UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

~~__________________________~~_____________________

FORM 10-Q

~~__________________________~~_____________________

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, ~~2023~~2024

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the Transition Period From __________ to __________

Commission File Number 001-11048

~~__________________________~~_____________________

ENVELA CORPORATION

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

~~__________________________~~

Nevada		88-0097334
(STATE OF INCORPORATION)		(I.R.S. EMPLOYER IDENTIFICATION NO.)

1901 GATEWAY DRIVE, STE 100, IRVING, TX 75038

(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

(972) 587-4049

(REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE)

www.envela.com

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol		Name of exchange on which registered
~~COMMON STOCK,~~Common Stock, par value $0.01 per share		ELA		NYSE American

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May ~~3, 2023,~~7, 2024 the registrant had ~~26,924,631~~26,276,427 shares of common stock outstanding.

TABLE OF CONTENTS

PART I.	FINANCIAL INFORMATION	~~Page No.~~PAGE NO.

Item 1.	Financial Statements	3

	Condensed Consolidated Statements of Income for the three months ended March 31, 2024 and 2023 ~~and 2022 (unaudited)~~(Unaudited)	3

	Condensed Consolidated Balance Sheets as of March 31, ~~2023 (unaudited)~~2024 (Unaudited) and December 31, ~~2022.~~2023	4

	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023 ~~and 2022 (unaudited)~~(Unaudited)	5

	Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, ~~2022~~2024 and 2023 ~~(unaudited)~~(Unaudited)	6

	Notes to Condensed Consolidated Financial Statements ~~(unaudited)~~(Unaudited)	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2524

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2834

Item 4.	Controls and Procedures	3834

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	3935

Item 1A.	Risk Factors	3935

Item 2.	Unregistered Sales of Equity Securities, ~~and~~ Use of Proceeds and Issuer Purchases of Equity Securities	3935

Item 3.	Defaults Upon Senior Securities	3935

Item 4.	Mine Safety Disclosures	3935

Item 5.	Other Information	3935

Item 6.	Exhibits	4036

SIGNATURES		4137


2

~~Table of Contents~~

PART I. FINANCIAL INFORMATION

~~Item 1. Financial Statements~~ITEM 1: FINANCIAL STATEMENTS

ENVELA CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

	(Unaudited)		(Unaudited)			Three Months Ended March 31,
Three Months Ended March 31,	2023		2022
Revenue:
(Unaudited)						2024			2023

Sales	$	48,389,040	$	47,415,098		$	39,857,780		$	49,809,532
Cost of goods sold		36,979,138		37,704,064			29,537,096			38,399,630

Gross margin		11,409,902		9,711,034			10,320,684			11,409,902

Expenses:
Selling, General & Administrative Expenses		7,905,303		6,559,755
Depreciation and Amortization		354,351		291,947
Selling, general and administrative							7,636,976			7,905,303
Depreciation and amortization							343,565			354,351

Total operating expenses		8,259,654		6,851,702			7,980,541			8,259,654

Operating income		3,150,248		2,859,332			2,340,143			3,150,248
Other income (expense), net		210,779		(58,576	)

Other income/(expense):
Other income							238,528			210,779
Interest expense		117,064		123,239			(120,854	)		(117,064	)

Income before income taxes		3,243,963		2,677,517			2,457,817			3,243,963
Income tax expense		717,646		30,292			(550,278	)		(717,646	)

Net income	$	2,526,317	$	2,647,225		$	1,907,539		$	2,526,317

Basic earnings per share:
Net income	$	0.09	$	0.10		$	0.07		$	0.09

Diluted earnings per share:
Net income	$	0.09	$	0.10		$	0.07		$	0.09

Weighted average shares outstanding:
Basic		26,924,631		26,924,631			26,419,039			26,924,631
Diluted		26,939,631		26,939,631			26,434,039			26,939,631

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


3

~~Table of Contents~~

ENVELA CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31,		December 31,		March 31,			December 31,
	2023		2022		2024			2023
Assets	(unaudited)				(Unaudited)
Current assets:
Cash and cash equivalents	$	20,352,709	$	17,169,969	$	19,783,867		$	17,853,853
Trade receivables, net of allowances		8,291,353		7,949,775
Notes receivable, net of allowances		-		578,250
Accounts receivable, net of allowances						4,597,054			7,811,159
Notes receivable						3,383			4,700
Inventories		19,105,838		18,755,785		25,622,436			23,146,177
Deferred tax asset		1,140,002		1,488,258
Current right-of-use assets from operating leases		1,700,508		1,683,060
Prepaid expenses		1,279,664		1,231,817		1,296,667			1,082,425
Other current assets		252,387		35,113

Total current assets		52,122,461		48,892,027		51,303,407			49,898,314
Property and equipment, net		9,228,454		9,393,802		11,048,221			10,764,224
Right-of-use assets from operating leases						3,757,873			4,189,621
Goodwill		3,621,453		3,621,453		3,921,453			3,921,453
Intangible assets, net		4,813,270		4,993,545		4,513,017			4,499,170
Operating lease right-of-use assets		3,757,873		4,189,621
Other assets		198,447		186,761		201,447			201,447

Total assets	$	73,741,958	$	71,277,209	$	74,745,418		$	73,474,229

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable-trade	$	2,746,229	$	3,358,881
Accounts payable					$	3,747,804		$	3,126,743
Notes payable		1,246,961		1,250,702		1,475,625			1,361,443
Current operating lease liabilities		1,827,285		1,686,997
Operating lease liabilities						1,840,082			1,807,729
Accrued expenses		2,077,832		2,286,594		2,375,661			2,486,423
Customer deposits and other liabilities		1,767,088		282,482
Other liabilities						741,808			211,651

Total current liabilities		9,665,395		8,865,656		10,180,980			8,993,989
Deferred tax liability						21,177			38,668
Notes payable, less current portion		14,419,637		14,726,703		13,146,097			13,572,048
Long-term operating lease liabilities, less current portion		3,814,159		4,368,400
Operating lease liabilities, less current portion						2,085,918			2,560,671

Total liabilities		27,899,191		27,960,759	$	25,434,172		$	25,165,376

Commitments and contingencies
Contingencies (Note 16)

Stockholders’ equity:
Preferred stock, $0.01 par value; 5,000,000 shares authorized;
no shares issued and outstanding		-		-
Common stock, $0.01 par value; 60,000,000 shares authorized;
26,924,631 shares issued and outstanding		269,246		269,246
Preferred stock, $0.01 par value; 5,000,000 shares authorized; no shares issued and outstanding						-			-
Common stock, $0.01 par value; 60,000,000 shares authorized; 26,924,631 shares issued and 26,307,318 shares outstanding as of March 31, 2024; 26,924,631 shares issued and 26,508,658 shares outstanding as of December 31, 2023						269,246			269,246
Treasury stock at cost, 617,313 and 415,973 shares, as of March 31, 2024 and December 31, 2023, respectively						(3,060,195	)		(2,155,049	)
Additional paid-in capital		40,173,000		40,173,000		40,173,000			40,173,000
Retained earnings		5,400,521		2,874,204		11,929,195			10,021,656

Total stockholders’ equity		45,842,767		43,316,450		49,311,246			48,308,853

Total liabilities and stockholders’ equity	$	73,741,958	$	71,277,209	$	74,745,418		$	73,474,229

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


4

~~Table of Contents~~

ENVELA CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three Months Ended March 31,	2023			2022
	(Unaudited)			(Unaudited)			Three Months Ended March 31,
(Unaudited)							2024			2023
Operations
Net income	$	2,526,317		$	2,647,225		$	1,907,539		$	2,526,317
Adjustments to reconcile net income to net cash provided by operations:
Depreciation, amortization, and other		354,351			291,947
Bad debt expense		(13,091	)		-
Deferred Taxes		348,256			-
Depreciation and amortization								343,565			354,351
Provision for credit losses								45,869			(13,091	)
Deferred taxes								(17,491	)		348,256
Non-cash lease expense								462,882			473,881
Changes in operating assets and liabilities:
Trade receivables		(328,487	)		1,809,397
Accounts receivable								3,168,236			(328,487	)
Inventories		(350,053	)		(573,139	)		(2,476,259	)		(350,053	)
Prepaid expenses		(47,847	)		(173,436	)		(214,242	)		(47,847	)
Other assets		(228,959	)		(794,731	)		4,700			(228,959	)
Accounts payable and accrued expenses		(821,413	)		81,088
Accounts payable								621,060			(612,651	)
Accrued expenses								(110,762	)		(208,762	)
Operating leases		346			5,449			(473,535	)		(473,535	)
Customer deposits and other liabilities		1,484,605			64,969
Other liabilities								530,159			1,484,605

Net cash provided by operations		2,924,025			3,358,769			3,791,721			2,924,025

Investing
Payments from notes receivable		578,250			-
Purchase of property and equipment		(8,728	)		(93,384	)		(448,242	)		(8,728	)
Purchase of intangible assets								(193,167	)		-
Investment in notes receivable								(3,383	)		578,250

Net cash provided by (used in) investing		569,522			(93,384	)
Net cash (used in) provided by investing								(644,792	)		569,522

Financing
Payments on notes payable		(310,807	)		(206,274	)		(311,769	)		(310,807	)
Payments on line of credit		-			(1,700,000	)
Purchase of treasury stock								(905,146	)		-

Net cash used in financing		(310,807	)		(1,906,274	)
Net cash (used in) financing								(1,216,915	)		(310,807	)

Net change in cash and cash equivalents		3,182,740			1,359,111			1,930,014			3,182,740
Cash and cash equivalents, beginning of period		17,169,969			10,138,148			17,853,853			17,169,969

Cash and cash equivalents, end of period	$	20,352,709		$	11,497,259		$	19,783,867		$	20,352,709

Supplemental Disclosures
Supplemental disclosures
Cash paid during the period for:
Interest	$	116,061		$	129,989		$	178,674		$	116,061
Income taxes	$	-		$	-		$	-		$	-

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


5

~~Table of Contents~~

ENVELA CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

~~For the Three Months ended March 31, 2022 and 2023~~

~~(Unaudited)~~

Common Stock

Preferred Stock

Additional
Paid-in

Accumulated

Total
Stockholders'

Shares

Amount

Shares

Amount

Capital

Deficit

Equity

Balances at January 1, 2022

26,924,631

$ 269,246

-

$ -

$ 40,173,000

$ (12,814,929 )

$ 27,627,317

Net Income

-

-

-

-

-

2,647,225

2,647,225

Balances at March 31, 2022

26,924,631

$ 269,246

-

$ -

$ 40,173,000

$ (10,167,704 )

$ 30,274,542

For the Three Months Ended March 31, 2023

Common Stock

Treasury Stock

Preferred Stock

Additional
Paid-in

Retained

Total
Stockholders'

(Unaudited)

Shares

Amount

Shares

Amount

Shares

Amount

Capital

Earnings

Equity

Balance as of January 1, 2023

26,924,631

$ 269,246

-

$ -

-

$ -

$ 40,173,000

$ 2,874,204

$ 43,316,450

Net Income

2,526,317

2,526,317

Balance as of March 31, 2023

26,924,631

$ 269,246

-

$ -

-

$ -

$ 40,173,000

$ 5,400,521

$ 45,842,767

Common Stock

Preferred Stock

Additional
Paid-in

Retained

Total
Stockholders'

Shares

Amount

Shares

Amount

Capital

Earnings

Equity

Balances at January 1, 2023

26,924,631

$ 269,246

-

$ -

$ 40,173,000

$ 2,874,204

$ 43,316,450

Net Income

-

-

-

-

-

2,526,317

2,526,317

Balances at March 31, 2023

26,924,631

$ 269,246

-

$ -

$ 40,173,000

$ 5,400,521

$ 45,842,767

For the Three Months Ended March 31, 2024

Common Stock

Treasury Stock

Preferred Stock

Additional
Paid-in

Retained

Total
Stockholders'

(Unaudited)

Shares

Amount

Shares

Amount

Shares

Amount

Capital

Earnings

Equity

Balance as of January 1, 2024

26,924,631

$ 269,246

(415,973 )

$ (2,155,049 )

-

$ -

$ 40,173,000

$ 10,021,656

$ 48,308,853

Net Income

1,907,539

1,907,539

Shares repurchased

-

-

(201,340 )

(905,146 )

-

-

(905,146 )

Balance as of March 31, 2024

26,924,631

$ 269,246

(617,313 )

$ (3,060,195 )

-

$ -

$ 40,173,000

$ 11,929,195

$ 49,311,246

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

6
~~Table of Contents~~

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
~~(Unaudited)~~(UNAUDITED)

NOTE 1 — BASIS OF PRESENTATION

These unaudited interim condensed consolidated financial statements of Envela ~~Corproration,~~Corporation, a Nevada corporation, and its subsidiaries (together with its subsidiaries, the “Company” or “Envela”), included herein have been prepared in accordance with accounting principles generally accepted in the United States (“U.S.”) for interim financial information and with the instructions to Quarterly Reports on Form 10-Q and Article 10 of Regulation S-X prescribed by the Securities and Exchange Commission (the “SEC”). Pursuant to the SEC’s rules and regulations, they do not include all of the information and notes required by accounting principles generally accepted in the U.S. (“U.S. GAAP”) for complete financial statements. In the opinion of management, all adjustments, which are of a normal and recurring nature except those which have been disclosed elsewhere in this Quarterly Report on Form 10-Q ~~(this “Form~~(“Form 10-Q”), necessary for a fair presentation of the consolidated financial statements for these interim periods, have been included. Operating results presented for ~~the three months ended March 31, 2023~~these interim periods are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, ~~2023~~2024 (“~~fiscal 2023”~~Fiscal 2024”). ~~For further information, refer to~~Management suggests these unaudited condensed consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2022~~2023 (“~~fiscal 2022”~~Fiscal 2023”) ~~of Envela~~ filed with the SEC on March ~~16,~~ 21, 2024 (“2023 ~~(the “2022~~ Annual Report”).
Contemporaneously with filing this Form 10-Q, we updated our two reportable segments by renaming the ECHG segment the “Commercial” segment and the DGSE segment the “Consumer” segment. The segment name changes did not result in any change to the composition of the Company’s operations and therefore did not result in any change to the historical results. Our operations conducted by each of our segments are more specifically described below.

The preparation of interim condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

NOTE 2 — PRINCIPLES OF CONSOLIDATION AND NATURE OF OPERATIONS
Throughout this document, Envela Corporation is referred to as “we,” “us,” “our,” “Envela,” or the “Company.”

Envela ~~and~~serves as a holding company, conducting its operations via subsidiaries ~~engage~~engaged in ~~diverse business~~various businesses and activities within the ~~recommerce sector. These activities include being one of the nation's premier authenticated recommerce retailers of luxury hard assets; providing end-of-life asset~~re-commerce and recycling sectors. The products and ~~resale to businesses, organization and retail consumers; offering data destruction and IT asset management; and providing products,~~ services ~~and solutions to industrial and commercial companies.~~we offer are delivered by these subsidiaries under their distinct brands, rather than directly by Envela ~~operates primarily via~~Corporation itself. Our operations are organized into two operating and reportable ~~segments.~~ segments: commercial and consumer, which additionally are the Company’s reporting units.
Consumer Segment
Our consumer segment ~~formerly known~~operates in the jewelry industry, specializing in the online and brick-and-mortar sale of authenticated high-end luxury goods, fine jewelry, watches, and bullion. Our diamonds and gemstones are recycled, meaning they were previously set and then unset to become a new design – allowing for a truly low-carbon, ethical origin. The company focuses on buying and selling pre-owned luxury items, ethically sourced diamonds, gemstones, and precious metals, catering to consumers seeking environmentally responsible options for engagement rings, wedding bands, and other fine jewelry. Our profound commitment to extending the lifespan of luxury goods stems from our understanding that well-crafted items have an enduring quality, enabling them to maintain their beauty and value as ~~the DGSE segment, operates DGSE, LLC (“DGSE”), Dallas Gold & Silver Exchange, Charleston Gold & Diamond Exchange, and Bullion Express brands.~~ they are passed from one owner to another.
Commercial Segment
Our commercial segment ~~formerly known as~~specializes in the ~~ECHG segment, operates ECHG, LLC (“ECHG”), Echo Environmental Holdings, LLC (“Echo”),~~de-manufacturing of end-of-life electronic assets to reclaim commodities and other materials, while also engaging in the IT asset disposition (ITAD) industry. The separated commodities, including metals, plastics, and glass, are sold to downstream processors where they are further processed and reintroduced into new products. ITAD ~~USA Holdings, LLC (“ITAD USA”), Teladvance, LLC (“Teladvance”), CEX Holdings, LLC (“CEX”)~~services maximize the residual value of retired IT assets by adhering to a reuse-first philosophy and ~~Avail Recovery Solutions, LLC (“Avail”). Envela~~ensuring equipment is refurbished and re-marketed after data sanitization. The company focuses on offering services that manage the entire lifecycle of technology products to ensure data security, regulatory compliance, and environmental sustainability. We are proud of our role to support a ~~Nevada corporation, headquartered in Irving, Texas.~~circular economy through responsible reuse and recycling of electronic devices.

7
~~Table of Contents~~
Our consumer segment primarily buys and resells or recycles luxury hard assets like jewelry, diamonds, gemstones, fine watches, rare coins and related collectibles, precious-metal bullion products, gold, silver and other precious-metals. We operate seven jewelry stores at both the retail and wholesale levels throughout the United States via its facilities in Texas and South Carolina. The Company expects to expand soon to Arizona, see Note 16 – Subsequent Events, to these interim condensed consolidated financial statements. The consumer segment is currently promoting and building their Bullion Express brand into a leading on-line seller of bullion. Buying and selling items for their precious-metals content is a major method by which we are marketed. The consumer segment also offers jewelry repair services, custom-made jewelry and consignment items, and maintains relationships with refiners for precious-metal items that are not appropriate for resale. We also maintain a presence in the retail market through websites, ~~www.dgse.com~~, ~~www.cgdeinc.com~~ ~~and~~ ~~www.bullionexpress.com~~.
Our commercial segment, primarily buys electronic components from business and other organizations, such as school districts, for end-of-life recycling and resale, or to add life to electronic devices by data destruction and refurbishment for reuse. We also conduct such recycling and resale at the retail level. We focus on end-of-life electronics recycling and sustainability and ITAD USA provides IT equipment disposition, including compliance and data sanitization services. Teladvance, CEX and Avail operate as value-added resellers by providing offerings and services to companies looking either to upgrade capabilities or dispose of equipment. Like the consumer segment, the commercial segment also maintains relationships with refiners or recyclers to which it sells valuable materials it extracts from electronics and IT equipment that are not appropriate for resale or reuse. The commercial segment’s customers are companies and organizations that are based domestically and internationally.

