pro forma data is for informational purposes only and may not necessarily reflect the actual results of operations had Step-By-Step been operated as part of the Company since July 1, 2022.* Furthermore, the pro forma results do not intend to predict the future results of operations of the Company.

Tiger

Marygold UK acquired Tiger Financial and Asset Management Limited (“Tiger”), an asset manager and investment advisor, in 2022 with an agreed purchase price of $2.9 million, subject to adjustment as provided for in the Stock Purchase Agreement (“SPA”). In accordance with the SPA, there was a downward adjustment of the purchase price of less than $0.1 million as a result of existing clientele closing their accounts prior to December 31, 2023. The remaining purchase price payment of $0.6 million was made in January 2024.

NOTE 7. IMPAIRMENT LOSS

During the fourth quarter of fiscal 2024, the Company recorded an impairment loss of $1.4 million related to the goodwill and other intangible assets in its beauty products business unit. The business unit has been suffering from increased losses resulting from pandemic-related changes in its distribution channels and increased costs. The impairment loss of $1.4 million included goodwill of $0.4 million and indefinite and finite lived intangible assets totaling $1.0 million relating to brand name, formulas and customer relations. The Company determined the fair value of the reporting unit using multiple methods including discounted cash flows and pricing of comparable companies.

**NOTE 8. GOODWILL **

Changes in the carrying amount of goodwill were as follows (in thousands):

The Company tests for goodwill impairment at each reporting unit annually on June 30. Refer to Note 7, Impairment Loss, regarding the goodwill impairment recorded during 2024.

NOTE 9. INTANGIBLE ASSETS

Total amortization expense for intangible assets was $0.4 million for both the years ended June 30, 2024 and 2023. Refer to Note 7, Impairment Loss, regarding the intangible asset impairment recorded during fiscal 2024.

Estimated remaining amortization expenses of intangible assets for the next five fiscal years and thereafter are as follows (in thousands):

**NOTE 10. RELATED PARTY TRANSACTIONS **

USCF Investments - Related Party Transactions

The Funds managed by USCF and USCF Advisers are considered to be related parties. The Company’s fund management revenue, totaling $19.0 million and $20.9 million for the years ended June 30, 2024 and 2023, respectively, were earned from these related parties. Accounts receivable, totaling $1.5 million and $1.7 million as of June 30, 2024 and 2023, respectively, were owed from the Funds that are related parties. USCF Investments, from time to time, provides initial investments in the creation of ETP and ETF funds that USCF manages. As of June 30, 2024 and 2023, the Company invested a total of $7.5 million and $5.8 million, respectively, of funds managed by USCF Advisers. The Company owns approximately 45% and 68% of the outstanding shares of these investments as of June 30, 2024 and 2023, respectively.

USCF Advisors is contractually obligated to pay license fees up to $0.8 million to an affiliated entity related to intellectual property rights for two of the funds during fiscal 2025 and 2026. The amount of license fee accrued as an expense during fiscal 2024 was $0.4 million.

**NOTE 11. LOANS **

As of June 30, 2024, Brigadier had an outstanding principal balance of $0.3 million due to Bank of Montreal related to the purchase of its Saskatoon office land and building. The bank loan matured and was paid off in full in July 2024.

Gourmet Foods has a finance lease liability related to a solar energy system. Total lease liabilities under the lease for the years ended June 30, 2024 and 2023 were $0.1 million and are included under loans-property and equipment on our Consolidated Balance Sheets.

NOTE 12. STOCKHOLDERS’ EQUITY

Warrants to Purchase Common Stock

In connection with the Company’s underwritten public offering in fiscal 2022, the Company issued the underwriter’s warrants to purchase up to an aggregate of 82,500 shares of Common Stock as compensation for their services related to this issuance. The warrants may be exercised until March 14, 2027. The exercise price of each warrant is $2.40 per share.

Convertible Preferred Stock

The Company has 50,000,000 shares authorized to issue as Preferred Stock. The Preferred Stock is designated into two series:5,000,000 shares designated as Series A and 45,000,000 shares designated as Series B. As of June 30, 2024 there areno issued or outstanding shares of Series A stock.

Each issued Series B Convertible Preferred Stock is convertible into 20 shares of common stock and carries a vote of 20 shares of common stock in all matters brought before the shareholders for a vote. There are 49,360 shares of Series B Convertible Preferred Stock outstanding as of June 30, 2024 and 2023.

