10-Q 1 ela_10q.htm FORM 10-Q ela_10q.htm

 

 

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 June 30, 2023

 

 

OR

 

 

☐

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

 

ela_10qimg1.jpg

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, 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 August 2, 2023, the registrant had 26,897,210 shares of common stock outstanding.

 

 

 

TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION

 

Page No.

 

 

 

 

 

 

Item 1.

Financial Statements

 

3

 

 

 

 

 

 

Condensed Consolidated Statements of Income for the three months and six months ended June 30, 2023 and 2022 (unaudited)

 

3

 

 

 

 

 

 

Condensed Consolidated Balance Sheets as of June 30, 2023 (unaudited) and December 31, 2022

 

4

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022 (unaudited)

 

5

 

 

 

 

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity for the three months ended June 30, 2022 and 2023 (unaudited)

 

6

 

 

 

 

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity for the six months ended June 30, 2022 and 2023 (unaudited)

 

7

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements (unaudited)

 

8

 

 

 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

26

 

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

42

 

 

 

 

 

 

Item 4.

Controls and Procedures

 

43

 

 

 

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

 

 

 

 

Item 1.

Legal Proceedings

 

44

 

 

 

 

 

 

Item 1A.

Risk Factors

 

44

 

 

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

44

 

 

 

 

 

 

Item 3.

Defaults Upon Senior Securities

 

44

 

 

 

 

 

 

Item 4.

Mine Safety Disclosures

 

44

 

 

 

 

 

 

Item 5.

Other Information

 

44

 

 

 

 

 

 

Item 6.

Exhibits

 

45

 

 

 

 

 

 

SIGNATURES

 

46

 

 

 
2

Table of Contents

 

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

ENVELA CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

 

 

 

Three Months Ended June 30,

 

 

Six  Months Ended June 30,

 

(Unaudited)

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Sales

 

$50,303,527

 

 

$42,639,718

 

 

$98,692,567

 

 

$90,054,816

 

Cost of goods sold

 

 

39,541,480

 

 

 

31,161,718

 

 

 

76,520,618

 

 

 

68,865,782

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross margin

 

 

10,762,047

 

 

 

11,478,000

 

 

 

22,171,949

 

 

 

21,189,034

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, General & Administrative Expenses

 

 

8,362,554

 

 

 

7,200,733

 

 

 

16,267,857

 

 

 

13,845,704

 

Depreciation and Amortization

 

 

336,174

 

 

 

279,516

 

 

 

690,525

 

 

 

571,463

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating expenses

 

 

8,698,728

 

 

 

7,480,249

 

 

 

16,958,382

 

 

 

14,417,167

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

2,063,319

 

 

 

3,997,751

 

 

 

5,213,567

 

 

 

6,771,867

 

Other income

 

 

153,652

 

 

 

21,401

 

 

 

364,431

 

 

 

48,041

 

Interest expense

 

 

114,688

 

 

 

121,042

 

 

 

231,752

 

 

 

244,281

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

2,102,283

 

 

 

3,898,110

 

 

 

5,346,246

 

 

 

6,575,627

 

Income tax expense

 

 

498,574

 

 

 

50,252

 

 

 

1,216,220

 

 

 

80,544

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$1,603,709

 

 

$3,847,858

 

 

$4,130,026

 

 

$6,495,083

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$0.06

 

 

$0.14

 

 

$0.15

 

 

$0.24

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$0.06

 

 

$0.14

 

 

$0.15

 

 

$0.24

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

26,916,648

 

 

 

26,924,631

 

 

 

26,920,618

 

 

 

26,924,631

 

Diluted

 

 

26,931,648

 

 

 

26,939,631

 

 

 

26,935,618

 

 

 

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

 

 

 

June 30,

 

 

December 31,

 

 

 

2023

 

 

2022

 

Assets

 

(unaudited)

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$18,380,776

 

 