For additional information on ~~the businesses of both~~ the consumer and commercial segments, see “Item 1. Business – ~~Operating Segments”~~How We Organize Our Business” in the Company’s ~~2022~~2023 Annual Report.

The interim condensed consolidated financial statements have been prepared in accordance with U.S. GAAP and include the accounts of the Company and its subsidiaries. All ~~material~~ intercompany transactions and balances have been eliminated.

NOTE 3 — ACCOUNTING POLICIES AND ESTIMATES

Financial Instruments

The carrying amounts reported in the condensed consolidated balance sheets for cash and cash equivalents, ~~trade~~accounts receivables, prepaid expenses, other current assets, accounts payable, accrued expenses, ~~customer deposits~~ and other liabilities approximate fair value because of the immediate or short-term nature of these financial instruments. Notes payable ~~and line of credit~~ approximate fair value due to the market interest rate charged.

~~Earnings Per Share~~Use of Estimates

~~Basic earnings per share~~The preparation of ~~our common stock, par value $0.01 per share (our “Common Stock”), is computed by dividing net earnings available~~interim condensed consolidated financial statements in conformity with U.S. GAAP requires management to ~~holders~~make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. Examples of estimates and assumptions include: revenue recognition, determining the nature and timing of satisfaction of the Company’s Common Stock by the weighted average number of shares of Common Stock outstanding for the reporting period. Diluted earnings per share reflect the potential dilution that could occur if securities orperformance obligations, variable consideration, and other contracts requiring the Company to issue Common Stock were exercised or converted into Common Stock. For the calculation of diluted earnings per share, the basic weighted average number of shares is increased by the dilutive effect of stock optionsobligations such as product returns and ~~warrants outstanding determined using the treasury stock method.~~

~~Table of Contents~~

~~Goodwill~~

Goodwill is not amortized but evaluated for impairment on an annual basis during the fourth quarter of our fiscal year, or earlier if events or circumstances indicate the carrying value may be impaired. The Company’s goodwill is related to the commercial segment only and not the entire Company. The commercial segment has its own, separate financial information to perform goodwill impairment testing at least annually or if events indicate that those assets may be impaired. As a result of the current market and economic conditions related to surging inflation and the war between Ukraine and Russia, in accordance with step 1 of the guidelines set forth in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 350-20-35-3A, management concluded there were no impairments of goodwill that resulted from those triggering events for the three months ended March 31, 2023. Management will continue to evaluate goodwill for the commercial segment. For tax purposes, goodwill is amortized and deductible over fifteen years.

Goodwill was allocated in connection with three acquisitions of the assets now held by Echo on May 20, 2019 (the “Echo Transaction”), of the assets now held by Teladvance on June 9, 2021 (the “CExchange Transaction”) and of the assets now held by Avail on October 29, 2021 (the “Avail Transaction”). The preliminary goodwill associated with the Avail Transaction was $3,491,285, which was the initial purchase price less the approximate fair value of the net assets purchased. There have been several adjustments made to goodwill concerning the Avail Transaction during fiscal year 2022. On May 31, 2022, an additional cash payment was made of $216,988 due to certain conditions being met concerning the cash balance upon a certain date. The cash payment increased goodwill for the Avail Transaction to $3,708,273. During fiscal year 2022 management also identified $2,736,000 of intangibles that were not initially included inrefunds; loss contingencies; the fair value of ~~Avail’s net assets. The separation~~and/or potential impairment of ~~intangibles reduced~~goodwill and intangible assets for the ~~Avail Transaction goodwill to $972,272. There~~reporting units; useful lives of our tangible and intangible assets; allowances for credit losses; the market value of, and demand for, our inventory and the potential outcome of uncertain tax positions that have been ~~no other adjustments~~recognized on our consolidated financial statements or ~~impairment charges to goodwill. As of March 31, 2023~~tax returns. Actual results and ~~December 31, 2022, goodwill as reported in the condensed consolidated balance sheets was $3,621,453.~~outcomes may differ from management’s estimates and assumptions.

~~Recent Accounting Pronouncements~~Revenue Recognition

In June 2016, the FASB issued a new credit loss accounting standard ASU 2016-13. The new accounting standard introduces the current expected credit losses methodology for estimating allowances for credit losses which will be based on expected losses rather than incurred losses. We will be required to use a forward-looking expected credit loss methodology for accounts receivable, loans and other financial instruments. The ASU is effective for the fiscal years beginning after December 15, 2022. We adopted this ASU as of January 1, 2023, which includes interim periods within the reporting period. ASU 2016-13 was adopted by using a modified retrospective transition approach to align our credit loss methodology with the new standard. There were no effects of this standard on our financial position, results of operations or cash flows.

There were no other new accounting standards that had a material impact on the Company’s consolidated financial statements during the three-month period ended March 31, 2023, and there were no other new accounting standards or pronouncements that were issued but not yet effective as of March 31, 2023 that the Company expects to have a material impact on its consolidated financial statements.

~~Table of Contents~~

~~NOTE 4 — INVENTORIES~~

~~A summary of inventories is as follows:~~

March 31,

December 31,

2023

2022

Consumer

Resale

$ 18,151,841

$ 16,462,749

Recycle

20,313

46,697

Subtotal

18,172,154

16,509,446

Commercial

Resale

623,041

1,858,519

Recycle

310,643

387,820

Subtotal

933,684

2,246,339

$ 19,105,838

$ 18,755,785

~~NOTE 5 — GOODWILL~~

~~The change in goodwill is as follows:~~

March 31,

December 31,

2023

2022

Opening balance

$ 3,621,453

$ 6,140,465

Reductions (1)

-

(2,519,012 )

Goodwill

$ 3,621,453

$ 3,621,453

(1) The reduction in goodwill of $2,519,012 for fiscal 2022, is a combination of an additional cash payment made on May 31, 2022 of $216,988, increasing goodwill for the Avail Transaction, offset by the effect of identifying $2,736,000 of intangible assets that was not initially included in the fair value of Avail’s net assets, reducing goodwill and increasing intangible assets.

~~Table of Contents~~

~~NOTE 6 — PROPERTY AND EQUIPMENT~~

~~Property and equipment consist of the following:~~

March 31,

December 31,

2023

2022

Consumer

Land

$ 1,640,220

$ 1,640,219

Building and improvements

2,798,975

2,798,975

Leasehold improvements

1,450,695

1,450,695

Machinery and equipment

1,094,940

1,078,595

Furniture and fixtures

603,943

603,944

Vehicles

22,859

22,859

7,611,632

7,595,287

Less: accumulated depreciation

(2,733,466 )

(2,651,832 )

Sub-Total

4,878,166

4,943,455

Commercial

Building and improvements

151,647

151,647

Machinery and equipment

1,173,019

1,180,636

Furniture and fixtures

145,950

145,950

1,470,616

1,478,233

Less: accumulated depreciation

(589,289 )

(515,673 )

Sub-Total

881,327

962,560

Corporate

Land

1,106,664

1,106,664

Building and improvements

2,502,216

2,502,216

Machinery and equipment

28,627

28,627

3,637,507

3,637,507

Less: accumulated depreciation

(168,546 )

(149,720 )

Sub-Total

3,468,961

3,487,787

$ 9,228,454

$ 9,393,802

~~Table of Contents~~

~~NOTE 7 — INTANGIBLE ASSETS~~

~~Intangible assets consist of the following:~~

March 31,

December 31,

2023

2022

Consumer

Domain names

$ 41,352

$ 41,352

Point of sale system

330,000

330,000

371,352

371,352

Less: accumulated amortization

(352,002 )

(335,502 )

Subtotal

19,350

35,850

Commercial

Trademarks (1)

1,483,000

1,483,000

Customer Contracts (1)

1,873,000

1,873,000

Trademarks/Tradenames (2)

114,000

114,000

Customer Relationships (2)

345,000

345,000

Trademarks/Tradenames (3)

1,272,000

1,272,000

Customer Relationships (3)

1,464,000

1,464,000

6,551,000

6,551,000

Less: accumulated amortization

(1,757,080 )

(1,593,305 )

Subtotal

4,793,920

4,957,695

$ 4,813,270

$ 4,993,545

~~(1) Intangibles relate to the Echo Transaction on May 20, 2019.~~

~~(2) Intangibles relate to the CExchange Transaction on June 9, 2021.~~

~~(3) Intangibles relate to the Avail Transaction on October 29, 2021.~~

~~The following table outlines the estimated future amortization expense related to intangible assets held as of March 31, 2023:~~

Consumer

Commercial

Total

2023 (excluding the three months ending March 31, 2023)

13,850

491,325

505,175

2024

5,500

655,100

660,600

2025

-

655,100

655,100

2026

-

655,100

655,100

2027

-

655,100

655,100

Thereafter

-

1,682,195

1,682,195

$ 19,350

$ 4,793,920

$ 4,813,270

~~Table of Contents~~

~~NOTE 8— ACCRUED EXPENSES~~

~~Accrued expenses consist of the following:~~

March 31,

December 31,

2023

2022

Consumer

Accrued interest

$ 12,277

$ 11,624

Payroll

93,548

146,817

Property taxes

66,350

115,222

Sales tax

59,865

153,039

Other administrative expenss

30,425

424

Subtotal

262,465

427,126

Commercial

Accrued interest

8,656

8,228

Payroll

178,334

336,226

Unvouchered payables - inventory

146,533

803,649

Material & shipping costs - COGS

770,205

229,159

Other accrued expenses

11,131

7,392

Subtotal

1,114,859

1,384,654

Corporate

Accrued interest

7,464

7,543

Payroll

12,870

25,179

Professional fees

132,431

199,508

Property Tax

21,900

87,275

Other administrative expenses

1,144

-

Federal Income tax

332,381

-

State income tax

192,318

155,309

Subtotal

700,508

474,814

$ 2,077,832

$ 2,286,594

~~NOTE 9 — SEGMENT INFORMATION~~

As stated in Note 1 – Basis of Presentation, we updated our two reportable segments by renaming the ECHG segment to the “Commercial” segment and the DGSE segment to the “Consumer” segment. The segment name changes did not result in any change to the composition of the Company’s operations and therefore did not result in any change to the historical results. Our operations conducted by each of our segments are more specifically described below.

~~We determine our business segments based upon an internal reporting structure. Our financial performance is based on the following segments: consumer and commercial.~~

The consumer segment includes Dallas Gold & Silver Exchange, which has six retail stores in the Dallas/Fort Worth Metroplex (“DFW”), and Charleston Gold & Diamond Exchange, which has one retail store in Mt. Pleasant, South Carolina. The consumer segment also operates the on-line Bullion Express brand.

~~The commercial segment includes Echo, ITAD USA, Teladvance, CEX and Avail. These five companies are involved in recycling and the reuse of electronic components.~~

~~Table of Contents~~

We allocate a portion of certain corporate costs and expenses, including information technology as well as rental income and expenses relating to our corporate headquarters, to our business segments. These income and expenses are included in selling, general and administrative (“SG&A”) expenses, depreciation and amortization, other income, interest expense and income tax expense. Our management team evaluates each segment and makes decisions about the allocation of resources according to each segment’s profit. Allocation amounts are generally agreed upon by management and may differ from arms-length allocations.

~~The following separates the consumer and the commercial financial results of operations for the three months ended March 31, 2023 and 2022:~~

For The Three Months Ended March 31,
2023
2022
Consumer
Commercial
Consolidated
Consumer
Commercial
Consolidated
Revenue:
Sales
$ 36,704,397 $ 11,684,643 $ 48,389,040 $ 35,782,872 $ 11,632,226 $ 47,415,098
Cost of goods sold
32,719,429 4,259,709 36,979,138 31,559,410 6,144,654 37,704,064
Gross profit
3,984,968 7,424,934 11,409,902 4,223,462 5,487,572 9,711,034
Expenses:
Selling, general and administrative expenses
2,396,025 5,509,278 7,905,303 2,137,949 4,421,806 6,559,755
Depreciation and amortization
98,134 256,217 354,351 106,963 184,984 291,947
2,494,159 5,765,495 8,259,654 2,244,912 4,606,790 6,851,702
Operating income
1,490,809 1,659,439 3,150,248 1,978,550 880,782 2,859,332
Other income/expense:
Other income (expense)
23,534 187,245 210,779 (27,992 ) (30,584 ) (58,576 )
Interest expense
59,618 57,446 117,064 61,241 61,998 123,239
Income before income taxes
1,454,725 1,789,238 3,243,963 1,889,317 788,200 2,677,517
Income tax expense
317,841 399,805 717,646 13,177 17,115 30,292
Net income
$ 1,136,884 $ 1,389,433 $ 2,526,317 $ 1,876,140 $ 771,085 $ 2,647,225

~~NOTE 10 — REVENUE RECOGNITION~~

Accounting Standards Codification (“ASC”) ASC ~~606”)~~606, Revenue Recognition provides guidance to identify performance obligations for revenue-generating transactions. The ~~initial step is~~Company applies a five-step approach in determining the amount and timing of revenue to ~~identify~~be recognized: (1) identifying the contract with a ~~customer created with the sales invoice or a repair ticket. Secondly, to identify~~customer; (2) identifying the performance obligations in the ~~contract as we promise to deliver the purchased item or promised repairs in return for payment or future payment as a receivable. The third step is~~contract; (3) determining the transaction ~~price of the contract obligation as in the full ticket price, negotiated price or a repair price. The next step is to allocate~~price; (4) allocating the transaction price to the performance obligations ~~as we designate a separate price for each item. The final step~~ in the ~~guidance is to recognize~~contract; and (5) recognizing revenue ~~as each~~when the corresponding performance obligation is satisfied.

Consumer Segment

~~Table of Contents~~

~~The following disaggregation of total revenue is listed by sales category and segment for the three months ended March 31, 2023 and 2022:~~

CONSOLIDATED

Three Months Ended March 31,

2023

2022

Revenues

Gross Profit

Margin

Revenues

Gross Profit

Margin

Consumer

Resale

$ 33,719,960

$ 3,304,932

9.8 %

$ 33,677,133

$ 3,742,852

11.1 %
Recycled

2,984,437

680,036

22.8 %

2,105,739

480,610

22.8 %

Subtotal

36,704,397

3,984,968

10.9 %

35,782,872

4,223,462

11.8 %

Commercial

Resale

8,558,090

5,799,126

67.8 %

9,579,857

4,574,268

47.7 %
Recycled

3,126,553

1,625,808

52.0 %

2,052,369

913,304

44.5 %

Subtotal

11,684,643

7,424,934

63.5 %

11,632,226

5,487,572

47.2 %

$ 48,389,040

$ 11,409,902

23.6 %

$ 47,415,098

$ 9,711,034

20.5 %

For the consumer segment, revenue for monetary transactions (i.e., cash and receivables) with ~~dealers and the retail public~~wholesale customers are recognized when the merchandise is delivered or at point of sale for retail customers, and payment has been made either by immediate payment or through a receivable ~~obligation at one of our over-the-counter retail stores. Revenue~~obligation. For e-commerce, revenue is recognized upon when the ~~shipment of goods when retail and wholesale customers have~~customer has fulfilled their obligation to pay, or promise to pay ~~through e-commerce or phone sales. Shipping~~ and ~~handling costs are accounted for as fulfillment costs after the customer obtains control of the goods.~~goods have been shipped.

~~Crafted-precious-metal items at the end~~Revenue on precious metals requiring an assay are recognized upon transfer of their useful lives are sold for its precious metal contained. The metal is assayed to determine the precious metal content, a price is agreed upon and payment is made usually within two days. Revenue is recognized from the sale once the performance obligation is satisfied.

In limited circumstances, merchandise is exchanged for similar merchandise and/or monetary consideration with both dealers and retail customers, for which revenue is recognized in accordance with Accounting Standards Codification (“ASC”) 845, Nonmonetary Transactions. When merchandise is exchanged for similar merchandise and there is no monetary component to the exchange, there is no revenue recognized. Instead, the basis of the merchandise relinquished becomes the basis of the merchandise received, less any indicated impairment of value of the merchandise relinquished. When merchandise is exchanged for similar merchandise and there is a monetary component to the exchange, revenue is recognized to the extent of the monetary assets received that determines the cost of saletitle, based on the ~~ratio of monetary assets received to monetary and non-monetary assets received multiplied by the cost~~determination of the ~~assets surrendered.~~underlying weight and price of the associated metals.

~~Table of Contents~~

The Company offers the option of third-party financing for customers wishing to borrow money for the purchase. The customer applies on-line with the third party and upon going through the credit check will be approved or denied. If accepted, the customer is allowed to purchase according to the limits set by the finance company. Revenue is recognized from the sale upon transfer of title, with the promise of the third-party financing company to pay.

Our return policy covers retail transactions. In some cases, customers may return a product purchased within 30 days of the receipt of the items for a full refund. Also, in some cases customers may cancel the sale within 30 days of making a commitment to purchase the items. Additionally, a customer may return an item for full refund if they can demonstrate that the item is not authentic, or there was an error in the description of the piece. Returns are accounted for as a reversal of the original transaction, with the effect of reducing revenues, and cost of sales, and returning the merchandise to inventory. DGSE has established an allowance for estimated returns based on our review of historical returns experience and reduces our reported revenues and cost of sales accordingly. For the three months ended March 31, 2023 and 2022, our allowance for returns remained the same at approximately $28,000 for both years.