Stock-based Compensation

In 2021, the Company adopted the 2021 Omnibus Equity Incentive Plan (“Equity Plan”) which provides for the grant of stock-based awards, including stock options, restricted stock awards (“RSAs”) and restricted stock units (“RSUs”), to employees and non-employees. A total of 5,000,000 shares of common stock are authorized for issuance under the Plan, of which 3,755,529 are available for future grants as of June 30, 2024.

The fair value of stock options are estimated on the date of grant using the Black-Scholes option pricing model and recognized as compensation on a straight-line basis between the date of grant and the date the options become fully vested. Stock options issued have a term of ten years. The fair value of the options granted were estimated using the following assumptions:

The fair value of RSAs is estimated on the grant date based on the closing quoted market price of the Company’s stock and generally vest over a four-year period following issuance date, subject to continued service. The fair value of RSAs is recognized as compensation on a straight-line basis between the date of grant and the date the RSAs become fully vested.

During fiscal 2024 and 2023, the following activity occurred under the Company’s Equity Plan.

The total fair value of the stock option grants, calculated using the Black-Scholes option-pricing model using the assumptions noted above, was determined to be $0.3 million and $0.4 million for fiscal 2024 and 2023, respectively. The weighted average remaining contractual term of the stock options outstanding as of June 30, 2024 was 8.9 years. The aggregate intrinsic value of stock options outstanding as of June 30, 2024 was $0.1 million.

Stock-based compensation relating to RSAs totaled $0.3 million and less than $0.1 million for the years ended June 30, 2024 and 2023, respectively, and are included in salaries and compensation in the Consolidated Statements of Operations. Holders of RSAs generally have the rights and privileges of a stockholder with respect to the shares of common stock granted to the holder, including the right to vote such shares and the right to receive dividends with respect to such shares. However, all cash and stock dividends and distributions shall be held back by the Company for the holder’s account until such time as the related portion of the restricted stock award vests (at which time such dividends or distributions, as applicable, shall be released and paid).

Stock-based compensation relating to stock options and RSAs totaled $0.4 million and $0.1 million for the years ending June 30, 2024 and 2023, respectively, and are included in the Consolidated Statements of Operations. As of June 30, 2024, there was $0.5 million of unrecognized compensation expense related to outstanding stock options that will be recognized over a remaining weighted average period of 2.9 years and there was $0.5 million of unrecognized compensation expense related to outstanding RSAs that will be recognized over a remaining weighted average period of 2.0 years. The aggregate expected stock-based compensation expense remaining to be recognized reflects only awards as of June 30, 2024 and assumes no forfeiture activity.

There wereno shares issued for vendor services during the years ending June 30, 2024 and 2023*.*

**NOTE 13. INCOME TAXES **

The following table summarizes (loss) income before income taxes (in thousands):

Income Tax Provision

The composition of the benefit from (provision for) income taxes consisted of the following (in thousands):

Tax effects of temporary differences that give rise to significant portions of the Company’s deferred tax assets for the years ended June 30, 2024* *and 2023 are presented below (in thousands):

The Company’s accounting for deferred taxes involves the evaluation of several factors concerning the realizability of the Company’s net deferred tax assets. The Company primarily considered such factors as the Company’s history of operating losses, the nature of the Company’s deferred tax assets and the timing, likelihood and amount, if any, of future taxable income during the periods in which those temporary differences and carryforwards become deductible. The Company does not have a valuation allowance as of June 30, 2024 and 2023 as the Company believes that it is more likely than not that the net deferred tax assets will be realized*.*

The benefit from (provision for) income taxes for the years ended June 30, 2024* and 2023 *differed from the amounts computed by applying the statutory federal income tax rate of 21.0% to pretax (loss) income as a result of the following (in thousands):

Tax positions are evaluated in a two-step process. The Company first determines whether it is more likely than not that a tax position will be sustained upon examination. If a tax position meets the more-likely-than-not recognition threshold it is then measured to determine the amount of benefit to recognize in the financial statements. The tax position is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. The change in the balance of gross unrecognized tax benefits, which includes interest and penalties, during the year ended June 30, 2024 was as follows (in thousands):

The Company files income tax returns in the United States, and various state and foreign jurisdictions. The federal, state and foreign income tax returns are subject to tax examinations for the tax years 2019 through 2023 as of year ended June 30, 2024*.To the extent the Company has tax attribute carry forwards, the tax years in which the attribute was generated may still be adjusted upon examination by the U.S. Internal Revenue Service, state or foreign tax authorities to the extent utilized in a future period. There were no ongoing examinations by taxing authorities as of June 30, 2024.*

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. As of June 30, 2023, the Company accrued and recognized as a liability $0.1 million of interest and related penalties to uncertain tax positions.