$17,169,969

 

Trade receivables, net of allowances

 

 

7,854,632

 

 

 

7,949,775

 

Notes receivable, net of allowances

 

 

-

 

 

 

578,250

 

Inventories

 

 

21,518,309

 

 

 

18,755,785

 

Prepaid expenses

 

 

1,155,980

 

 

 

1,231,817

 

Other current assets

 

 

125,217

 

 

 

35,113

 

 

 

 

 

 

 

 

 

 

Total current assets

 

 

49,034,914

 

 

 

45,720,709

 

Property and equipment, net

 

 

10,354,448

 

 

 

9,393,802

 

Right-of-use assets from operating leases

 

 

5,039,806

 

 

 

5,872,681

 

Goodwill

 

 

3,621,453

 

 

 

3,621,453

 

Intangible assets, net

 

 

4,643,246

 

 

 

4,993,545

 

Deferred tax asset

 

 

612,832

 

 

 

1,488,258

 

Other assets

 

 

299,445

 

 

 

186,761

 

 

 

 

 

 

 

 

 

 

Total assets

 

$73,606,144

 

 

$71,277,209

 

 

 

 

 

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable-trade

 

$3,262,092

 

 

$3,358,881

 

Notes payable

 

 

1,251,747

 

 

 

1,250,702

 

Operating lease liabilities

 

 

1,744,419

 

 

 

1,686,997

 

Accrued expenses

 

 

2,164,751

 

 

 

2,286,594

 

Customer deposits and other liabilities

 

 

348,430

 

 

 

282,482

 

 

 

 

 

 

 

 

 

 

Total current liabilities

 

 

8,771,439

 

 

 

8,865,656

 

Notes payable, less current portion

 

 

14,105,417

 

 

 

14,726,703

 

Operating lease liabilities, less current portion

 

 

3,477,632

 

 

 

4,368,400

 

 

 

 

 

 

 

 

 

 

Total liabilities

 

 

26,354,488

 

 

 

27,960,759

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

26,897,210 shares outstanding as of June 30, 2023; 26,924,631 shares issued and outstanding as of

 

 

 

 

 

 

 

 

December 31, 2022

 

 

269,246

 

 

 

269,246

 

Treasury stock at cost, 27,421 and 0 shares, as of June 30, 2023 and December 31, 2022, respectively

 

 

(194,820)

 

 

-

 

Additional paid-in capital

 

 

40,173,000

 

 

 

40,173,000

 

Retained earnings

 

 

7,004,230

 

 

 

2,874,204

 

 

 

 

 

 

 

 

 

 

Total stockholders’ equity

 

 

47,251,656

 

 

 

43,316,450

 

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$73,606,144

 

 

$71,277,209

 

 

 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 Six Months Ended June 30,

 

2023

 

 

2022

 

 

 

(Unaudited)

 

 

(Unaudited)

 

Operations

 

 

 

 

 

 

Net income

 

$4,130,026

 

 

$6,495,083

 

Adjustments to reconcile net income to net cash provided by operations:

 

 

 

 

 

 

 

 

Depreciation, amortization, and other

 

 

690,525

 

 

 

571,463

 

Bad debt expense

 

 

173,196

 

 

 

25,000

 

Deferred taxes

 

 

875,426

 

 

 

-

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Trade receivables

 

 

(78,053)

 

 

1,452,651

 

Inventories

 

 

(2,762,524)

 

 

(3,755,662)

Prepaid expenses

 

 

75,838

 

 

 

(981,616)

Other assets

 

 

(202,788)

 

 

754,759

 

Accounts payable and accrued expenses

 

 

(218,632)

 

 

767,122

 

Operating leases

 

 

(472)

 

 

14,478

 

Customer deposits and other liabilities

 

 

65,948

 

 

 

1,019,363

 

 

 

 

 

 

 

 

 

 

Net cash provided by operations

 

 

2,748,490

 