A significant amount of revenue stems from sales to two precious metal partners. One partner constitutes 24.5%, and the second partner constitutes 23.7%, of the revenues for the three months ended March 31, 2023. However, the Company believes that the products it sells is marketable to numerous sources at competitive prices.Commercial Segment

The commercial segment ~~has several~~recognizes revenue ~~streams and recognize revenue according to ASC 606~~ at an amount that reflects the consideration to which the entities expect to be entitled in exchange for transferring goods or services to the customer. ~~The revenue streams are as follows:~~

Outright sales are recorded when product is shipped and title transferred. Once the price is established and the terms are agreed to and the product is shipped and title is transferred, the revenue is recognized.

The commercial segment ~~has fulfilled its performance obligation with an agreed upon transaction price, payment terms and shipping the product.~~

~~We recognize~~recognizes refining revenue when our inventory arrives at the destination port and the performance obligation is satisfied by transferring the control of the promised goods that are identified in the customer contract. The initial invoice is recognized in full when our performance obligation is satisfied, as stated in the first sentence. Under the guidance of ASC 606, an estimate of the variable consideration that are expected to be entitled is included in the transaction price stated at the current precious metal spot price and weight of the precious metal. An adjustment to revenue is made in the period once the underlying weight and any precious metal spot price movement is resolved, which is usually around six (6) weeks. Any adjustment from the resolution of the underlying uncertainty is netted with the settlement due from the original contract. Historically, these amounts have been insignificant.

The commercial segment also provides recycling services according to a Scope of Work (“SOW”). ~~Services~~Recycling services are primarily recognized based on the number of units processed by a preset price per ~~unit. Activity reports are produced weekly with the counts~~unit or weight measurements, and revenue is recognized upon completion of the SOW.

The commercial segment provides freight arrangement services related to inbound asset or material movements to our facilities. Freight arrangement services are recognized at settlement with our inbound customers which occurs when the SOW has been completed. Under the guidance of ASC 606 the Company is deemed to be a principal and as such records freight arrangement services as a component of revenue and the associated expense is recorded as a component of cost of goods sold.

The commercial segment recognizes revenue on outright sales when terms and transaction price are agreed to, product is shipped, and title is transferred.

See Note 10 – Revenue for further detail.

Sales Returns and Allowances

Sales are recorded, net of expected returns. In some cases, the consumer and commercial segment’s customers may return a product purchased within 30 days of receipt. Our allowance for estimated returns is based on our review of historical returns experience and reduces our reported revenues and cost of sales accordingly.

For the ~~billing~~three months ended March 31, 2024 and March 31, 2023, the consumer segment’s allowance for returns was $28,402 and $0, respectively. For the three months ended March 31, 2024 and March 31, 2023, the commercial segment’s allowance for returns was $6,578 and $0, respectively.

Concentrations and Credit Risk

The Company is potentially subject to concentrations of credit risk in its accounts receivable. A significant amount of revenue stems from one precious metals partner, which accounted for 6% of our sales for the ~~weekly reports. Recycling services can be conducted~~period ended March 31, 2024, and 6% of our sales for the period ended March 31, 2023. However, the Company believes that the products it sells are marketable to numerous sources at ~~our facility, or~~competitive prices.

Shipping and Handling Costs

Within the ~~recycling services can be performed at~~consumer and commercial segments shipping and handling costs are accounted for as fulfillment costs within costs of goods sold.

For the ~~client’s facility.~~ three months ended March 31, 2024 and March 31, 2023, the consumer segment’s shipping and handling costs were $439 and $0, respectively. For the three months ended March 31, 2024 and March 31, 2023, the commercial segment’s shipping and handling costs were $1,394,077 and $1,689,941, respectively.

Advertising Costs

The ~~SOW will determine~~consumer and commercial segment’s advertising costs are expensed as incurred.

For the ~~charges~~three months ended March 31, 2024 and ~~whether~~March 31, 2023, the ~~service will be completed at our facility or at~~consumer segment’s advertising costs were $247,903 and $206,075, respectively. For the ~~client’s facility. Payment terms are also dictated in~~three months ended March 31, 2024 and March 31, 2023, the ~~SOW.~~commercial segment’s advertising costs were $71,095 and $14,553, respectively.


169

~~Table of Contents~~

~~Accounts Receivable~~Leases:

We ~~record trade receivables~~determine if an arrangement is a lease at inception. We do not separate non-lease components from lease components to which they relate and have accounted for the combined lease and non-lease components as a single lease component. Many of our lease agreements contain renewal options; however, we do not recognize right-of-use assets or lease liabilities for renewal periods unless it is determined that we are reasonably certain of renewing the lease at inception or when ~~revenue is recognized. The new accounting standard introduces~~ a ~~new expected credit losses methodology for estimating allowances for credit losses which is based on expected losses rather than incurred losses. We are required~~triggering event occurs.

In determining our right-of-use assets and lease liabilities, we apply a discount rate to the minimum lease payments within each lease agreement. ASC 842, Leases requires us to use the interest rate that a ~~forward-looking expected credit loss methodology for accounts receivable. This new methodology is effective for~~lessee would have to pay to borrow on a collateralized basis over a similar term in an amount equal to the ~~fiscal years beginning January 1, 2023. We will~~lease payments in a similar economic environment. If we cannot readily determine the discount rate implicit in lease agreements, we utilize our incremental borrowing rate. For leases one-year or less the Company has elected not to record ~~an allowance for doubtful accounts, which is primarily determined by an analysis of our trade receivables aging,~~lease liabilities and right-of use assets and instead recognize the expense associated with the lease payments using the new expected losses methodology. The allowance is determined based on historical experience of collecting past due amounts, based on the degree of their aging. In addition, specific accounts that are considered and expected to be uncollectable are included in the allowance. These provisions are reviewed to determine the adequacy of the allowance for doubtful accounts. Trade receivables are charged off when there is certainty as to their being uncollectible. Trade receivables are considered delinquent when payment has not been made within contract terms. The consumer segment had no allowance for doubtful accounts balance as of March 31, 2023 and December 31, 2022. Some of commercial segment’s customers are on payment terms, and although low risk, occasionally the need may arise to record an allowance for receivables that are deemed high risk using the new expected loss methodology. The commercial segment’s allowance for doubtful accounts, as of March 31, 2023 and December 31, 2022 was $0 and $51,734.straight-line basis.

Income Taxes:

Income taxes are accounted for under the asset and liability method prescribed by ASC 740, Income Taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to ~~apply~~be applicable to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. ~~A valuation allowance is recorded to reduce the carrying amounts~~

Valuation of Deferred Tax Assets

The Company’s deferred tax assets ~~unless~~include certain future tax benefits. The Company records a valuation allowance against any portion of those deferred income tax assets when it believes, based on the weight of available evidence, it is more likely than not ~~such~~that some portion or all of the deferred tax asset will not be realized. The Company reviews the likelihood that the benefit of the deferred tax assets will be ~~realized. During fiscal 2022, management determined~~realized and the need for valuation allowances on a quarterly basis, or more frequently if events indicate that ~~it was more likely than not the tax asset would be reduced by future taxable income, therefore, the remaining valuation allowance at December 31, 2022, was released. As of March 31, 2023, we had~~ a tax deferred asset of $1,140,002 with $0 offsetting valuation allowance. As of March 31, 2022, the Company had a deferred tax asset of $3,928,134 with an offsetting valuation allowance of $3,928,134, netting the tax asset to $0.

We account for our position in tax uncertainties in accordance with ASC 740, Income Taxes. The guidance establishes standards for accounting for uncertainty in income taxes. The guidance provides several clarifications related to uncertain tax positions. Most notably, a “more likely-than-not” standard for initial recognition of tax positions, a presumption of audit detection and a measurement of recognized tax benefits based on the largest amount that has a greater than 50 percent likelihood of realization. The guidance applies a two-step process to determine the amount of tax benefit to be recognized in the financial statements. First, we must determine whether any amount of the tax benefit may be recognized. Second, we determine how much of the tax benefit should be recognized (this would only apply to tax positions that qualify for recognition.).review is required. We have not taken a tax position that, if challenged, would have a material effect on the consolidated financial statements or the effective tax rate for the three months ended March 31, 2024.

For the period ended March 31, 2024, the Company had a deferred tax liability of $21,177. For the period ended December 31, 2023, the Company had a deferred tax liability of $38,668. The Company did not have a valuation allowance for the period ended March 31, 2024 and ~~2022.~~December 31, 2023.

Segment Information

The accounting standards for reporting information about operating segments defines an operating segment as a component of an enterprise that engages in business activities from which it may earn revenues and incur expenses for which discrete financial information is available that is evaluated regularly by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources and in assessing performance.

The Company’s financial performance is based on the following segments: consumer and commercial.

The Company allocates its corporate expenses including selling, general and administrative expenses, depreciation and amortization, other income, interest expense, and income tax expense.

See Note 2 – Principles of Consolidation and Nature of Operations for further detail.


1710

~~Table of Contents~~

~~NOTE 11 — LEASES~~Earnings Per Share

~~In determining~~Basic earnings per share of our ~~right-of-use assets and lease liabilities, we apply a discount rate~~common stock, par value $0.01 per share (our “Common Stock”), is computed by dividing net earnings available to the minimum lease payments within each lease agreement. ASC 842 requires us to use the interest rate that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. If we cannot readily determine the discount rate implicit in lease agreements, we utilize our incremental borrowing rate.

The Company has nine operating leases as of March 31, 2023—five in DFW, two in Mt. Pleasant, South Carolina and two in Chandler, Arizona. The leases for the consumer segment are: 1) the flagship store located at 13022 Preston Road, Dallas, Texas expiring on January 31, 2027, with an option to extend the lease for an additional five years, at the prevailing market rate for comparable space in comparable buildings in the vicinity; 2) the Grand Prairie, Texas lease which was renewed starting July 1, 2022, expiring June 30, 2027, with an option to extend the lease for an additional five years; 3) the two leases for the Mt. Pleasant, South Carolina location expiring on April 30, 2025, with no additional renewal options; and 4) the lease for the Euless, Texas location expiring June 30, 2025, with an option to extend the lease for an additional five years. The leases for the commercial segment are: 1) the Echo location on W. Belt Line Road, in Carrollton, Texas, expiring January 31, 2026, with an option to extend the lease an additional five years: 2) the lease for the Teladvance location, which also houses ITAD USA and CEX, on Realty Road in Carrollton, Texas expiring January 31, 2027, with no additional renewal options; and 3) the two leases for the Avail location in Chandler, Arizona expiring on May 31, 2025, with no additional renewal options. Allholders of the Company’s nine leases as of March 31, 2023 are triple net, for which it pays its proportionate share of common area maintenance, property taxes and property insurance. Leasing costs for the three months ended March 31, 2023 and 2022 was $659,616 and $622,863 respectively, comprised of a combination of minimum lease payments and variable lease costs.

~~As of March 31, 2023,~~Common Stock by the weighted average ~~remaining lease term and~~number of shares of Common Stock outstanding for the reporting period. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts requiring the Company to issue Common Stock were exercised or converted into Common Stock. For the calculation of diluted earnings per share, the basic weighted average ~~discount rate for operating leases was 3.3 years~~number of shares is increased by the dilutive effect of stock options and ~~4.4%, respectively. For~~warrants outstanding determined using the ~~three months ended March 31, 2023 and 2022, the Company’s cash paid for operating lease liabilities was $656,520 and $616,097 respectively.~~

~~Table of Contents~~

~~Future annual minimum lease payments as of March 31, 2023:~~

Operating

Leases

Consumer

2023 (excluding the three months ending March 31, 2023)

406,955

2024

552,414

2025

434,274

2026

355,000

2027 and thereafter

50,114

Total minimum lease payments

1,798,757

Less imputed interest

(149,993 )

Consumer Sub-Total

1,648,764

Commercial

2023 (excluding the three months ending March 31, 2023)

1,018,905

2024

1,396,129

2025

1,321,297

2026

474,326

2027 and thereafter

33,455

Total minimum lease payments

4,244,112

Less imputed interest

(251,432 )

Commercial Sub-Total

3,992,680

Total

5,641,444

Current portion

1,827,285

$ 3,814,159

~~NOTE 12 — BASIC AND DILUTED AVERAGE SHARES~~treasury stock method.

~~A reconciliation of basic and diluted weighted average common shares for the three months ended March 31, 2023 and 2022 is as follows:~~

	~~For the Three Months Ended~~Stock-Based Compensation
	~~March 31,~~
	~~2023~~		~~2022~~

~~Basic weighted average shares~~		~~26,924,631~~		~~26,924,631~~
~~Effect of potential dilutive securities~~		~~15,000~~		~~15,000~~
~~Diluted weighted average shares~~		~~26,939,631~~		~~26,939,631~~

~~Table of Contents~~

For the three months ended March 31, 2023 and 2022, there was a total of 15,000 common stock options, warrants, and Restricted Stock Units (RSUs) unexercised, respectively. For the three months ended March 31, 2023 and 2022, there were no anti-dilutive shares.

On March 14, 2023, a stock repurchase program was unanimously approved by the Company’s Board of Directors, with gives management authorization to purchase up to one million (1,000,000) shares of the Company’s stock, of a per-share price not to exceed $9, on the open market.

~~NOTE 13 — LONG-TERM DEBT~~

~~Long-term debt consists of the following:~~

Outstanding Balance

March 31,

December 31,

Current

2023

2022

Interest Rate

Maturity

Consumer

Note payable, Farmers Bank (1)

$ 2,642,199

$ 2,668,527

3.10%

November 15, 2026

Note payable, Truist Bank (2)

865,437

874,418

3.65%

July 9, 2030

Note payable, Texas Bank & Trust (3)

451,569

456,187

3.75%

September 14, 2025

Note payable, Texas Bank & Trust (4)

1,675,086

1,691,020

3.25%

July 30, 2031

Consumer Sub-Total

5,634,291

5,690,152

��

Commercial

Note payable, Farmers Bank (1)

5,994,831

6,054,565

3.10%

November 15, 2026

Line of Credit (5)

-

-

3.10%

November 15, 2024

Avail Transaction note (6)

1,333,333

1,500,000

0.00%

April 1, 2025

Commercial Sub-Total

7,328,164

7,554,565

Corporate

Note payable, Texas Bank & Trust (7)

2,704,143

2,732,688

3.25%

Novemeber 4, 2025

Sub-Total

15,666,598

15,977,405

Current portion

1,246,961

1,250,702

$ 14,419,637

$ 14,726,703

(1) On November 23, 2021, Farmers State Bank of Oakley, Kansas (“FSB”) refinanced prior related party notes held by the consumer segment and the commercial segment. The commercial segment note was refinanced with a remaining and outstanding balance of $6,309,962, is a five-year promissory note amortized over 20 years at 3.1% annual interest rate. The note has monthly principal and interest payments of $35,292. The consumer segment note was refinanced with a remaining and outstanding balance of $2,781,087, is a five-year promissory note amortized over 20 years at 3.1% annual interest rate. The note has monthly principal and interest payments of $15,555.

(2) On July 9, 2020, the consumer segment closed the purchase of a retail building located at 610 E. Round Grove Road in Lewisville, Texas for $1.195 million. The purchase was partly financed through a $956,000, ten-year loan, bearing an annual interest rate of 3.65%, amortized over 20 years, payable to Truist Bank (f/k/a BB&T Bank). The note has monthly interest and principal payments of $5,645.

(3) On September 14, 2020, the consumer segment closed on the purchase of a retail building located at 1106 W. Northwest Highway in Grapevine, Texas for $620,000. The purchase was partly financed through a $496,000, five-year loan, bearing an annual interest rate of 3.75%, amortized over 20 years, payable to Texas Bank & Trust. The note has monthly interest and principal payments of $2,941.

~~Table of Contents~~

(4) On July 30, 2021, the consumer segment closed the purchase of a new retail building located at 9166 Gaylord Parkway in Frisco, Texas for $2,215,500. The purchase was partly financed through a $1,772,000, five-year loan (the “TB&T Frisco Loan”), bearing an annual interest rate of 3.75%, amortized over 20 years, payable to Texas Bank and Trust. The note has monthly interest and principal payments of $10,509.

(5) On November 23, 2021, the Company secured a 36-month line of credit from FSB for $3,500,000 at 3.1% annual interest rate. As of March 31, 2023 and December 31, 2022, the outstanding balance of the line of credit was $0.

(6) On October 29, 2021, the commercial segment entered into the Avail Transaction to purchase all of the assets, liabilities and rights and interests of Avail AZ, for $4.5 million. The purchase was facilitated by an initial payment of $2.5 million at closing, and the remaining $2.0 million to be paid out by 12 quarterly payments starting April 1, 2022, of $166,667 each. The Installment note payable for the Avail Transaction imputed at 3.1%

(7) On November 4, 2020, 1901 Gateway Holdings, LLC, a wholly owned subsidiary of Envela Corporation, closed on the purchase of its new corporate office building located at 1901 Gateway Drive, Irving, Texas for $3.521 million. The building was partially financed through a $2.96 million, five-year loan, bearing an interest rate of 3.25%, amortized over 20 years, payable to Texas Bank & Trust. The note has monthly interest and principal payments of $16,792.