NOTE 14. COMMITMENTS AND CONTINGENCIES

Lease Commitments

The Company leases various facilities and offices in the US, UK, Canada and New Zealand with varying lease terms.

For the years ended June 30, 2024* *and 2023, the combined operating lease costs of the Company totaled $0.9 million and $0.8 million, respectively, and are recorded in general and administrative expense in the Consolidated Statements of Operations.

Future minimum consolidated lease payments for the Company are as follows (in thousands):

The weighted average remaining lease term for the Company’s operating leases was 1.3 years as of June 30, 2024* *and a weighted-average discount rate of 5.3% was used to determine the total operating lease liabilities. The remaining lease term for the Company’s finance lease was 7.4 years as of June 30, 2024 with an annual interest rate of 7.0%.

Other Agreements and Commitments

As Marygold builds out its Fintech app, it enters into agreements with various service providers. As of June 30, 2024, Marygold has future payment commitments with its primary service vendors totaling $1.1 million including $1.0 million due in fiscal 2025 and $0.1 million due in fiscal 2026.

Litigation

From time to time, the Company may be involved in legal proceedings arising primarily from the ordinary course of their respective businesses. Except as described below, there are no pending legal proceedings against the Company. The Company’s policy is to expense legal costs relating to litigation as the costs are incurred. USCF is an indirect wholly-owned subsidiary of the Company. USCF LLC, as the general partner of the United States Oil Fund, LP (“USO”) and the general partner and sponsor of the related public funds may, from time to time, be involved in litigation arising out of its operations in the ordinary course of business. Except as described herein, USO and USCF are not currently party to any material legal proceedings.

In re: United States Oil Fund, LP Securities Litigation

On June 19, 2020, USCF LLC, USO, John P. Love, and Stuart P. Crumbaugh were named as defendants in a putative class action filed by purported shareholder Robert Lucas (the “Lucas Class Action”). The Court thereafter consolidated the Lucas Class Action with two related putative class actions filed on July 31, 2020 and August 13, 2020, and appointed a lead plaintiff. The consolidated class action is pending in the U.S. District Court for the Southern District of New York under the caption In re: United States Oil Fund, LP Securities Litigation, Civil Action No. 1:20-cv-04740.

On November 30, 2020, the lead plaintiff filed an amended complaint (the “Amended Lucas Class Complaint”). The Amended Lucas Class Complaint asserts claims under the 1933 Act, the Exchange Act, and Rule 10b-5*.* The Amended Lucas Class Complaint challenges statements in registration statements that became effective on February 25, 2020 and March 23, 2020 as well as subsequent public statements through April 2020 concerning certain extraordinary market conditions and the attendant risks that caused the demand for oil to fall precipitously, including the COVID-19 global pandemic and the Saudi Arabia-Russia oil price war. The Amended Lucas Class Complaint purports to have been brought by an investor in USO on behalf of a class of similarly-situated shareholders who purchased USO securities between February 25, 2020 and April 28, 2020 and pursuant to the challenged registration statements. The Amended Lucas Class Complaint seeks to certify a class and to award the class compensatory damages at an amount to be determined at trial as well as costs and attorney’s fees. The Amended Lucas Class Complaint named as defendants USCF, USO, John P. Love, Stuart P. Crumbaugh, Nicholas D. Gerber, Andrew F Ngim, Robert L. Nguyen, Peter M. Robinson, Gordon L. Ellis, and Malcolm R. Fobes III, as well as the marketing agent, ALPS Distributors, Inc., and the Authorized Participants: ABN Amro, BNP Paribas Securities Corporation, Citadel Securities LLC, Citigroup Global Markets, Inc., Credit Suisse Securities USA LLC, Deutsche Bank Securities Inc., Goldman Sachs & Company, J.P. Morgan Securities Inc., Merrill Lynch Professional Clearing Corporation, Morgan Stanley & Company Inc., Nomura Securities International Inc., RBC Capital Markets LLC, SG Americas Securities LLC, UBS Securities LLC, and Virtu Financial BD LLC.