 

 

6,362,641

 

 

 

 

 

 

 

 

 

 

Investing

 

 

 

 

 

 

 

 

Investment in note receivable

 

 

578,250

 

 

 

-

 

Purchase of property and equipment

 

 

(1,300,871)

 

 

(203,929)

Adjustment to the purchase price of the Avail Transaction

 

 

-

 

 

 

(216,988)

 

 

 

 

 

 

 

 

 

Net cash used in investing

 

 

(722,621)

 

 

(420,917)

 

 

 

 

 

 

 

 

 

Financing

 

 

 

 

 

 

 

 

Payments on notes payable

 

 

(620,242)

 

 

(444,396)

Purchase of treasury stock

 

 

(194,820)

 

 

-

 

Payments on line of credit

 

 

-

 

 

 

(1,700,000)

 

 

 

 

 

 

 

 

 

Net cash used in financing

 

 

(815,062)

 

 

(2,144,396)

 

 

 

 

 

 

 

 

 

Net change in cash and cash equivalents

 

 

1,210,807

 

 

 

3,797,328

 

Cash and cash equivalents, beginning of period

 

 

17,169,969

 

 

 

10,138,148

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents, end of period

 

$18,380,776

 

 

$13,935,476

 

 

 

 

 

 

 

 

 

 

Supplemental Disclosures

 

 

 

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

 

 

 

Interest

 

$233,495

 

 

$252,431

 

Income taxes

 

$162,000

 

 

$98,000

 

 

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 June 30, 2022 and 2023

(Unaudited)

 

 

 

Common Stock

 

 

Treasury Stock

 

 

Preferred Stock

 

 

Additional Paid-in

 

 

Accumulated

 

 

Total

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at April 1, 2022

 

 

26,924,631

 

 

$269,246

 

 

 

-

 

 

$-

 

 

 

-

 

 

$-

 

 

$40,173,000

 

 

$(10,167,704)

 

$30,274,542

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3,847,858

 

 

 

3,847,858

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at June 30, 2022

 

 

26,924,631

 

 

$269,246

 

 

 

-

 

 

$-

 

 

 

-

 

 

$-

 

 

$40,173,000

 

 

$(6,319,846)

 

$34,122,400

 

 

 

 

Common Stock

 

 

Treasury Stock

 

 

Preferred Stock

 

 

Additional

Paid-in

 

 

Retained

 

 

Total

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at April 1, 2023

 

 

26,924,631

 

 

$269,246

 

 

 

-

 

 

$-

 

 

 

-

 

 

$-

 

 

$40,173,000

 

 

$5,400,521

 

 

$45,842,767

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Net Income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,603,709

 

 

 

1,603,709

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Shares repurchased

 

 

-

 

 

 

-

 

 

 

(27,421)

 

$(194,820)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(194,820)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at June 30, 2023

 

 

26,924,631

 

 

$269,246

 

 

 

(27,421)

 

$(194,820)

 

 

-

 

 

$-

 

 

$40,173,000

 

 

$7,004,230

 

 

$47,251,656

 

 

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

 

 
6

Table of Contents

 

 

ENVELA CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Six Months ended June 30, 2022 and 2023

(Unaudited) 

 

 

 

Common Stock

 

 

Treasury Stock

 

 

Preferred Stock

 

 

Additional

Paid-in

 

 

Accumulated

 

 

Total

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

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

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

6,495,083

 

 

 

6,495,083

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at June 30, 2022

 

 

26,924,631

 

 

$269,246

 

 

 

-

 

 

$-

 

 

 

-

 

 

$-

 

 

$40,173,000

 

 

$(6,319,846)

 

$34,122,400

 

 

 

 

Common Stock

 

 

Treasury Stock

 

 

Preferred Stock

 

 

Additional

Paid-in

 

 

Retained

 

 

Total

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

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

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

4,130,026

 

 

 