~~Future scheduled principal payments of our notes payable as of March 31, 2023 are as follows:~~

~~CONSUMER SEGMENT~~

Note payable, Farmers State Bank

Year Ending December 31,

Amount

2023 (excluding the three months ended March 31, 2023)

$ 79,098

2024

108,743

2025

112,162

2026

2,342,196

Subtotal

$ 2,642,199

Note payable, Truist Bank

Year Ending December 31,

Amount

2023 (excluding the three months ended March 31, 2023)

$ 27,006

2024

37,342

2025

38,748

2026

40,206

2027

42,081

Thereafter

680,054

Subtotal

$ 865,437

~~Table of Contents~~

Note payable, Texas Bank & Trust

Year Ending December 31,

Amount

2023 (excluding the three months ended March 31, 2023)

$ 13,885

2024

19,209

2025

418,475

Subtotal

$ 451,569

Note payable, Texas Bank & Trust

Year Ending December 31,

Amount

2023 (excluding the three months ended March 31, 2023)

$ 47,852

2024

66,225

2025

75,219

2026

78,741

2027

80,717

Thereafter

1,326,332

Subtotal

$ 1,675,086

~~COMMERCIAL SEGMENT~~

Note payable, Farmers Bank

Year Ending December 31,

Amount

2023 (excluding the three months ended March 31, 2023)

$ 179,463

2024

246,725

2025

254,483

2026

5,314,160

Subtotal

$ 5,994,831

Note payable, Avail Transaction

Year Ending December 31,

Amount

2023 (excluding the three months ended March 31, 2023)

$ 500,000

2024

666,667

2025

166,666

Subtotal

$ 1,333,333

~~Table of Contents~~

~~CORPORATE~~

Note payable, Texas Bank & Trust - Envela

Year Ending December 31,

Amount

2023 (excluding the three months ended March 31, 2023)

$ 84,881

2024

116,501

2025

2,502,761

Subtotal

2,704,143

$ 15,666,598

~~Future scheduled aggregate amount of principal payments and maturities of our notes payable as of March 31, 2023 are as follows:~~

Scheduled

Principal

Loan

Scheduled Principal Payments and Maturities by Year:

Payments

Maturities

Total

2023 (excluding the three months ended March 31, 2023)

932,185

-

932,185

2024

1,261,412

-

1,261,412

2025

772,385

2,796,129

3,568,514

2026

464,900

7,310,403

7,775,303

2027

122,798

-

122,798

Thereafter

428,266

1,578,120

2,006,386

Total

$ 3,981,946

$ 11,684,652

$ 15,666,598

~~Table of Contents~~

~~NOTE 14 — STOCK-BASED COMPENSATION~~

The Company accounts for ~~share-based~~stock-based compensation by measuring the cost of employee services received in exchange for an award of equity instruments, including grants of stock options, based on the fair value of the award at the date of grant. In addition, to the extent that the Company receives an excess tax benefit upon exercise of an award, such benefit is reflected as cash flow from financing activities in the consolidated statement of cash flows.

See Note 14 – Stock-Based Compensation for further detail.

Taxes Collected from Customers

The Company’s policy is to present taxes collected from customers and remitted to governmental authorities on a net basis. The Company records the amounts collected as a current liability and relieves such liability upon remittance to the taxing authority without impacting revenue or expenses.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. The carrying amounts reported in the consolidated balance sheets approximate fair value.

Accounts Receivable, Net of Allowances

Accounts receivable represent amounts primarily due from customers on product and other sales. Our allowance for credit losses is primarily determined by an analysis of our trade receivables aging, using the expected losses methodology. The allowance for credit losses is determined based on historical experience of collecting past due amounts, based on the degree of their aging. In addition, specific accounts that are considered and expected to be uncollectable are included in the allowance for credit losses. Trade receivables are considered delinquent when payment has not been made within contract terms. Trade receivables are charged off when there is certainty as to their being uncollectible.

For the three months ended March 31, 2024 and March 31, 2023, the consumer segment’s allowance for credit losses was $0 and $0, respectively. For the three months ended March 31, 2024 and March 31, 2023, the commercial segment’s allowance for credit losses was $306,727 and $0, respectively.

Inventories

Consumer Segment

The consumer segment values inventory at the lower of cost or net realizable value. We acquire inventory based on our own internal estimate of the fair value of the items at the time of purchase. We consider factors such as the current spot market price of precious metals and current market demand for the items being purchased. Consigned inventory has a net zero balance. The majority of our inventory has some component of its value that is based on the spot market price of precious metals. Because the overall market value for precious metals regularly fluctuates, we monitor these fluctuations for any adverse impact on the carrying value of our inventory.

Commercial Segment

Our inventory primarily includes processed and unprocessed, base metals, electronic scrap materials containing precious metals as well as technology assets being held for resale. The processed and unprocessed base metals and electronic scrap materials are valued utilizing the average cost method. Our technology assets are valued utilizing the retail cost method.

See Note 4 – Inventories for further detail.

Goodwill

Goodwill is not amortized but evaluated for impairment on an annual basis during the fourth quarter of our fiscal year, or earlier if events or circumstances indicate the carrying value may be impaired. There were no triggering events identified during the first three months of fiscal 2024 requiring an interim goodwill impairment test, and the Company did not record a goodwill impairment charge in any of the periods presented. There have been no other adjustments to goodwill in any of the periods presented.

See Note 5 – Goodwill for further detail.

Property and Equipment, Net

Property and equipment is carried at cost less accumulated depreciation and is depreciated on a straight-line basis over the estimated useful lives of the assets; except for construction in progress which has not yet been placed into service. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Expenditures for maintenance and repairs are charged against income as incurred; betterments that increase the value or materially extend the life of the related assets are capitalized.

See Note 6 – Property and equipment, net for further detail.

Intangible Assets, Net

Finite-lived intangible assets are carried at cost less accumulated amortization and are amortized on a straight-line basis over the estimated useful lives of the assets; except for assets under development which have not yet been placed into service. Finite-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

See Note 7 – Intangibles, net for further detail.

Correction of Immaterial Error

The Company’s consumer segment previously reported revenue from freight arrangement services as a component of cost of goods sold. The Company has further evaluated the nature and scope of its service offering and has determined that it meets the definition of a principal in accordance with ASC 606 and as such be reported within revenue. As a result of the correction, for the three months ended March 31,2023 revenue and cost of goods sold increased by $1,420,492. The error had no impact on operating income, net income, and net income per share nor any other financial statement amount. Further these errors had no impact on the consolidated balance sheets, statements of stockholders’ equity, and statement of cash flows. These corrections do not affect any of the metrics used to calculate and evaluate management’s compensation and had no impact on bonuses, commissions, stock-based compensation, or any other employee renumeration. Historical amounts have been corrected and are presented on a comparable basis.

See Note 10 – Revenue for further detail.

Changes in Disclosure

The Company has elected to discontinue reporting the disaggregation of inventory and revenue by resale and recycle. The Company’s business operations continue to evolve and includes fee for service revenue that does not always correlate to these categories and underlying inventory positions; further our inventory positions within these disaggregated presentations can vary at any point in time as they are a diverse mix of technology assets, precious and base metals and luxury hard assets. The Company believes that its disclosure of the nature of its operations, the inventory held at each segment and associated risk factors provides a sufficient understanding of its impact on our business.

See Note 4 – Inventories and Note 10 – Revenue, for further detail.

Reclassifications

For the Company’s 2023 Annual Report, the presentation of the operations section within its Consolidated Cash Flow Statements was updated to present "non-cash lease expense" as a separate line item, previously included within "changes in operating assets and liabilities – operating leases.” The Company has elected to reclassify $473,881 from operating leases to non-cash lease expenses in the Consolidated Cash Flow Statement for the period ending March 31, 2023.

See the Condensed Consolidated Statements of Cash Flows for further detail.

For the Company’s 2023 Annual Report, the amount reported for other current assets within the Consolidated Balance Sheets related entirely to notes receivables. The Company has elected to present notes receivable as its own line item and has reclassified the historical presentation of the aforementioned for the period ended December 31, 2023.

See the Condensed Consolidated Balance Sheets for further detail.

The Company previously did not disclose construction in progress and intangible assets under development. The Company has determined that providing this information further enhances the understanding of the nature of our capital expenditures. The Company has elected to reclassify the historical presentation of the aforementioned for the period ended December 31, 2023.

See Note 6 – Property and equipment, net for further detail.

The Company previously reported the development of its enterprise resource planning system within property and equipment, net. The Company has further evaluated the nature of this asset under ASC 350, Intangibles – Goodwill and Other and has determined that it is a nonmonetary asset without physical substance and was acquired separately from hardware and as such be reported within intangibles, net. The Company has elected to reclassify the historical presentation of the aforementioned for the period ended December 31, 2023.

See Note 7 – Intangibles, net for further detail.

Recent Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures ("ASU 2023-07”), which will require the Company to disclose segment expenses that are significant and regularly provided to the CODM. In addition, ASU 2023-07 will require the Company to disclose the title and position of its CODM and how the CODM uses segment profit or loss information in assessing segment performance and deciding how to allocate resources. ASU 2023-07 will be effective for fiscal years beginning January 1, 2024, Form 10-K, and interim periods within fiscal years beginning on January 1, 2025. The standard will be adopted beginning January 1, 2024, for the fiscal year and adopted for the interim periods beginning January 1, 2025, by using a modified retrospective transition approach. The Company does not expect adoption to have a material impact on its consolidated financial statements.

In December 2023, the FASB issued Accounting Standards Update 2023-09 (“ASU 2023-09”), Income Taxes (Topic 740): Improvement to Income Tax Disclosures, amending income tax disclosure requirements for the effective tax rate reconciliation and income taxes paid. The amendments in ASU 2023-09 are effective beginning in the Company’s fiscal 2025 and are applied prospectively. Early adoption and retrospective application of the amendments are permitted. The Company does not expect adoption to have a material impact on its consolidated financial statements.

No other recently issued or effective ASU’s had, or are expected to have, a material impact on the Company’s results of operations, financial condition or liquidity.

NOTE 4 — INVENTORIES

The following table summarizes the details of the Company’s inventories:

	March 31,		December 31,
	2024		2023
Consumer
Trade inventories	$	24,128,255	$	21,905,055

Sub-total		24,128,255		21,905,055

Commercial
Trade inventories		1,494,181		1,241,122

Sub-total		1,494,181		1,241,122

	$	25,622,436	$	23,146,177

NOTE 5 — GOODWILL

The following table summarizes the details of the Company’s changes in goodwill:

	March 31,		December 31,
	2024		2023
Consumer
Opening balance	$	300,000	$	-
Additions/(reductions) ⁽¹⁾		-		300,000

Sub-total		300,000		300,000

Commercial
Opening balance		3,621,453		3,621,453
Additions/(reductions)		-		-

Sub-total		3,621,453		3,621,453

	$	3,921,453	$	3,921,453

(1) The increase in goodwill of $300 thousand for the year ended December 31, 2023 relates to the Company’s acquisition of Steven Kretchmer, Inc. on September 12, 2023 (“Kretchmer Transaction”). The Kretchmer Transaction remains within the measurement period of ASC 805, Business Combinations. The measurement period is the period after the acquisition date during which the acquirer may adjust the provisional amounts recognized for a business combination.

NOTE 6 — PROPERTY AND EQUIPMENT, NET

The following table summarizes the details of the Company’s property and equipment, net:

										Adjusted
	March 31,			December 31,						December 31,
	2024			2023			Reclassification			2023
Consumer
Land	$	1,824,892		$	1,824,892		$	-		$	1,824,892
Building and improvements		3,039,823			4,126,507			(1,443,207	)		2,683,300
Leasehold improvements		1,444,814			1,450,695			-			1,450,695
Furniture and fixtures		793,646			802,058			(101,226	)		700,832
Machinery and equipment		1,150,137			1,224,783			(3,215	)		1,221,568
Vehicles		22,859			22,859			-			22,859
Construction in progress ⁽¹⁾		1,392,786			-			1,547,648			1,547,648
		9,668,957			9,451,794			-			9,451,794

Less: accumulated depreciation		(3,019,183	)		(2,946,727	)		-			(2,946,727	)

Sub-total		6,649,774			6,505,067			-			6,505,067

Commercial
Leasehold improvements		151,647			151,647			-			151,647
Furniture and fixtures		145,950			145,950			-			145,950
Machinery and equipment		1,095,917			1,142,731			(48,979	)		1,093,752
Vehicles		222,232			222,232			-			222,232
Construction in progress ⁽²⁾		96,257			-			48,979			48,979
		1,712,003			1,662,560			-			1,662,560

Less: accumulated depreciation		(893,459	)		(819,389	)		-			(819,389	)

Sub-total		818,544			843,171			-			843,171

Corporate
Land		1,106,664			1,106,664			-			1,106,664
Building and improvements		2,490,879			2,505,716			(3,500	)		2,502,216
Machinery and equipment		45,234			28,627			-			28,627
Enterprise resource planning system ⁽³⁾		-			191,075			(191,075	)		-
Construction in progress ⁽⁴⁾		179,849			-			3,500			3,500
		3,822,626			3,832,082			(191,075	)		3,641,007

Less: accumulated depreciation		(242,723	)		(225,021	)		-			(225,021	)

Sub-total		3,579,903			3,607,061			(191,075	)		3,415,986

	$	11,048,221		$	10,955,299		$	(191,075	)	$	10,764,224

(1) Construction in progress relates to the build-out of production equipment.

(2) Construction in progress relates to the build-out of our Arizona retail stores.

(3) Reclassified amount to intangibles, net. See Note 7 – Intangible, Net for further details.

(4) Construction in progress pertains to improvements to our corporate headquarters.

NOTE 7 — INTANGIBLES, NET

The following table summarizes the details of the Company’s intangible assets, net:

									Adjusted
	March 31,			December 31,					December 31,
	2024			2023			Reclassification		2023
Consumer
Domain names	$	41,352		$	41,352		$	-	$	41,352
Point of sale system		330,000			330,000			-		330,000
		371,352			371,352			-		371,352
Less: accumulated amortization		(368,598	)		(365,852	)		-		(365,852	)

Sub-total		2,754			5,500			-		5,500

Commercial
Trademarks/tradenames		2,869,000			2,869,000			-		2,869,000
Customer contracts		1,873,000			1,873,000			-		1,873,000
Customer relationships		1,809,000			1,809,000			-		1,809,000
		6,551,000			6,551,000			-		6,551,000
Less: accumulated amortization		(2,405,767	)		(2,248,405	)		-		(2,248,405	)

Sub-total		4,145,233			4,302,595			-		4,302,595

Corporate
Enterprise resource planning system		384,242			-					-
Assets under development ⁽¹⁾		-			-			191,075		191,075
		384,242			-			191,075		191,075

Less: accumulated amortization		(19,212	)		-			-		-

Sub-total		365,030			-			191,075		191,075

	$	4,513,017		$	4,308,095		$	-	$	4,499,170

(1) Assets under development relate to the development of our enterprise resource planning system.

The following table depicts the Company’s estimated future amortization expense related to intangible assets as of March 31, 2024:

	Consumer		Commercial		Corporate		Total

2024		2,754		491,325		57,638		551,717
2025		-		655,100		76,848		731,948
2026		-		655,100		76,848		731,948
2027		-		655,100		76,848		731,948
2028		-		655,100		76,848		731,948
Thereafter		-		1,033,508		-		1,033,508

	$	2,754	$	4,145,233	$	365,030	$	4,513,017

NOTE 8 — ACCRUED EXPENSES

The following table summarizes the details of the Company’s accrued expenses:

	March 31,		December 31,
	2024		2023
Consumer
Accrued interest	$	14,970	$	11,904
Payroll		637		226,435
Taxes		122,186		125,130
Other		2		-

Sub-total		137,795		363,469

Commercial
Accrued interest		8,308		7,903
Payroll		-		375,663
Taxes		8,367		-
Unvouchered inventory payments		1,137,801		1,041,188
Other		45,111		96,422

Sub-total		1,199,587		1,521,176

Corporate
Accrued interest		7,148		7,227
Payroll		-		24,543
Taxes		908,219		404,357
Professional fees		122,821		165,651
Other		91		-

Sub-total		1,038,279		601,778

	$	2,375,661	$	2,486,423

NOTE 9 — SEGMENT INFORMATION

The following table depicts the Company’s disaggregated statements of income:

	Three Months Ended March 31,
	2024			% of Sales⁽¹⁾			2023			% of Sales⁽¹⁾
Consumer	$	28,226,017			70.8	%	$	36,704,397			73.7	%
Commercial		11,631,763			29.2	%		13,105,135			26.3	%

Sales		39,857,780			100.0	%		49,809,532			100.0	%

Consumer		24,676,828			61.9	%		32,719,429			65.7	%
Commercial		4,860,268			12.2	%		5,680,201			11.4	%

Cost of goods sold		29,537,096			74.1	%		38,399,630			77.1	%

Gross margin		10,320,684			25.9	%		11,409,902			22.9	%

Consumer		3,251,490			8.2	%		2,396,025			4.8	%
Commercial		4,385,486			11.0	%		5,509,278			11.1	%

Selling, general and administrative		7,636,976			19.2	%		7,905,303			15.9	%

Consumer		93,676			0.2	%		98,134			0.2	%
Commercial		249,889			0.6	%		256,217			0.5	%

Depreciation and amortization		343,565			0.8	%		354,351			0.7	%

Total operating expenses		7,980,541			20.0	%		8,259,654			16.6	%

Operating income		2,340,143			5.9	%		3,150,248			6.3	%

Other income/(expense):

Consumer		8,005			0.0	%		23,534			0.0	%
Commercial		230,523			0.6	%		187,245			0.4	%

Other income		238,528			0.6	%		210,779			0.4	%

Consumer		(64,401	)		(0.2	)%		(59,618	)		(0.1	)%
Commercial		(56,453	)		(0.1	)%		(57,446	)		(0.1	)%

Interest expense		(120,854	)		(0.3	)%		(117,064	)		(0.2	)%

Income before income taxes		2,457,817			6.2	%		3,243,963			6.5	%

Consumer		(59,151	)		(0.1	)%		(317,841	)		(0.6	)%
Commercial		(491,127	)		(1.3	)%		(399,805	)		(0.9	)%

Income tax expense		(550,278	)		(1.4	)%		(717,646	)		(1.5	)%

Net income	$	1,907,539			4.8	%	$	2,526,317			5.1	%

(1) The "% of Sales" figures present the proportion of each line item to the total consolidated sales for the respective period, which management believes is relevant to an assessment and understanding of our financial condition and results of operations.

The following chart depicts the Company’s total assets:

	As of
	March 31, 2024		December 31, 2023

Consumer	$	34,993,787	$	35,839,361
Commercial		35,682,400		33,777,041
Corporate		4,069,231		3,857,827

	$	74,745,418	$	73,474,229

NOTE 10 — REVENUE

The following table depicts the Company’s disaggregation of total sales and gross margin:

	For the Three Months Ended March 31,
	2024							2023
	Sales		Gross Margin		Margin			Sales		Gross Margin		Margin

Consumer	$	28,226,017	$	3,549,189		12.6	%	$	36,704,397	$	3,984,968		10.9	%

Commercial		11,631,763		6,771,495		58.2	%		11,684,643		7,424,934		63.5	%

Correction of immaterial error ⁽¹⁾									1,420,492		-		-

Commercial adjusted									13,105,135		7,424,934		56.7	%

	$	39,857,780	$	10,320,684		25.9	%	$	49,809,532	$	11,409,902		22.9	%

(1) Correction of Immaterial Error relating to freight arrangement services, see Note 3 - ACCOUNTING POLICIES AND ESTIMATES for further detail.