The lead plaintiff has filed a notice of voluntary dismissal of its claims against BNP Paribas Securities Corporation, Citadel Securities LLC, Citigroup Global Markets Inc., Credit Suisse Securities USA LLC, Deutsche Bank Securities Inc., Morgan Stanley & Company, Inc., Nomura Securities International, Inc., RBC Capital Markets, LLC, SG Americas Securities LLC, and UBS Securities LLC.

USCF, USO, and the individual defendants in In re: United States Oil Fund, LP Securities Litigation intend to vigorously contest such claims and have moved for their dismissal.

Mehan Action

On August 10, 2020, purported shareholder Darshan Mehan filed a derivative action on behalf of nominal defendant USO, against defendants USCF, John P. Love, Stuart P. Crumbaugh, Nicholas D. Gerber, Andrew F Ngim, Robert L. Nguyen, Peter M. Robinson, Gordon L. Ellis, and Malcolm R. Fobes, III (the “Mehan Action”). The action is pending in the Superior Court of the State of California for the County of Alameda as Case No. RG20070732.

The Mehan Action alleges that the defendants breached their fiduciary duties to USO and failed to act in good faith in connection with a March 19, 2020 registration statement and offering and disclosures regarding certain extraordinary market conditions that caused demand for oil to fall precipitously, including the COVID-19 global pandemic and the Saudi Arabia-Russia oil price war. The complaint seeks, on behalf of USO, compensatory damages, restitution, equitable relief, attorney’s fees, and costs. All proceedings in the Mehan Action are stayed pending disposition of the motion(s) to dismiss in In re: United States Oil Fund, LP Securities Litigation.

USCF, USO, and the other defendants intend to vigorously contest such claims.

In re United States Oil Fund, LP Derivative Litigation

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

The complaints in the Cantrell and AML Actions are nearly identical. They each allege violations of Sections 10(b), 20(a) and 21D of the Exchange Act, Rule 10b-5 thereunder, and common law claims of breach of fiduciary duties, unjust enrichment, abuse of control, gross mismanagement, and waste of corporate assets. These allegations stem from USO’s disclosures and defendants’ alleged actions in light of the extraordinary market conditions in 2020 that caused demand for oil to fall precipitously, including the COVID-19 global pandemic and the Saudi Arabia-Russia oil price war. The complaints seek, on behalf of USO, compensatory damages, restitution, equitable relief, attorney’s fees, and costs. The plaintiffs in the Cantrell and AML Actions have marked their actions as related to the Lucas Class Action.

The Court consolidated the Cantrell and AML Actions under the caption In re United States Oil Fund, LP Derivative Litigation, Civil Action No. 1:20-cv-06974 and appointed co-lead counsel. All proceedings in In re United States Oil Fund, LP Derivative Litigation are stayed pending disposition of the motion(s) to dismiss in In re: United States Oil Fund, LP Securities Litigation.

USCF, USO, and the other defendants intend to vigorously contest the claims in In re United States Oil Fund, LP Derivative Litigation.

No accrual has been recorded with respect to the above legal matters as of June 30, 2024* *and 2023. We are currently unable to predict the timing or outcome of, or reasonably estimate the possible losses or range of, possible losses resulting from these matters. It is reasonably possible that this estimate will change in the near term. An adverse outcome regarding these matters could materially adversely affect the Company’s financial condition, results of operations and cash flows.

Retirement Plan

The Company has a 401(k) Profit Sharing Plan (“401K Plan”) covering U.S. employees who are over 21 years of age and who have completed a minimum of 1,000 hours of service and have worked for the Company for at least three months. Participants may contribute a portion of their salary into the 401K Plan subject to certain limitations. In addition, the Company makes a safe harbor matching contribution. Company paid matching contributions of $0.2 million for each of the years ended June 30, 2024* and 2023,*respectively.

NOTE 15. SEGMENT REPORTING

In its operation of the business, our chief operating decision maker who is our Chief Executive Officer reviews revenues and profits in assessing segment performance and deciding how to allocate resources. During the periods presented, the Company reported its financial performance based on the following segments.

The following table presents a summary of operating information (in thousands):

The following table presents a summary of identifiable assets by geographical location (in thousands):

NOTE 16. SUBSEQUENT EVENTS

The Company evaluated subsequent events for recognition and disclosure through the date the consolidated financial statements were issued or filed. As described in Note 11. Loans, the Company repaid in full the Brigadier mortgage loan of $0.3 million in July 2024. Other than that item, nothing has occurred outside normal operations since June 30, 2024 that required recognition or disclosure in these financial statements.