4,130,026

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares repurchased

 

 

-

 

 

 

-

 

 

 

(27,421)

 

$(194,820)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(194,820)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at June 30, 2023

 

 

26,924,631

 

 

$269,246

 

 

 

(27,421)

 

$(194,820)

 

 

-

 

 

$-

 

 

$40,173,000

 

 

$7,004,230

 

 

$47,251,656

 

 

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

 

 
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 1 — BASIS OF PRESENTATION

 

These unaudited interim condensed consolidated financial statements of Envela 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 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 10-Q”), necessary for a fair presentation of the consolidated financial statements for these interim periods, have been included. Operating results presented for these interim periods are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2023 (“fiscal 2023”). For further information, refer to the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (“fiscal 2022”) of Envela filed with the SEC on March 16, 2023 (the “2022 Annual Report”).

 

Contemporaneously with filing our Quarterly Report Form 10-Q for the period ending March 31, 2023, 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 in the following notes to our condensed consolidated financial statements.

 

Starting January 1, 2023, expenses previously classified as other expenses related to the Company’s corporate campus overhead have been included in selling, general, and administrative expenses. Since the presentation of these expenses changed January 1, 2023, management believes the presentation of the 2022 corporate campus overhead should be reclassified to selling, general, and administrative expense for comparison purposes for the three and six months ended June 30, 2022. 

 

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

 

Envela and its subsidiaries engage in diverse business 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 recycling 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. Envela operates primarily via two operating and reportable segments. Our consumer segment, formerly known as the DGSE segment, operates DGSE, LLC (“DGSE”), Dallas Gold & Silver Exchange, Charleston Gold & Diamond Exchange, and Bullion Express brands. Our commercial segment, formerly known as the ECHG segment, operates ECHG, LLC (“ECHG”), Echo Environmental Holdings, LLC (“Echo”), ITAD USA Holdings, LLC (“ITAD USA”), Teladvance, LLC (“Teladvance”), CEX Holdings, LLC (“CEX”) and Avail Recovery Solutions, LLC (“Avail”). Envela is a Nevada corporation, headquartered in Irving, Texas.

 

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, South Carolina and Arizona. The Company purchased a new retail building in Arizona, but has yet to open. The consumer segment is continuing to promote and build the 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 retained for resale. We also maintain a presence in retail markets through websites, www.dgse.com, www.cgdeinc.com and www.bullionexpress.com.

 

 
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Our commercial segment primarily buys electronic components from business and other organizations, such as school districts, for end-of-life recycling and resell, or to add life to electronic devices by data destruction and refurbishment for reuse. We also recycle and resale electronics 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” in the Company’s 2022 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 equivalents, trade 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 approximate fair value due to the market interest rate charged.

 

Earnings Per Share

 

Basic earnings per share of our common stock, par value $0.01 per share (our “Common Stock”), is computed by dividing net earnings available to holders 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 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 number of shares is increased by the dilutive effect of stock options and warrants outstanding determined using the treasury stock method.

 

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. 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 and six months ended June 30, 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. 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 in the fair value of Avail’s net assets. The separation of intangibles reduced the Avail Transaction goodwill to $972,272. There have been no other adjustments or impairment charges to goodwill. As of June 30, 2023 and December 31, 2022, goodwill as reported in the condensed consolidated balance sheets was $3,621,453.

 

Reclassifications

 

Prior period amounts included in current assets, for both right-of-use assets from operating leases and deferred tax asset, have been reclassified for current period presentation, to be included in non-current assets. The right-of-use assets from operating leases reclassified for December 31, 2022, amounted to 2.4% of the total assets at $1,683,060. The deferred tax asset reclassified for December 31, 2022, amounted to 2.0% of the total assets at $1,488,258.

 

 
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Recent Accounting Pronouncements

 

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 and six-month period ended June 30, 2023. There were no other new accounting standards or pronouncements that were issued but not yet effective as of June 30, 2023 that the Company expects to have a material impact on its consolidated financial statements.