The following table lists the opening and closing balances of our contract assets and liabilities:

	Accounts		Contract		Contract
	Receivable		Assets		Liabilities
Consumer
Opening Balance - 1/1/2023		839,239		-		196,382
Closing Balance - 3/31/2023		443,223		-		153,379

Commercial
Opening Balance - 1/1/2023		7,110,536		-		-
Closing Balance - 3/31/2023		7,848,131		-		-

	Accounts		Contract		Contract
	Receivable		Assets		Liabilities
Consumer
Opening Balance - 1/1/2024		3,411,501		-		58,728
Closing Balance - 3/31/2024		244,914		-		96,485

Commercial
Opening Balance - 1/1/2024		4,399,658		-		-
Closing Balance - 3/31/2024		4,352,140		-		-

The Company has no contract assets, and the only contract liability is customer deposits, which is reported within other liabilities in the Unaudited Condensed Consolidated Balance Sheets.

NOTE 11 — LEASES

The following table depicts the Company’s future annual minimum leases payments as of March 31, 2024:

	Operating
	Leases
Consumer
2024	$	415,526
2025		412,271
2026		354,998
2027		50,114
2028		-
Thereafter		-

Total minimum lease payments		1,232,909
Less imputed interest		(65,819	)

Sub-total		1,167,090

Commercial
2024		1,048,490
2025		1,321,298
2026		474,320
2027		33,454
2028		-
Thereafter		-

Total minimum lease payments		2,877,562
Less imputed interest		(118,652	)

Sub-total		2,758,910

Total		3,926,000

Current portion		1,840,082

	$	2,085,918

All of the Company’s facilities leases as of March 31, 2024 are non-cancellable and triple net, for which it pays its proportionate share of common area maintenance, property taxes and property insurance. Leasing costs for the three months ended March 31, 2024 and 2023 were $784,735 and $659,616, respectively, comprised of a combination of minimum lease payments and variable lease costs.

As of March 31, 2024, the weighted average remaining lease term and weighted average discount rate for operating leases were 2.3 years and 4.3%. As of March 31, 2023, the weighted average remaining lease term and weighted average discount rate for operating leases were 3.3 years and 4.4%.

NOTE 12 — BASIC AND DILUTED AVERAGE SHARES

The following table is a reconciliation of the Company’s basic and diluted weighted average common shares:

	For the Three Months Ended
	March 31,
	2024		2023

Basic weighted average shares		26,419,039		26,924,631
Effect of potential dilutive securities		15,000		15,000
Diluted weighted average shares		26,434,039		26,939,631

For the three months ended March 31, 2024 and 2023, there was a total of 15,000 common stock options, warrants, and Restricted Stock Units (“RSUs”) unexercised. For the three months ended March 31, 2024 and 2023, there were no anti-dilutive shares.

On March 14, 2023, a stock repurchase program was unanimously approved by the Company’s Board of Directors (the “Board”), that gave management authorization to purchase up to one million (1,000,000) shares of the Company’s stock, at a per share price not to exceed $9.00, on the open market. The plan expires on March 31, 2026.

The following table lists the repurchase of Company shares as of March 31, 2024:

	Total Number		Average Price				Shares
Fiscal Period	of Shares Purchased		Paid per Share		Total Price Paid		Available to Purchase
Balance as of January 1, 2024		415,973	$	5.18	$	2,155,049		584,027

January 1 - 31, 2024		59,417		4.52		268,569		524,610
February 1 - 29, 2024		56,343		4.53		255,195		468,267
March 1 - 31, 2024		85,580		4.46		381,382		382,687

Balance as of March 31, 2024		617,313	$	4.96	$	3,060,195		382,687

NOTE 13 — DEBT

The following table summarizes the details of the Company’s long-term debt obligations:

	Outstanding Balance
	March 31,			December 31,
	2024			2023
Consumer
Note payable, FSB ⁽¹⁾	$	2,537,700		$	2,563,108
Note payable, Truist Bank ⁽³⁾		829,204			838,430
Notes payable, TBT ^(4,5)		2,043,823			2,064,928
Note payable, Kretchmer Transaction ⁽⁶⁾		200,000			200,000

Sub-total		5,610,727			5,666,466

Commercial
Note payable, FSB ⁽²⁾		5,754,790			5,815,381
Note payable, Avail Transaction ⁽⁷⁾		666,667			833,333

Sub-total		6,421,457			6,648,714

Corporate
Line of credit, FSB ⁽⁸⁾		-			-
Note payable, TBT ⁽⁹⁾		2,589,538			2,618,311

Sub-total		2,589,538			2,618,311

Sub-total		14,621,722			14,933,491

Current portion		(1,475,625	)		(1,361,443	)

	$	13,146,097		$	13,572,048

The following table depicts the Company’s future principal payments on long-term debt obligations as of March 31, 2024:

	2024		2025		2026		2027		2028		Thereafter
Consumer
Note payable, FSB ⁽¹⁾		81,564		112,106		2,344,030		-		-		-
Note payable, Truist Bank ⁽³⁾		28,029		38,745		40,203		42,077		43,639		636,511
Notes payable, TBT ^(4,5)		70,158		495,231		78,985		80,973		83,696		1,234,780
Note payable, Kretchmer Transaction ⁽⁶⁾		200,000		-		-		-		-		-

Sub-total		379,751		646,082		2,463,218		123,050		127,335		1,871,291

Commercial
Note payable, FSB ⁽²⁾		186,131		254,483		5,314,176		-		-		-
Note payable, Avail Transaction ⁽⁷⁾		500,000		166,667		-		-		-		-

Sub-total		686,131		421,150		5,314,176		-		-		-

Corporate
Line of Credit, FSB ⁽⁸⁾		-		-		-		-		-		-
Note payable, TBT ⁽⁹⁾		87,761		2,501,777		-		-		-		-

Sub-total		87,761		2,501,777		-		-		-		-

	$	1,153,643	$	3,569,009	$	7,777,394	$	123,050	$	127,335	$	1,871,291

(1) On November 23, 2021, the consumer segment entered into a $2.781 million secured amortizing note payable with Farmer’s State Bank of Oakley, Kansas (“FSB”). The note payable bears interest at 3.10% and matures on November 15, 2026.

(2) On November 23, 2021, the commercial segment entered into a $6.309 million secured amortizing note payable with FSB. The note payable bears interest at 3.10% and matures on November 15, 2026.

(3) On July 9, 2020, the consumer segment entered into a $1.195 million secured amortizing note payable with Truist Bank. The note payable bears interest at 3.65% and matures on July 9, 2030.

(4) On September 14, 2020, the consumer segment entered into a $620 thousand secured amortizing note payable with Texas Bank & Trust (“TBT”). The note payable bears interest at 3.75% and matures on September 14, 2025.

(5) On July 30, 2021, the consumer segment entered into a $2.215 million secured amortizing note payable with TBT. The note payable bears interest at 3.75% and matures on July 30, 2031.

(6) On September 12, 2023, the consumer segment entered into a $300 thousand secured amortizing note payable in relation to the Kretchmer Transaction. The note payable’s imputed interest is 3.10% and matures on October 1, 2025. The consumer segment is restructuring the Kretchmer Transaction and the aforementioned terms and conditions and as such is electing to record the note payable in current liabilities.

(7) On October 29, 2021, the consumer segment entered into a $4.500 million secured amortizing note payable in relation to the acquisition of Avail Recovery Solutions, LLC on October 29, 2021 (“Avail Transaction"). The note payable’s imputed interest is 3.10% and matures on April 1, 2025.

(8) On November 23, 2021, the Company entered into a $3.500 million secured line of credit with FSB. The line of credit bears interest at 3.10% and matures on November 15, 2024. This note was previously presented within our commercial segment and is now presented within corporate as the line of credit provides borrowing capacity for all segments.

(9) On November 4, 2020, a wholly owned subsidiary of Envela entered into a $2.960 million secured amortizing note payable with TBT. The note payable bears interest at 3.25% and matures on November 4, 2025.

The Company was in compliance with all of its debt obligation covenants for the periods ended March 31, 2024 and March 31, 2023.

The following table depicts the Company’s future scheduled aggregate principal payments and maturities as of March 31, 2024:

	Scheduled
	Principal		Loan
Scheduled Principal Payments and Maturities by Year:	Payments		Maturities		Total
2024		953,643		200,000		1,153,643
2025		773,845		2,795,164		3,569,009
2026		465,087		7,312,307		7,777,394
2027		123,050		-		123,050
2028		127,335		-		127,335
Thereafter		301,908		1,569,383		1,871,291

Total	$	2,744,868	$	11,876,854	$	14,621,722

NOTE 14 — STOCK-BASED COMPENSATION

There was no stock-based compensation expense for the three months ended March 31, ~~2023~~2024 and ~~2022.~~March 31, 2023.

NOTE 15 — RELATED PARTY TRANSACTIONS

The Company has a corporate policy governing the identification, review, consideration and approval or ratification of transactions with related ~~persons, as that term is defined in the Instructions to Item 404(a) of Regulation S-K, promulgated under the Securities Act (“Related Party”).~~persons. Under this policy, all ~~Related Party~~related party transactions are identified and approved prior to consummation of the transaction to ensure they are consistent with the Company’s best interests and the best interests of its shareholders. ~~Among other factors, the Company’s Board considers the size~~There are no related party transactions subject to reporting as of March 31, 2024 and duration of the transaction, the nature and interest of the Related Party in the transaction, whether the transaction may involve a conflict of interest and if the transaction is on terms that are at least as favorable to the Company as would be available in a comparable transaction with an unaffiliated third party. Envela’s Board reviews all Related Party transactions at least annually to determine if it is in the Board’s best interests and the best interests of the Company’s shareholders to continue, modify, or terminate any of the Related Party transactions. Envela’s Related Person Transaction Policy is available for review in its entirety under the “Investors” menu of the Company’s corporate relations website at www.envela.com.March 31, 2023.

NOTE 16 — ~~SUBSEQUENT EVENTS~~CONTINGENCIES

~~On April 3, 2023, by means~~We review the need to accrue for any loss contingency and establish a liability when, in the opinion of an auction, the consumer segment placed under contract a stand-alone retail building in Phoenix, Arizona, for $1.2 million as part of their expansion into other markets. The building has approximately 6,000 square feet and we are expecting to close the purchase by Thursday, May 4, 2023.

~~NOTE 17 — CONTINGENCIES~~

Surging inflation and supply chain interruptions continue to adversely affect global economic business conditions. Future sales on products like ours could decline or fluctuate due to increased or fluctuating commodities prices, particularly gold. The Federal Reserve has continued raising interest rates to combat inflation and restore price stability andmanagement, it is ~~expected~~probable that ~~rates~~a matter would result in a liability and the amount of loss, if any, can be reasonably estimated. We do not believe that the resolution of any currently pending lawsuits, claims, and proceedings, either individually or in the aggregate, will ~~continue to rise at~~have a ~~slower~~material adverse effect on financial position, results of operations or liquidity. However, the outcomes of any currently pending lawsuits, claims and ~~more deliberate pace through fiscal 2023. Although we are continuing to monitor~~proceedings cannot be predicted, and ~~assess~~therefore, there can be no assurance that this will be the economic effects of inflation levels and supply chain interruptions, the ultimate impact is highly uncertain and subject to change. In addition, the economic effects of the foregoing are subject to, among other things, the effect of government responses on our operations.

The global tension caused by the conflict between Russia and Ukraine has upset the stability within the region of the former Soviet era block. This could lead to further volatility in global energy and other industries that could negatively impact our operations. The U.S. government has imposed sanctions and export controls against Russia and Russian interests and threatened additional sanctions and controls, which have impacted global supply chains. The impact of these measures, as well as other measures taken, as it concerns our operations is currently unknown.case.


2423

~~Table of Contents~~

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Unless the context indicates otherwise for one of our specific operating segments, references to “we,” “us,” “our,” the ~~”Company”~~“Company” and “Envela” refer to the consolidated business operations of Envela Corporation, and all of its direct and indirect subsidiaries.

Forward-Looking Statements

This Quarterly Report on Form 10-Q for the quarter ended March 31, ~~2023~~2024 (this “Form 10-Q”), including but not limited to: (i) the section of this Form 10-Q entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations;” (ii) information concerning our business prospects or future financial performance, anticipated revenues, expenses, profitability or other financial items; and (iii) our strategies, plans and objectives, together with other statements that are not historical facts, includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements generally can be identified by the use of forward-looking terminology, such as “may,” “will,” “would,” “expect,” “intend,” “could,” “estimate,” “should,” “anticipate”, “potential,” “continue,” “deploy” or “believe.” We intend that all forward-looking statements be subject to the safe harbors created by these laws. All statements other than statements of historical information provided herein are forward-looking based on current expectations regarding important risk factors. Many of these risks and uncertainties are beyond our ability to control, and, in many cases, we cannot predict all of the risks and uncertainties that could cause our actual results to differ materially from those expressed in the forward-looking statements. Actual results could differ materially from those expressed in the forward-looking statements, and readers should not regard those statements as a representation by us or any other person that the results expressed in the statements will be achieved. Important risk factors that could cause results or events to differ from current expectations are described under the section entitled “Risk Factors” in the Company’s ~~2022~~2023 Annual Report and any material updates are described under the section of this Form 10-Q entitled “Risk Factors” and elsewhere in this Form 10-Q. These factors are not intended to be an all-encompassing list of risks and uncertainties that may affect the operations, performance, development and results of our business. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation to release publicly the results of any revisions to these forward-looking statements, which may be made to reflect events or circumstances after the date thereon, including without limitation, changes in our business strategy or planned capital expenditures, or store growth plans, or to reflect the occurrence of unanticipated events.

~~Envela Overview~~Introduction

This section includes a discussion of our operations for the three months ended March 31, 2024 and March 31, 2023. The ~~Company operates through two recommerce business segments represented by customer designations.~~following discussion and analysis provides information for which management believes is relevant to an assessment and understanding of our financial condition and results of operations. The ~~consumer segment, formerly known as~~discussion should be read in conjunction with the ~~DGSE segment, focuses on the recommercialization of luxury hard assets,~~Company’s 2023 Annual Report, and the ~~commercial segment formerly known as~~Unaudited Condensed Consolidated Financial Statements and the ~~ECHG segment, focuses on the recommercialization~~related Notes thereto included in Part I, Item 1 of ~~business IT equipment and electronic devices.~~

Through the consumer segment, the Company recommercializes luxury hard assets and operates the Dallas Gold and Silver Exchange, Charleston Gold & Diamond Exchange, and Bullion Express brands. Through the commercial segment, the Company recommercializes business IT equipment and electronic devices and operates Echo, ITAD USA, Teladvance, CEX and Avail. Echo focuses on end-of-life electronics recycling and sustainability, ITAD USA provides IT equipment disposition, including compliance and data sanitization services, and Teladvance, CEX and Avail operate as value-added resellers by providing offerings and services to companies looking either to upgrade capabilities or dispose of equipment. In addition to its operations through the consumer and commercial segments, Envela also leases unused space at its Company headquarters in Irving, Texas to third-party tenants.this report.

2524

Table of Contents

~~Consumer Segment Business Overview~~

The consumer segment is headquartered in Dallas, Texas and focuses on sustainable, authenticated recommerce of luxury hard assets, including diamonds. Its retail strategy is anchored in being an information resource for clients, bringing transparency to purchase and sale transactions, and offering value and liquidity to those seeking to buy, sell or trade jewelry, fine watches, diamonds, rare coins and currency as well as other valuables. The Company wholesales and retails these items through its Charleston Gold & Diamond Exchange and Dallas Gold & Silver Exchange operations. Dallas Gold & Silver Exchange and Charleston Gold & Diamond Exchange have specialized in buying and selling jewelry for almost 50 years, making our expert staff among the best in the business.

Dallas Gold & Silver Exchange also maintains a number of related operations, on-site jewelry and watch repair and restoration at its Dallas flagship location, and design of custom bridal and fashion jewelry. In addition, it also has a precious-metal bullion-trading operation that buys and sells all forms of gold, silver, platinum and palladium products, including United States and other government-issue coins, private-mint medallions, art bars and trade unit bars.

~~For additional information regarding the consumer segment, see “Item 1. Business - Operating Segments - DGSE Segment.” in the Company’s 2022 Annual Report.~~

~~Consumer Segment Recommerce Activities~~

We operate a sustainable marketplace for preowned luxury goods. We buy and sell coins, diamonds, jewelry, and related accessories and other merchandise. Our ability to offer quality pre-owned goods at prices significantly lower than original retail prices attracts value-conscious customers. The consumer segment depends on purchasing products and materials from secondary markets. We are reliant on our ability to obtain an adequate supply of products and material at prices or other terms acceptable to us. The gross profit on sales of inventory depends primarily on our assessment of the purchase value at the time the property is purchased and our ability to sell that merchandise in a timely manner.

~~Consumer Segment Precious Metals Pricing and Business Impact~~

We are exposed to various market risks. Market risk is the potential loss arising from the adverse changes in market prices and rates. The nature of the consumer operations results in exposure to fluctuations in commodity prices, specifically diamonds, platinum, gold and silver. We do not currently use derivatives to hedge these risks.

As a significant portion of our inventory and sales involve gold and jewelry, our results can be influenced by the market price of gold and diamonds. Our retail sales and gross margin could be materially impacted if prices of diamonds, platinum, gold, or silver rise so significantly that our consumers’ behavior changes or if price increases cannot be passed onto our customers.

Because the consumer segment buys and resells precious metals, it is impacted by fluctuations and changes in precious-metal pricing which rises and falls based upon global supply and demand dynamics, with the greatest impact on us relating to gold as it represents a significant portion of the precious-metal in which we trade. Such fluctuations, particularly with respect to gold, which accounts for a majority of our merchandise costs, can have a significant impact on its earnings and cash availability.

~~Table of Contents~~

We continue to monitor the economic impact on our operations from surging inflation and the conflict in Ukraine. Uncertainties exist that could affect our operations or cash flows in the future, such as continued inflationary environmental changes (including, but not limited to, labor, materials, and advertising costs). The Company’s ability to recruit and retain qualified team members, organized retail crime, or the consumers’ ability to spend on discretionary categories.

~~Consumer Segment Growth and Expansion~~

Our continued strategy will be to expand the number of locations we operate through opening new (“de novo”) locations in both current markets within DFW and South Carolina. The Company expects to soon expand into Arizona, see Note 16 – Subsequent Events, to these interim condensed consolidated financial statements. Our ability to add new stores is dependent on several variables, such as projected achievement of internal investment hurdles, the availability of acceptable sites, the regulatory environment, local zoning ordinances, access to capital and the availability of qualified personnel. We see opportunity for further expansion through de novo openings in the United States. The Company expects capital expenditures over the next twelve months including the potential purchase of additional properties.

~~Commercial Segment Business Overview~~

The commercial segment operates Echo, ITAD USA, Teladvance, CEX and Avail, through which it primarily buys and resells or recycles electronic components and IT equipment. Echo focuses on end-of-life electronics recycling and also offers disposal transportation and product tracking, ITAD USA provides IT equipment disposition including compliance and data sanitization services and Teladvance, CEX and Avail operates as value-added resellers by providing offerings and services to companies looking to either upgrade capabilities or dispose of equipment. In addition, as a result of the CExchange Transaction, Teladvance offers its customers the ability to further offer their customers the ability to upgrade their old phones through a trade-in program supported by Teladvance. Like the consumer segment, the commercial segment also maintains relationships with refiners for which it sells extracted valuable materials from electronics and IT equipment deemed unsuitable for retail or wholesale customers.

~~Commercial Segment Recommerce Activities~~

A portion of the commercial business depends on obtaining products and material from secondary markets and is reliant on its ability to obtain an adequate supply of products and material at prices and other items acceptable to it. Although we believe that the long-term prospects for the industry remain bright, but because we do not have unlimited backlogs, our business can be promptly affected by short-term market fluctuations and supply limitations.

~~Commercial Segment Metals Pricing and Business Impact~~

The commercial recycling business is affected by precious and other non-ferrous metal prices, which fluctuate based upon global supply-and-demand dynamics, among other things, with the greatest impact relating to gold. As discussed below, we have seen a recent decrease of recycled items, which we believe is primarily due to the supply chain problems downstream with our customers.

~~Table of Contents~~

~~Commercial Segment Growth and Expansion~~

The commercial strategy is to expand both organically and through acquisitions. As an organization, we strive to deliver value through organic growth, high customer loyalty and retention as well as strategic acquisitions. We are committed to continuous innovation. Many of our clients have made commitments to going carbon neutral over the next few years and we see the potential to further expand key relationships as we partner with them in more ways to help them achieve their goal. With an emphasis on increasing recurring revenues and expanding our margins, commercially we believe our organic strategy will ultimately drive strong financial performance, including cash flow to support our acquisition strategy. Commercial’s business strategy has always included pursuing synergistic acquisitions, and we plan to continue to expand the business by making strategic acquisitions and regularly seeking suitable acquisition targets to enhance its growth.

~~For additional information regarding the commercial segment, see “Item 1. Business—Operating Segments—ECHG Segment.” in the Company’s 2022 Annual Report.~~

~~Economic Conditions~~

Surging inflation, supply chain disruptions and the war in Ukraine have affected the recommerce business in unpredictable ways. There have been fewer customers raising money by selling items. For more information, see Note 17 to these interim condensed consolidated financial statements.

~~Critical Accounting Policies and Estimates~~

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with United States generally accepted accounting (“U.S. GAAP”) principles. The preparation of these financial statements requires our management to make judgments and estimates that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenue generated, and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these judgments and estimates under different assumptions or conditions and any such differences may be material.

While our significant accounting policies are more fully described in “Note 1 — Accounting Policies and Nature of Operations” in the Company’s 2022 Annual Report, we believe that the accounting estimates discussed below relate to the more significant areas involving management’s judgments and estimates.

~~Inventories~~

The consumer Segment inventory is valued at the lower of cost or net realizable value (“NRV”). We acquire a majority of our inventory from individual customers, including pre-owned jewelry, watches, bullion, rare coins and monetary collectibles. We acquire these items based on our own internal estimate of the fair value of the items at the time of purchase. We consider factors such as the current spot market price of precious metals and current market demand for the items being purchased. It supplements these purchases from individual customers with inventory purchased from wholesale vendors. These wholesale purchases can take the form of full asset purchases, or consigned inventory. Consigned inventory is accounted for on our balance sheet with a fully offsetting contra account so that consigned inventory has a net zero balance. The majority of our inventory has some component of its value that is based on the spot market price of precious metals. Because the overall market value for precious metals regularly fluctuates, these fluctuations could have either a positive or negative impact on the value of our inventory and could positively or negatively impact our profitability. We monitor these fluctuations to evaluate any necessary impairment to inventory.

~~Table of Contents~~

The Echo inventory principally includes processed and unprocessed electronic scrap materials. The value of the material is derived from recycling the precious and other scrap metals included in the scrap. The processed and unprocessed materials are carried at the lower of the average cost of the material during the month of purchase or NRV. The in-transit material is carried at lower of cost or NRV using the retail method. Under the retail method the valuation of the inventory at cost and the resulting gross margins are calculated by applying a cost to retail ratio to the retail value of the inventory.

For the three months ended March 31, 2023, we have not identified critical accounting estimates that involve a significant level of estimation uncertainty and would have a material impact on our results. Refer to our significant accounting policies are more fully described in Note 3 to these interim condensed consolidated financial statements.

~~Recent Accounting Pronouncements~~

~~See Note 3- Accounting Policies and Estimates, to these interim condensed consolidated financial statements for recently adopted accounting pronouncements.~~

Use of Non-U.S. GAAP Financial Measures

InWithin this ~~management’s~~management discussion and analysis, we use supplemental measures of our performance, which are derived from our interim consolidated financial information, but which are not presented in our interim consolidated financial statements prepared in accordance with U.S. GAAP. We believe that providing these non-U.S. GAAP financial measures adds a meaningful presentation of our operating and financial performance. See the reconciliation of net income to Adjusted EBITDA ~~(defined below),~~and Net Cash, in Non-U.S. GAAP Financial Measures below.

Critical Accounting Policies and Estimates

There were no material changes to our critical accounting policies and estimates as described in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of the Company’s 2023 Annual Report.

We believe that the accounting estimates discussed below relate to the more significant areas involving management’s judgments and estimates.

Economic Conditions

The U.S. and other world economies are currently experiencing high interest rates and high levels of inflation, coupled with commodity price risk, mainly associated with variations in the market price of precious metals and diamonds which have the potential to impact consumer discretionary spending behavior. Furthermore, adverse macroeconomic conditions can also impact demand for resale technology assets.

As to counterbalance economic cycles that impact market selling prices and/or underlying operating costs we adjust the inbound purchase price of commodity-based products, luxury hard assets and resale technology.

We continuously monitor our inventory positions and associated working capital to respond to market conditions and to meet seasonal business cycles and expansionary plans. These economic cycles may from time to time require the business to utilize its line of credit or seek additional capital.

There can be no assurance that the measures we have adopted will be successful in mitigating the aforementioned risks.

General

Envela serves as a holding company, conducting its operations via subsidiaries engaged in various businesses and activities within the re-commerce and recycling sectors. The products and services we offer are delivered by these subsidiaries under their distinct brands, rather than directly by Envela Corporation itself. Our operations are organized into two operating and reportable segments: commercial and consumer.

Consumer Segment

Our consumer segment operates in the jewelry industry, specializing in the online and brick-and-mortar sale of authenticated high-end luxury goods, fine jewelry, watches, and bullion. Our diamonds and gemstones are recycled, meaning they were previously set and then unset to become a new design – allowing for a truly low-carbon, ethical origin. The company focuses on buying and selling pre-owned luxury items, ethically sourced diamonds, gemstones, and precious metals, catering to consumers seeking environmentally responsible options for engagement rings, wedding bands, and other fine jewelry. Our profound commitment to extending the lifespan of luxury goods stems from our understanding that well-crafted items have an enduring quality, enabling them to maintain their beauty and value as they are passed from one owner to another.

Table of Contents

Commercial Segment

Our commercial segment specializes in the de-manufacturing of end-of-life electronic assets to reclaim commodities and other materials, while also engaging in the IT asset disposition (ITAD) industry. The separated commodities, including metals, plastics, and glass, are sold to downstream processors where they are further processed and reintroduced into new products. ITAD services maximize the residual value of retired IT assets by adhering to a reuse-first philosophy and ensuring equipment is refurbished and re-marketed after data sanitization. The company focuses on offering services that manage the entire lifecycle of technology products to ensure data security, regulatory compliance, and environmental sustainability. We are proud of our role to support a circular economy through responsible reuse and recycling of electronic devices.

Segment Activities

The Company believes it is well positioned to take advantage of its overall capital structure.

Consumer Segment

Our strategy is to expand the number of locations we operate through opening new locations throughout the U.S. Likewise, we continue to evaluate opportunities related to complementary product and service offerings for our stores and online business.

Commercial Segment

Our strategy is to expand both organically and through acquisitions. The Company has taken considerable steps to bolster its management team and operating systems as to position itself for growth. Our production facilities are capable of managing the expansion of existing relationships and consolidation of acquisition targets within a relative proximity to our existing facilities.

Change in Disclosure of Results of Operations

The Company previously disaggregated revenue and gross margin by resale and recycle for each segment within the results of operations. The Company’s revenue and gross margin is now comprised of more diverse revenue and gross margin streams associated with service offerings and as such to continue reporting under the prior disclosure methodology would be less representative of how the business operates. The Company believes that this change has no material impact on the interpretation of our results of operations.

Recent Accounting Pronouncements

See Note 3 - Accounting Policies and Estimates, to these interim condensed consolidated financial statements for recently adopted accounting pronouncements.

Non-U.S. GAAP Financial Measures

Adjusted EBITDA

Adjusted EBITDA is a key performance measure that ~~our~~ management uses to assess our operating performance. Because Adjusted EBITDA facilitates internal comparisons of our historical operating performance on a more consistent basis, we use this measure as an overall assessment of our performance, to evaluate the effectiveness of our ~~business~~ strategies and for ~~business~~ planning purposes. Adjusted EBITDA may not be comparable to similarly titled metrics of other companies. Adjusted EBITDA means earnings before interest expense, other (income) expense, net, income tax expense, and depreciation and amortization. Adjusted EBITDA is a non-U.S. GAAP measure and should not be considered as an alternative to the presentation of net income or any other measure of financial performance calculated and presented in accordance with U.S. GAAP.

Table of Contents

The following table provides a reconciliation of net income to ~~EBITDA:~~Adjusted EBITDA for the three months ended March 31, 2024 and 2023:

	For the three months Ended March 31,															For the Three Months Ended March 31,
	2023									2022						2024									2023
	Consumer			Commercial			Consolidated			Consumer		Commercial		Consolidated		Consumer			Commercial			Consolidated			Consumer			Commercial			Consolidated

EBITDA Reconciliation:
Adjusted EBITDA Reconciliation:
Net Income	$	1,136,884		$	1,389,433		$	2,526,317		$	1,876,140	$	771,085	$	2,647,225	$	88,476		$	1,819,063		$	1,907,539		$	1,136,884		$	1,389,433		$	2,526,317
Add (deduct):
Depreciation and amortization		98,134			256,217			354,351			106,963		184,984		291,947		93,676			249,889			343,565			98,134			256,217			354,351
Other (income) expense		(23,534	)		(187,245	)		(210,779	)		27,992		30,584		58,576
Other income																	(8,005	)		(230,523	)		(238,528	)		(23,534	)		(187,245	)		(210,779	)
Interest expense		59,618			57,446			117,064			61,241		61,998		123,239		64,401			56,453			120,854			59,618			57,446			117,064
Income tax expense		317,841			399,805			717,646			13,177		17,115		30,292		59,151			491,127			550,278			317,841			399,805			717,646

EBITDA	$	1,588,943		$	1,915,656		$	3,504,599		$	2,085,513	$	1,065,766	$	3,151,279
Adjusted EBITDA																$	297,699		$	2,386,009		$	2,683,708		$	1,588,943		$	1,915,656		$	3,504,599

Net Cash

Net Cash is the difference between (i) cash and cash equivalents and (ii) the sum of debt obligations. We believe that presenting net of cash is useful to investors as a measure of our leverage, as cash and cash equivalents can be used, among other things, to repay indebtedness.

The following table depicts the Company’s net cash:

	March 31,			December 31,
	2024			2023
Total cash	$	19,783,867		$	17,853,853

Less: debt obligations		(14,621,722	)		(14,933,491	)

Net cash	$	5,162,145		$	2,920,362

The Company had a net cash position of $5,162,145 for the period ended March 31, 2024, as compared to a net cash position of $2,920,362 for the period ended December 31, 2023.

Results of Operations

The following table depicts our disaggregated statements of income for the three months ended March 31, 2024 and 2023:

	For the Three Months Ended March 31,
	2024												2023
	Consumer			Commercial			Consolidated			% of Sales⁽¹⁾			Consumer			Commercial			Consolidated			% of Sales⁽¹⁾

Sales	$	28,226,017		$	11,631,763		$	39,857,780			100.0	%	$	36,704,397		$	13,105,135		$	49,809,532			100.0	%
Cost of goods sold		24,676,828			4,860,268			29,537,096			74.1	%		32,719,429			5,680,201			38,399,630			77.1	%

Gross margin		3,549,189			6,771,495			10,320,684			25.9	%		3,984,968			7,424,934			11,409,902			22.9	%

Expenses:
Selling, general and administrative		3,251,490			4,385,486			7,636,976			19.2	%		2,396,025			5,509,278			7,905,303			15.9	%
Depreciation and amortization		93,676			249,889			343,565			0.8	%		98,134			256,217			354,351			0.7	%

Total operating expenses		3,345,166			4,635,375			7,980,541			20.0	%		2,494,159			5,765,495			8,259,654			16.6	%

Operating income		204,023			2,136,120			2,340,143			5.9	%		1,490,809			1,659,439			3,150,248			6.3	%

Other income/(expense):
Other income		8,005			230,523			238,528			0.6	%		23,534			187,245			210,779			0.4	%
Interest expense		(64,401	)		(56,453	)		(120,854	)		-0.3	%		(59,618	)		(57,446	)		(117,064	)		-0.2	%

Income before income taxes		147,627			2,310,190			2,457,817			6.2	%		1,454,725			1,789,238			3,243,963			6.5	%

Income tax expense		(59,151	)		(491,127	)		(550,278	)		-1.4	%		(317,841	)		(399,805	)		(717,646	)		-1.5	%

Net income	$	88,476		$	1,819,063		$	1,907,539			4.8	%	$	1,136,884		$	1,389,433		$	2,526,317			5.1	%

Table of Contents

Comparison of Three Months Ended March 31, 2024 and 2023

The individual segments reported the following:

Sales

	Three Months Ended March 31,						Change
	2024			2023			Amount			%

Consolidated	$	39,857,780		$	49,809,532		$	(9,951,752	)		-20.0	%
% of consolidated sales		100.0	%		100.0	%

Consumer	$	28,226,017		$	36,704,397		$	(8,478,380	)		-23.1	%
% of consumer sales		100.0	%		100.0	%

Commercial	$	11,631,763		$	13,105,135		$	(1,473,372	)		-11.2	%
% of commercial sales		100.0	%		100.0	%

Consolidated

Sales decreased by $9,951,752, or 20.0%, during the three months ended March 31, 2024 to $39,857,780, as compared to $49,809,532 during the same period in 2023.

Consumer Segment

Sales in the consumer segment decreased by $8,478,380, or 23.1%, during the three months ended March 31, 2024 to $28,226,017, as compared to $36,704,397 during the same period in 2023. The change was primarily attributed to building an inventory position in advance of opening our Arizona stores and as such the business had to allocate inventory to these stores that would have relieved in a normal operating cycle.

Commercial Segment

Sales in the commercial segment decreased by $1,473,372, or 11.2%, during the three months ended March 31, 2024 to $11,631,763, as compared to $13,105,135 during the same period in 2023. The change was primarily attributed to lower revenue from softened demand for reuse hard drives, but was offset by stronger sales from the resale of personal technology assets. We had a strong supply of personal technology assets from our retail trade in partners who destocked in late Fiscal 2023.

Cost of Goods Sold

	Three Months Ended March 31,						Change
	2024			2023			Amount			%

Consolidated	$	29,537,096		$	38,399,630		$	(8,862,534	)		-23.1	%
% of consolidated sales		74.1	%		77.1	%

Consumer	$	24,676,828		$	32,719,429		$	(8,042,601	)		-24.6	%
% of consumer sales		87.4	%		89.1	%

Commercial	$	4,860,268		$	5,680,201		$	(819,933	)		-14.4	%
% of commercial sales		41.8	%		43.3	%

Consolidated

Cost of goods sold decreased by $8,862,534, or 23.1%, during the three months ended March 31, 2024 to $29,537,096, as compared to $38,399,630 during the same period in 2023.

Consumer Segment

Cost of goods sold in the consumer segment decreased by $8,042,601, or 24.6%, during the three months ended March 31, 2024 to $24,676,828, as compared to $32,719,429 during the same period in 2023. The change was primarily attributed to the aforementioned inventory build and by a mix of higher margin assets relieved from inventory which correspondingly had favorable impact on cost of goods sold as a % of sales.

Table of Contents

Commercial Segment

Cost of goods sold in the commercial segment decreased by $819,933, or 14.4%, during the three months ended March 31, 2024 to $4,860,268, as compared to $5,680,201 during the same period in 2023. The change was primarily attributed overall lower volumes and by a mix of higher margin assets relieved from inventory which correspondingly had a favorable impact on cost of goods sold as a % of sales.