 

NOTE 4 — INVENTORIES

 

A summary of inventories is as follows:

 

 

 

June 30,

 

 

December 31,

 

 

 

2023

 

 

2022

 

Consumer

 

 

 

 

 

 

Resale

 

$20,507,017

 

 

$16,462,749

 

Recycle

 

 

38,251

 

 

 

46,697

 

 

 

 

 

 

 

 

 

 

Subtotal

 

 

20,545,268

 

 

 

16,509,446

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

 

 

 

 

 

 

Resale

 

 

624,720

 

 

 

1,858,519

 

Recycle

 

 

348,321

 

 

 

387,820

 

 

 

 

 

 

 

 

 

 

Subtotal

 

 

973,041

 

 

 

2,246,339

 

 

 

 

 

 

 

 

 

 

 

 

$21,518,309

 

 

$18,755,785

 

 

 
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NOTE 5 — GOODWILL

 

The change in goodwill is as follows:

 

 

 

June 30,

 

 

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.

 

 
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NOTE 6 — PROPERTY AND EQUIPMENT

 

 Property and equipment consist of the following:

 

 

 

June 30,

 

 

December 31,

 

 

 

2023

 

 

2022

 

Consumer

 

 

 

 

 

 

Land

 

$1,640,219

 

 

$1,640,219

 

Building and improvements

 

 

4,030,125

 

 

 

2,798,975

 

Leasehold improvements

 

 

1,450,695

 

 

 

1,450,695

 

Machinery and equipment

 

 

1,149,891

 

 

 

1,078,595

 

Furniture and fixtures

 

 

603,944

 

 

 

603,944

 

Vehicles

 

 

22,859

 

 

 

22,859

 

 

 

 

8,897,733

 

 

 

7,595,287

 

Less: accumulated depreciation

 

 

(2,806,625)

 

 

(2,651,832)

 

 

 

 

 

 

 

 

 

Sub-Total

 

 

6,091,108

 

 

 

4,943,455

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

 

 

 

 

 

 

Building and improvements

 

 

151,647

 

 

 

151,647

 

Machinery and equipment

 

 

1,074,409

 

 

 

1,082,026

 

Vehicles

 

 

98,610

 

 

 

98,610

 

Furniture and fixtures

 

 

145,631

 

 

 

145,950

 

 

 

 

1,470,297

 

 

 

1,478,233

 

Less: accumulated depreciation

 

 

(657,093)

 

 

(515,673)

 

 

 

 

 

 

 

 

 

Sub-Total

 

 

813,204

 

 

 

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

 

 

(187,371)

 

 

(149,720)

 

 

 

 

 

 

 

 

 

Sub-Total

 

 

3,450,136

 

 

 

3,487,787

 

 

 

 

 

 

 

 

 

 

 

 

$10,354,448

 

 

$9,393,802

 

 

On May 4, 2023, DGSE closed the purchase of a new retail building located at 6030 North 19th Avenue in Phoenix, Arizona for $1,231,150. The purchase was paid through operating cash flow without the use of borrowed funds. The building will begin to be depreciated once it is put into use.

 

 
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Table of Contents

 

NOTE 7 — INTANGIBLE ASSETS

 

 Intangible assets consist of the following:

 

 

 

June 30,

 

 

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

 

 

(358,252)

 

 

(335,502)

 

 

 

 

 

 

 

 

 

Subtotal

 

 

13,100

 

 

 

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

 

 

(1,920,854)

 

 

(1,593,305)

 

 

 

 

 

 

 

 

 

Subtotal

 

 

4,630,146

 

 

 

4,957,695

 

 

 

 

 

 

 

 

 

 

 

 

$4,643,246

 

 

$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 June 30, 2023:

 

 

 

Consumer

 

 

Commercial

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

2023 (excluding the six months ending June 30, 2023)