Gross Margin

	Three Months Ended March 31,						Change
	2024			2023			Amount			%

Consolidated	$	10,320,684		$	11,409,902		$	(1,089,218	)		-9.5	%
% of consolidated sales		25.9	%		22.9	%

Consumer	$	3,549,189		$	3,984,968		$	(435,779	)		-10.9	%
% of consumer sales		12.6	%		10.9	%

Commercial	$	6,771,495		$	7,424,934		$	(653,439	)		-8.8	%
% of commercial sales		58.2	%		56.7	%

Consolidated

Gross margin decreased by $1,089,218, or 9.5%, during the three months ended March 31, 2024 to $10,320,684, as compared to $11,409,902 during the same period in 2023.

Consumer Segment

Gross margin in the consumer segment decreased by $435,779, or 10.9%, during the three months ended March 31, 2024 to $3,549,189, as compared to $3,984,968 during the same period in 2023. The net impact of the aforementioned resulted in sales contributing $(8,478,380) and cost of goods sold contributing $8,042,601 to the net decrease in gross margin of $435,779.

Commercial Segment

Gross margin in the commercial segment decreased by $653,439, or 8.8%, during the three months ended March 31, 2024 to $6,771,495, as compared to $7,424,934 during the same period in 2023. The net impact of the aforementioned resulted in sales contributing $(1,473,372) and cost of goods sold contributing $819,933 to the net decrease in gross margin of $653,439.

Selling, General and Administrative

	Three Months Ended March 31,						Change
	2024			2023			Amount			%

Consolidated	$	7,636,976		$	7,905,303		$	(268,327	)		-3.4	%
% of consolidated sales		19.2	%		15.9	%

Consumer	$	3,251,490		$	2,396,025		$	855,465			35.7	%
% of consumer sales		11.5	%		6.5	%

Commercial	$	4,385,486		$	5,509,278		$	(1,123,792	)		-20.4	%
% of commercial sales		37.7	%		42.0	%

Consolidated

Selling, general and administrative expense decreased by $268,327, or 3.4%, during the three months ended March 31, 2024 to $7,636,976, as compared to $7,905,303 during the same period in 2023.

Table of Contents

~~Results of Operations~~Consumer Segment

~~The following disaggregation of total revenue is listed~~Selling, general and administrative expense in the consumer segment increased by ~~sales category and segment for~~$855,465, or 35.7%, during the three months ended March 31, ~~2023~~2024 to $3,251,490, as compared to $2,396,025 during the same period in 2023. The change was primarily attributed to the onboarding of human capital, training and ~~2022:~~travel costs associated with our Arizona stores opening. As the Arizona stores open and sales are generated, our selling, general and administrative expense is expected to realign as a % of sales.

Commercial Segment

~~Comparison of~~Selling, general and administrative expense in the commercial segment decreased by $1,123,792, or 20.4%, during the three months ended March 31, ~~2023~~2024 to $4,385,486, as compared to $5,509,278 during the same period in 2023. The change was primarily attributed to operational focus on human capital costs and ~~2022~~processing efficiencies at our production facilities as they continue to align costs with our business model and margin achievement.

Depreciation and Amortization

Three Months Ended March 31,

Change

2024

2023

Amount

%

Consolidated

$ 343,565

$ 354,351

$ (10,786 )

-3.0 %
% of consolidated sales

0.8 %

0.7 %

Consumer

$ 93,676

$ 98,134

$ (4,458 )

-4.5 %
% of consumer sales

0.3 %

0.3 %

Commercial

$ 249,889

$ 256,217

$ (6,328 )

-2.5 %
% of commercial sales

2.1 %

2.0 %

~~Resale Revenue~~
Consolidated
Depreciation and amortization expense decreased by $10,786, or 3.0%, during the three months ended March 31, 2024 to $343,565, as compared to $354,351 during the same period in 2023.

Three Months Ended March 31,

Change

2023

2022

Amount

%

Resale Revenue

Consumer

$ 33,719,960

$ 33,677,133

$ 42,827

0 %
Commercial

$ 8,558,090

$ 9,579,857

$ (1,021,767 )

-11 %
Consumer Segment
Depreciation and amortization expense in the consumer segment decreased by $4,458, or 4.5%, during the three months ended March 31, 2024 to $93,676, as compared to $98,134 during the same period in 2023. There was no material impact from assets capitalized or reaching maturity in the comparative periods and as such no discussion point.
Commercial Segment
Depreciation and amortization expense in the commercial segment decreased by $6,328, or 2.5%, during the three months ended March 31, 2024 to $249,889, as compared to $256,217 during the same period in 2023. There was no material impact from assets capitalized or reaching maturity in the comparative periods and as such no discussion point.

30
Table of Contents

~~Resale revenue related to the consumer segment~~Other Income/(Expense)

Three Months Ended March 31,

Change

2024

2023

Amount

%

Consolidated

$ 238,528

$ 210,779

$ 27,749

13.2 %
% of consolidated sales

0.6 %

0.4 %

Consumer

$ 8,005

$ 23,534

$ (15,529 )

-66.0 %
% of consumer sales

0.0 %

0.1 %

Commercial

$ 230,523

$ 187,245

$ 43,278

23.1 %
% of commercial sales

2.0 %

1.4 %

Consolidated
Other income increased by ~~$42,827,~~$27,749, or 0.13% during the three months ended March 31, 2023, to $33,719,960, as compared to $33,677,133 during the same period in 2022. Resale revenue, such as bullion, jewelry, watches, and rare coins, increased slightly during the period.
~~Resale revenue related to the commercial segment decreased by $1,021,767, or 11%~~13.2%, during the three months ended March 31, ~~2023,~~2024 to ~~$8,558,090,~~$238,528, as compared to ~~$9,579,857~~$210,779 during the same period in ~~2022. Resale revenue decreased primarily due to supply chain issues the Company experienced during the three months ending March 31,~~ 2023.

~~Recycled Revenue~~Consumer Segment

Three Months Ended March 31,

Change

2023

2022

Amount

%

Recycled Revenue

Consumer

$ 2,984,437

$ 2,105,739

$ 878,698

42 %
Commercial

$ 3,126,553

$ 2,052,369

$ 1,074,184

52 %
~~Recycled revenue related to~~Other income in the consumer segment ~~increased~~decreased by ~~$878,698,~~$15,529, or ~~42%~~66.0%, during the three months ended March 31, ~~2023,~~2024 to ~~$2,984,437,~~$8,005, as compared to ~~$2,105,739~~$23,534 during the same period in ~~2022. Recycled revenue,~~2023. The change was primarily attributed to higher working capital requirements as the Company is carrying a higher inventory position from the aforementioned costs of launching our Arizona stores and as such ~~as bullion, jewelry, watches,~~there was less excess cashflow available to sweep to their interest-bearing cash account.
Interest income comprised $6 and ~~rare coins, increased primarily~~$21,564 of other income during the ~~period ending~~three months ended March 31, 2024 and March 31, 2023, ~~due to increased purchases of non-retail precious metals to be recycled instead of being sold to retail consumers.~~respectively.

~~Recycled revenue related to~~Commercial Segment
Other income in the commercial segment increased by ~~$1,074,184,~~$43,278, or ~~52%~~23.1%, during the three months ended March 31, ~~2023,~~2024 to ~~$3,126,553,~~$230,523, as compared to ~~$2,052,369~~$187,245 during the same period in ~~2022. Recycled revenue increased~~2023. The change was primarily ~~due~~attributed to ~~an increase~~a reduction in accounts receivable from the completion of ~~electronic material~~a large SOW with a recurring customer in which excess cashflow above working capital requirements was swept to ~~be recycled from material not suitable to resale to commercial customers~~their interest-bearing cash account.
Interest income comprised $196,562 and $61,378 of other income during the three months ~~ending~~ended March 31, 2024 and March 31, 2023, respectively.
Interest Expense

Three Months Ended March 31,

Change

2024

2023

Amount

%

Consolidated

$ (120,854 )

$ (117,064 )

$ (3,790 )

3.2 %
% of consolidated sales

-0.3 %

-0.2 %

Consumer

$ (64,401 )

$ (59,618 )

$ (4,783 )

8.0 %
% of consumer sales

-0.2 %

-0.2 %

Commercial

$ (56,453 )

$ (57,446 )

$ 993

-1.7 %
% of commercial sales

-0.5 %

-0.4 %

Consolidated
Interest expense increased by $3,790, or 3.2%, during the three months ended March 31, 2024 to $120,854, as compared to $117,064 during the same period in 2023.
Consumer Segment
Interest expense in the consumer segment increased by $4,783, or 8.0%, during the three months ended March 31, 2024 to $64,401, as compared to $59,618 during the same period in 2023. There was no material impact from additions or amortization in the comparative periods and as such no discussion point.

31
Table of Contents

~~Gross Profit - Resale~~Commercial Segment
Interest expense in the commercial segment decreased by $993, or 1.7%, during the three months ended March 31, 2024 to $56,453, as compared to $57,446 during the same period in 2023. There was no material impact from amortization in the comparative periods and as such no discussion point.

Three Months Ended March 31,

Change

2023

2022

Amount

%

Gross Profit - Resale

Consumer

$ 3,304,932

$ 3,742,852

$ (437,920 )

-12 %
Commercial

$ 5,799,126

$ 4,574,268

$ 1,224,858

27 %
Income Tax Expense

Three Months Ended March 31,

Change

2024

2023

Amount

%

Consolidated

$ (550,278 )

$ (717,646 )

$ 167,368

-23.3 %
% of consolidated sales

-1.4 %

-1.5 %

Consumer

$ (59,151 )

$ (317,841 )

$ 258,690

-81.4 %
% of consumer sales

-0.2 %

-0.9 %

Commercial

$ (491,127 )

$ (399,805 )

$ (91,322 )

22.8 %
% of commercial sales

-4.2 %

-3.1 %

~~Resale gross profit related to the consumer operations~~ Consolidated
Income tax expense, for both segments,for the three months ended March 31, ~~2023, decreased by $437,920, or 12%, to $3,304,932,~~2024, was $550,278, a decrease of $167,368, as compared to ~~resale gross profit~~income tax expense of $3,752,852 during the same period in 2022. The decrease in resale gross profit was due primarily to the need to purchase retail inventory following the 2022 Christmas season; therefore, in connection with inflationary pressures and rising prices of metals, there was an increase in purchase prices$717,646 for the three months ended March 31, 2023.
~~Resale gross profit related~~Currently, the Company has a deferred tax liability reflecting a future obligation to ~~the commercial operations~~pay taxes. The Company has a federal tax rate of approximately 21.0%, in addition to other state and local taxes, on net income. The effective income tax rate was 22.4% and 22.1% for the three months ended March 31, 2024 and 2023, ~~increased by $1,224,858, or 27%, to $5,799,126,~~respectively. Differences between our effective income tax rate and the U.S. federal statutory rate are the result of state taxes and non-deductible expenses, as ~~compared to resale gross profit of $4,574,268 during~~was the ~~same period in 2022. The~~Company’s case for the increase ~~in resale gross profit was primarily due to increased sales prices on material sold.~~
~~Gross Profit - Recycled~~

Three Months Ended March 31,

Change

2023

2022

Amount

%

Gross Profit - Recycled

Consumer

$ 680,036

$ 480,610

$ 199,426

41 %
Commercial

$ 1,625,808

$ 913,304

$ 712,504

78 %
~~Recycled gross profit related to the consumer operations~~ for the three months ended March 31, 2023, increased by $199,426, or 41%, to $680,036, as compared to gross profit of $480,610 during the same period in 2022. The increase in recycled gross profit was due primarily to 42% increase in recycled sales during the three months ended March 31, 2023 as2024, compared to the three months ended March 31, ~~2022.~~ 2023.
Net Income

Three Months Ended March 31,

Change

2024

2023

Amount

%

Consolidated

$ 1,907,539

$ 2,526,317

$ (618,778 )

-24.5 %
% of consolidated sales

4.8 %

5.1 %

Consumer

$ 88,476

$ 1,136,884

$ (1,048,408 )

-92.2 %
% of consumer sales

0.3 %

3.1 %

Commercial

$ 1,819,063

$ 1,389,433

$ 429,630

30.9 %
% of commercial sales

15.6 %

10.6 %

Consolidated
Net income decreased by $618,778, or 24.5%, during the three months ended March 31, 2024 to $1,907,539, as compared to $2,526,317 during the same period in 2023.
Consumer Segment
Net income decreased in the consumer segment by $1,048,408, or 92.2%, during the three months ended March 31, 2024 to $88,476, as compared to $1,136,884 during the same period in 2023. Refer to the aforementioned attributes discussed within the Comparison of Three Months Ended March 31, 2024 and 2023 for further details.

32
Table of Contents

~~Recycled gross profit related~~Commercial Segment
Net income increased in the commercial segment by $429,630, or 30.9%, during the three months ended March 31, 2024 to $1,819,063, as compared to $1,389,433 during the same period in 2023. Refer to the ~~commercial~~aforementioned attributes discussed within the Comparison of Three Months Ended March 31, 2024 and 2023 for further details.
Earnings Per Share
The following table depicts the Company’s earnings per share:

Three Months Ended March 31,

Change

2024

2023

Amount

%

Consolidated

$ 0.07

$ 0.09

$ (0.02 )

-22.2 %
Consolidated
Earnings per share, for the three months ended March 31, 2024, for net income per basic and diluted shares attributable to holders of our Common Stock was $0.07, compared to $0.09 per basic and diluted shares attributable to holders of our Common Stock for the three months ended March 31, 2023.
Liquidity and Capital Resources
The following table summarizes the Company’s Consolidated Statement of Cashflows:

Three Months Ended March 31,

Change

2024

2023

Amount

%

Net cash provided by (used in):

Operating activities

$ 3,791,721

$ 2,924,025

$ 867,696

29.7 %
Investing activities

(644,792 )

569,522

$ (1,214,314 )

-213.2 %
Financing activities

(1,216,915 )

(310,807 )

(906,108 )

291.5 %
Net increase in cash and cash equivalents

$ 1,930,014

$ 3,182,740

$ (1,252,726 )

-39.4 %
Operating Activities
During the three months ended March 31, 2024, cash flows provided by operations totaled $3,791,721, and during the three months ended March 31, 2023, cash flows provided by operations totaled $2,924,025, a change of $867,696. The increase in cash provided by operations for the three months ended March 31, 2024 was driven primarily by an increase in cash generated from a settlement of a large SOW with a recurring customer.
Investing Activities
During the three months ended March 31, 2024 and 2023, ~~increased~~cash flows (used in) provided by ~~$712,504, or 78%, to $1,625,808, as compared to gross profit~~investing activities totaled $(644,792) and $569,522, respectively, a change of ~~$913,304 during the same period in 2022.~~$(1,214,314). The increase in ~~recycled gross profit was due primarily to 52% increase~~cash used in ~~recycled sales~~investing activities during the three months ended March 31, ~~2023 and~~2024 was primarily attributed to an increase in ~~margin percentage~~capital expenditures related to ~~52%~~our enterprise resource planning system, improvements to our corporate headquarters and leaseholds for our planned Arizona stores. The prior comparative period included a favorable $569,522 movement, which primarily consisted of payments received from notes receivable of $578,250, offset by the ~~three months ended March 31, 2023, as compared~~purchase of property and equipment of $8,728, which further contributed to ~~44%, for~~ the ~~three months ended March 31, 2022.~~variance.

For The Three Months Ended March 31,

2023

2022

Consumer

Commercial

Consolidated

Consumer

Commercial

Consolidated

Revenue:

Sales

$ 36,704,397

$ 11,684,643

$ 48,389,040

$ 35,782,872

$ 11,632,226

$ 47,415,098

Cost of goods sold

32,719,429

4,259,709

36,979,138

31,559,410

6,144,654

37,704,064

Gross profit

3,984,968

7,424,934

11,409,902

4,223,462

5,487,572

9,711,034

Expenses:

Selling, general and administrative expenses

2,396,025

5,509,278

7,905,303

2,137,949

4,421,806

6,559,755

Depreciation and amortization

98,134

256,217

354,351

106,963

184,984

291,947

2,494,159

5,765,495

8,259,654

2,244,912

4,606,790

6,851,702

Operating income

1,490,809

1,659,439

3,150,248

1,978,550

880,782

2,859,332

Other income/expense:

Other income (expense)

23,534

187,245

210,779

(27,992 )

(30,584 )

(58,576 )
Interest expense

59,618

57,446

117,064

61,241

61,998

123,239

Income before income taxes

1,454,725

1,789,238

3,243,963

1,889,317

788,200

2,677,517

Income tax expense

317,841

399,805

717,646

13,177

17,115

30,292

Net income

$ 1,136,884

$ 1,389,433

$ 2,526,317

$ 1,876,140

$ 771,085

$ 2,647,225

Financing Activities

~~Selling, General and Administrative~~

Three Months Ended March 31,

Change

2023

2022

Amount

%

Selling, General and Administrative

Consumer

$ 2,396,026

$ 2,137,949

$ 258,077

12 %
Commercial

$ 5,509,278

$ 4,421,806

$ 1,087,472

25 %
~~Selling, General and Administrative Expenses, for the consumer segment,~~ for the three months ended March 31, 2023, increased by $258,077, or 12%, to $2,396,026, as compared to $2,137,949 during the same period in 2022. The increase was primarily due to increased expenses related to expanding our footprint into Arizona. During the three months ended March 31, ~~2022, the corporate building overhead expenses were classified as other expenses. Starting January 1,~~2024 and 2023, ~~those expenses have been classified as operating expenses within selling, general~~cash flows (used in) financing activities totaled $(1,216,915) and ~~administrative expenses.~~
~~Selling, General and Administrative Expenses, for the commercial segment,~~ for$(310,807), respectively, a change of $(906,108). The increase in cash used in financing activities during the three months ended March 31, ~~2023, increased by $1,087,472, or 25%, to $5,509,278, as compared to $4,421,806 during the same period in 2022. The increase~~2024 was primarily due to ~~increased expenses related to expanding the commercial business by increasing the infrastructure. During the three months ended March 31, 2022, the corporate building overhead expenses~~our share buyback plan as principal payments on debt were ~~classified as other expenses. Starting January 1, 2023, those expenses have been classified as operating expenses within selling, general and administrative expenses.~~in relative parity.
~~Depreciation and Amortization~~

Three Months Ended March 31,

Change

2023

2022

Amount

%

Depreciation and Amortization

Consumer

$ 98,134

$ 106,963

$ (8,829 )

-8 %
Commercial

$ 256,217

$ 184,984

$ 71,233

39 %

33
Table of Contents

~~Depreciation and amortization, for the consumer segment,~~ fCapital Resourcesor the three months ended March 31, 2023, decreased by $8,829, or 8%, to $98,134, as compared to $106,963 during the same period in 2022. The decrease was primarily due to some of the fixed assets being fully depreciated.

~~Depreciation and amortization, for the commercial segment,~~ for the three months ended March 31, 2023, increased by $71,233, or 39%, to $256,217, as compared to $184,984 during the same period in 2022. The increase was primarily due to the amortization of increased intangible assets added from the Avail Transaction during the latter half of fiscal 2022.
~~Other Income (Expense)~~

Three Months Ended March 31,

Change

2023

2022

Amount

%

Other Income (Expense)

Consumer

$ 23,534

$ (27,992 )

$ 51,526

184 %
Commercial

$ 187,245

$ (30,584 )

$ 217,829

712 %
~~Other income (expense), for the consumer segment,~~ for the three months ended March 31, 2023, increased by $51,526, or 184%, to $23,534, as compared to a net expense of $(27,992) during the same period in 2022. The increase in other income was primarily due to interest earned from bank accounts for the three months ended March 31, 2023. In addition, during the three months ended March 31, 2022, the corporate building overhead expenses were classified as other expenses. Starting January 1, 2023, those expenses have been classified as operating expenses within selling, general and administrative expenses.
~~Other income (expense), for the commercial segment,~~ for the three months ended March 31, 2023, increased by $217,829, or 712%, to $187,245, as compared to a net expense of $(30,584) during the same period in 2022. The increase in other income was primarily due to interest earned from bank accounts, of $61,378 and notes receivable interest received, of $94,115 from notes receivable formerly written off during fiscal year 2021. In addition, during the three months ended March 31, 2022, the corporate building overhead expenses were classified as other expenses. Starting January 1, 2023, those expenses have been classified as operating expenses within selling, general and administrative expenses.
~~Interest Expense~~

Three Months Ended March 31,

Change

2023

2022

Amount

%

Interest Expense

Consumer

$ 59,617

$ 61,241

$ (1,624 )

-3 %
Commercial

$ 57,446

$ 61,998

$ (4,552 )

-7 %
~~Interest expense, for the consumer segment,~~ for the three months ended March 31, 2023, decreased by $1,624, or 3%, to $59,617, as compared to $61,241 during the same period in 2022. The decrease was primarily due to reduced loan balances during the three months ended March 31, 2023 as compared to the three months ended March 31, 2022.
~~Interest expense, for the commercial segment,~~ for the three months ended March 31, 2023, decreased by $4,552, or 7%, to $57,446, as compared to $61,998 during the same period in 2022. The decrease was primarily due to reduced loan balances during the three months ended March 31, 2023 as compared to the three months ended March 31, 2022.
34
~~Table of Contents~~
~~Income Tax Expense~~

Three Months Ended March 31,

Change

2023

2022

Amount

%

Income Tax Expense

Consumer

$ 317,841

$ 13,177

$ 304,664

2312
%
Commercial

$ 399,805

$ 17,115

$ 382,690

2236
%
~~Income tax expense, for both segments,for the three months ended March 31, 2023, was $717,646, an increase of $687,354, as compared to income tax expense of $30,292 for the three months ended March 31, 2022. Currently,~~Although the Company has access to a deferred tax asset reflecting net operating losses brought over from prior years. Through fiscal 2022, there was an off-setting valuation allowance associated with the deferred tax asset. The valuation allowance was written off asline of December 31, 2022. Starting with the three months ended March 31, 2023, the Company will have a federal tax rate of approximately 21%, in addition to other state and local taxes, on net income. The effective income tax rate was 22.1% and 1.1% for the three months ended March 31, 2023 and 2022, respectively. Differences betweencredit our effective income tax rate and the U.S. federal statutory rate are the result of state taxes, non-deductible expenses and changes in the valuation allowance in relation to the deferred tax asset for net operating loss carryforwards, as was the Company’s case for the increase for the three months ended March 31, 2023, compared to the three months ended March 31, 2022.
~~Net Income~~

Three Months Ended March 31,

Change

2023

2022

Amount

%

Net Income

Consumer

$ 1,136,884

$ 1,876,140

$ (739,256 )

-39 %
Commercial

$ 1,389,433

$ 771,085

$ 618,348

80 %
Net income related to the consumer operations for the three months ended March 31, 2023, decreased by $739,256, or 39%, to $1,136,884, as compared to $1,876,140 during the same period in 2022. The decrease in net income was due primarily to the increased tax expense of $304,664, and the decrease in resale gross profit of $437,920 for the three months ended March 31, 2023, compared to the three month ended March 31, 2022.
Net income related to the commercial operations for the three months ended March 31, 2023, increased by $618,348, or 80%, to $1,389,433, as compared to $771,085 during the same period in 2022. The increase in net income was due primarily to an increase in gross profit of $1,937,362, offset by an increase in selling, general and administrative expenses of $787,472 and increased tax expense of $382,690 for the three months ended March 31, 2023, compared to the three months ended March 31, 2022.
35
~~Table of Contents~~
~~Earnings Per Share~~

Three Months Ended March 31,

Change

2023

2022

Amount

%

Earnings Per Share

$ 0.09

$ 0.10

$ (0.01 )

-10 %
Earnings per share, for the three months ended March 31, 2023, for net income per basic and diluted shares attributable to holders of our Common Stock was $0.09, compared to $0.10 per basic and diluted shares attributable to holders of our Common Stock for the three months ended March 31, 2022.
~~Liquidity and Capital Resources~~
~~The following table summarizes our cash flows for the periods indicated.~~

Three Months Ended March 31,

2023

2022

Net cash provided by (used in):

Operating activities

$ 2,924,025

$ 3,358,769

Investing activities

569,522

(93,384 )
Financing activities

(310,807 )

(1,906,274 )

Net increase in cash and cash equivalents

$ 3,182,740

$ 1,359,111

During the three months ended March 31, 2023, cash provided by operations totaled $2,924,025, which was primarily driven by net income of $2,526,317, reduction from non-cash charges, net of $689,516, and the increase in customer deposits and other liabilities of $1,484,605. In addition, the foregoing was offset by the decrease in accounts payable and accrued expenses of $821,413, an increase in other assets of $228,959, an increase of trade receivables of $328,487, the increase in inventories of $350,053 and the increase in prepaid expenses of $47,847.
During the three months ended March 31, 2023, cash provided by investing totaled $569,522, which primarily consisted of payments received from notes receivable of $578,250, offset by the purchase of property and equipment of $8,728.
~~During the three months ended March 31, 2023, cash used in financing totaled $310,807, which consisted of principal payments made against the notes payable loans of $310,807.~~
We expect our capital expenditures to total approximately $1,000,000 during the next 12 months. These expenditures will be driven by the purchase of additional equipment and potential property purchases by the consumer segment for retail locations and the build-out of those purchased properties. The Company has no capital expenditure commitments as of March 31, 2023. For more information, see Note 16 to our interim condensed consolidated financial statements.
36
~~Table of Contents~~
~~Our~~ primary source of liquidity and capital resources currently consist of cash generated from our operating ~~results and current borrowings, including~~activities. We do not anticipate the ~~Truist Lewisville Loan,~~need to fund our operations via the TB&T Grapevine Loan, the TB&T Irving Loan, the TB&T Frisco Loan and two FSB loans. For more information, see Note 13 to our interim condensed financial statements, which is incorporated into this item by reference. In addition, on November 23, 2021, the Company secured a thirty six month line of credit from Farmers State Bank of Oakley Kansas (the “FSB Facility”) for up to $3,500,000. The FSB Facility has an annual interest rate of 3.1%. We maintain the FSB Facility to help fund cash shortfalls thatand we ~~may have from time to time. We~~ do not ~~currently anticipate the need of those funds for operations and do not currently~~ have any amounts drawn ~~against the FSB Facility~~ as of ~~Mach~~March 31, ~~2023.~~
From time to time, we have adjusted and may further adjust our inventory levels to meet seasonal demand or in order to meet working capital requirements. Management believes we have sufficient capital resources to meet working capital requirements. In the event of significant growth in retail and wholesale jewelry sales and recycling demand, whether purchases or services, our demand for additional working capital will increase due to a related need to stock additional jewelry inventory, increases in wholesale accounts receivable and the purchasing of recycled material. Historically we have funded these activities through operations. If additional working capital is required, we will seek additional loans from individuals or other commercial banks. If necessary, inventory levels may be adjusted in order to meet unforeseen working-capital requirements.
2024. We have historically renewed, extended, or replaced short-term debt as it matures, and management believes that we will be able to continue to do so in the near future.

Capital Expenditures
In Fiscal 2024, the Company is deploying capital for additional growth, maintenance activity and enhancements to our enterprise resource planning system. The Company ~~leases certain~~continuously monitors the deployment of ~~its facilities under~~capital and primarily funds capital expenditures through cash flow from operating ~~leases. The minimum rental commitments, under non-cancellable operating leases, excluding imputed interest,~~activities. Where appropriate the Company may use debt financing on select projects. When this occurs, the Company further evaluates future cashflows of the project as to ensure the debt tenure and pay-back period are in alignment as well as the appropriateness of ~~March 31, 2023 are as follows:~~the rate of return.
Operating Leases

Total

2023

2024

2025

2026

Thereafter

Consumer (excluding the three months ending March 31, 2023)

$ 1,798,757

$ 406,955

$ 552,414

$ 434,274

$ 355,000

$ 50,114

Commercial (excluding the three months ending March 31, 2023)

4,244,112

1,018,905

1,396,129

1,321,297

474,326

33,455

Total

$ 6,042,869

$ 1,425,860

$ 1,948,543

$ 1,755,571

$ 829,326

$ 83,569

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to our stockholders.
37
~~Table of Contents~~

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Because we are a “smaller reporting company,” we are not required to disclose the information required by this item.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and our principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31, ~~2023.~~2024. We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow for timely decisions regarding required disclosure. Based on the evaluation of our disclosure controls and procedures as of March 31, ~~2023,~~2024, our principal executive officer and principal financial officer concluded that, as of such date, our disclosure controls and procedures were effective to provide reasonable assurance of the foregoing.

We believe, however, that a controls system, no matter how well designed and operated, cannot provide absolute assurance of achieving their objectives, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud or error, if any, within a company have been detected.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the period covered by this Quarterly Report on Form 10-Q that materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.

3834
Table of Contents

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

There are various claims, lawsuits and pending actions against the Company arising in the normal course of the Company's business. It is the opinion of management that the ultimate resolution of these matters will not have a material adverse effect on the Company’s financial condition, results of operations or cash flow. Management is also not aware of any legal proceedings contemplated by government agencies of which the outcome is reasonable likely to have a material adverse effect on the Company's financial condition, results of operations or cash flow.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors previously disclosed under Part I, Item 1A, “Risk Factors” in the Company’s ~~2022~~2023 Annual Report.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES, ~~AND~~ USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES~~PROCEEDS~~

~~Not applicable~~Repurchases
The following lists the repurchase of Company shares for the three months ended March 31, 2024:
Fiscal Period

Total Number of Shares Purchased as Part of Publicly Announced Plan or Program ^{(1) (2)}

Average Price
Paid Per Share ($)

Total Price Paid

Maximum Number of Shares that May Yet be Purchased Under the Plans

Balance as of January 1, 2024

415,973

$ 5.18

$ 2,155,049

584,027

January 1 - 31, 2024

59,417

4.52

268,569

524,610

February 1 - 29, 2024

56,343

4.53

255,195

468,267

March 1 - 31, 2024

85,580

4.46

381,382

382,687

Balance as of March 31, 2024

617,313

$ 4.96

3,060,195

382,687

(1) All shares were purchased in open-market transactions through the stock repurchase program approved by the Board on March 14, 2023 for the repurchase of up to one million shares of the Company’s common stock.
(2) The stock repurchase program was publicly announced on May 3, 2023 and expires March 31, 2026. Repurchases under the stock repurchase plan began on May 10, 2023.
The timing and amount of any common stock repurchased under the program will depend on a variety of factors including price, corporate and regulatory requirements, capital availability, and other market conditions.

ITEM 3.\ DEFAULTS UPON SENIOR SECURITIES

Not applicable

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable

ITEM 5. OTHER INFORMATION

None

3935
Table of Contents

ITEM 6. EXHIBITS

Exhibit
Number

Description

Filed
Herein

Incorporated
by Reference

Form

Date Filed
with SEC

Exhibit
Number
31.1

Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 implementing Section 302 of the Sarbanes-Oxley Act of 2002 by John R. Loftus

X

31.2

Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 implementing Section 302 of the Sarbanes-Oxley Act of 2002 by ~~Bret A. Pedersen~~John G. DeLuca

X

32.1

Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 by John R. Loftus

X

32.2

Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 by ~~Bret A. Pedersen~~John G. DeLuca

X

101.INS

XBRL Instance Document

X

101.SCH

XBRL Taxonomy Extension Schema Document

X

101.CAL

XBRL Taxonomy Calculation Linkbase Document

X

101.DEF

XBRL Taxonomy Definition Linkbase Document

X

101.LAB

XBRL Taxonomy Label Linkbase Document

X

101.PRE

XBRL Taxonomy Presentation Linkbase Document

X

104*

Cover Page Interactive Data File (formatted as Inline XBRL and contained in exhibit 101)

X

4036
Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

ENVELA CORPORATION
(Registrant)

Date: May ~~3, 2023~~8, 2024
By:
/s/ JOHN R. LOFTUS

John R. Loftus

Chief Executive Officer
(Principal Executive Officer)

Date: May ~~3, 2023~~8, 2024

/s/ ~~BRET A. PEDERSEN~~JOHN G. DELUCA

~~Bret A. Pedersen~~John G. DeLuca

Chief Financial Officer
(Principal Accounting Officer)

4137

	Common Stock				Preferred Stock				Additional Paid-in		Accumulated			Total Stockholders'
	Shares		Amount		Shares		Amount		Capital		Deficit			Equity

Balances at January 1, 2022		26,924,631	$	269,246		-	$	-	$	40,173,000	$	(12,814,929	)	$	27,627,317

Net Income		-		-		-		-		-		2,647,225			2,647,225

Balances at March 31, 2022		26,924,631	$	269,246		-	$	-	$	40,173,000	$	(10,167,704	)	$	30,274,542

For the Three Months Ended March 31, 2023	Common Stock				Treasury Stock				Preferred Stock				Additional Paid-in		Retained		Total Stockholders'
(Unaudited)	Shares		Amount		Shares		Amount		Shares		Amount		Capital		Earnings		Equity

Balance as of January 1, 2023		26,924,631	$	269,246		-	$	-		-	$	-	$	40,173,000	$	2,874,204	$	43,316,450

Net Income																2,526,317		2,526,317

Balance as of March 31, 2023		26,924,631	$	269,246		-	$	-		-	$	-	$	40,173,000	$	5,400,521	$	45,842,767

Note payable, Farmers State Bank

Year Ending December 31,	Amount

2023 (excluding the three months ended March 31, 2023)	$	79,098
2024		108,743
2025		112,162
2026		2,342,196

Subtotal	$	2,642,199

Note payable, Truist Bank

Year Ending December 31,	Amount

2023 (excluding the three months ended March 31, 2023)	$	27,006
2024		37,342
2025		38,748
2026		40,206
2027		42,081
Thereafter		680,054

Subtotal	$	865,437

Note payable, Texas Bank & Trust

Year Ending December 31,	Amount

2023 (excluding the three months ended March 31, 2023)	$	13,885
2024		19,209
2025		418,475

Subtotal	$	451,569

Note payable, Texas Bank & Trust

Year Ending December 31,		Amount

2023 (excluding the three months ended March 31, 2023)	$	47,852
2024		66,225
2025		75,219
2026		78,741
2027		80,717
Thereafter		1,326,332

Subtotal	$	1,675,086

Note payable, Farmers Bank

Year Ending December 31,	Amount

2023 (excluding the three months ended March 31, 2023)	$	179,463
2024		246,725
2025		254,483
2026		5,314,160

Subtotal	$	5,994,831

Note payable, Avail Transaction

Year Ending December 31,	Amount

2023 (excluding the three months ended March 31, 2023)	$	500,000
2024		666,667
2025		166,666

Subtotal	$	1,333,333

	Three Months Ended March 31,				Change
	2023		2022		Amount		%
Income Tax Expense
Consumer	$	317,841	$	13,177	$	304,664	2312	%
Commercial	$	399,805	$	17,115	$	382,690	2236	%

Fiscal Period	Total Number of Shares Purchased as Part of Publicly Announced Plan or Program ^{(1) (2)}		Average Price Paid Per Share ($)		Total Price Paid		Maximum Number of Shares that May Yet be Purchased Under the Plans
Balance as of January 1, 2024		415,973	$	5.18	$	2,155,049		584,027

January 1 - 31, 2024		59,417		4.52		268,569		524,610
February 1 - 29, 2024		56,343		4.53		255,195		468,267
March 1 - 31, 2024		85,580		4.46		381,382		382,687

Balance as of March 31, 2024		617,313	$	4.96		3,060,195		382,687

	ENVELA CORPORATION (Registrant)

Date: May ~~3, 2023~~8, 2024	By:	/s/ JOHN R. LOFTUS
		John R. Loftus
		Chief Executive Officer (Principal Executive Officer)

Date: May ~~3, 2023~~8, 2024		/s/ ~~BRET A. PEDERSEN~~JOHN G. DELUCA
		~~Bret A. Pedersen~~John G. DeLuca
		Chief Financial Officer (Principal Accounting Officer)