 

 

7,600

 

 

 

327,550

 

 

 

335,150

 

2024

 

 

5,500

 

 

 

655,100

 

 

 

660,600

 

2025

 

 

-

 

 

 

655,100

 

 

 

655,100

 

2026

 

 

-

 

 

 

655,100

 

 

 

655,100

 

2027

 

 

-

 

 

 

655,100

 

 

 

655,100

 

Thereafter

 

 

-

 

 

 

1,682,196

 

 

 

1,682,196

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$13,100

 

 

$4,630,146

 

 

$4,643,246

 

 

 
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Table of Contents

 

 NOTE 8— ACCRUED EXPENSES

 

Accrued expenses consist of the following:

 

 

 

June 30,

 

 

December 31,

 

 

 

2023

 

 

2022

 

Consumer

 

 

 

 

 

 

Accrued interest

 

$10,942

 

 

$11,624

 

Payroll

 

 

194,745

 

 

 

146,817

 

Property taxes

 

 

132,700

 

 

 

115,222

 

Sales tax

 

 

67,960

 

 

 

153,039

 

Other administrative expenses

 

 

14,891

 

 

 

424

 

 

 

 

 

 

 

 

 

 

Subtotal

 

 

421,238

 

 

 

427,126

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

 

 

 

 

 

 

Accrued interest

 

 

7,562

 

 

 

8,228

 

Payroll

 

 

354,072

 

 

 

336,226

 

Unvouchered payables - inventory/COGS

 

 

859,970

 

 

 

1,032,808

 

Other accrued expenses

 

 

22,261

 

 

 

7,392

 

 

 

 

 

 

 

 

 

 

Subtotal

 

 

1,243,865

 

 

 

1,384,654

 

 

 

 

 

 

 

 

 

 

Corporate

 

 

 

 

 

 

 

 

Accrued interest

 

 

7,148

 

 

 

7,543

 

Payroll

 

 

24,863

 

 

 

25,179

 

Professional fees

 

 

89,759

 

 

 

199,508

 

Property Tax

 

 

43,800

 

 

 

87,275

 

Federal & state Income tax

 

 

334,078

 

 

 

155,309

 

 

 

 

 

 

 

 

 

 

Subtotal

 

 

499,648

 

 

 

474,814

 

 

 

 

 

 

 

 

 

 

 

 

$2,164,751

 

 

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

 

 
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Table of Contents

 

The consumer segment includes Dallas Gold & Silver Exchange, which has six operating retail stores in the Dallas/Fort Worth Metroplex (“DFW”), one retail location in Phoenix, Arizona, as stated in a footnote to Note 6 – Property and Equipment, that has not yet opened, 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.

 

A portion of certain corporate costs and expenses is allocated, including information technology as well as rental income and expenses relating to our corporate headquarters, to the 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. The 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 June 30, 2023 and 2022:

 

 

 

For The Three Months Ended June 30,

 

 

 

2023

 

 

2022

 

 

 

Consumer

 

 

Commercial

 

 

Consolidated

 

 

Consumer

 

 

Commercial

 

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales

 

$39,641,434

 

 

$10,662,093

 

 

$50,303,527

 

 

$30,339,127

 

 

$12,300,591

 

 

$42,639,718

 

Cost of goods sold

 

 

35,546,792

 

 

 

3,994,688

 

 

 

39,541,480

 

 

 

26,150,543

 

 

 

5,011,175

 

 

 

31,161,718

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

4,094,642

 

 

 

6,667,405

 

 

 

10,762,047

 

 

 

4,188,584

 

 

 

7,289,416

 

 

 

11,478,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses (1)

 

 

2,472,973

 

 

 

5,889,581

 

 

 

8,362,554

 

 

 

2,252,909

 

 

 

4,947,824

 

 

 

7,200,733

 

Depreciation and amortization

 

 

79,408

 

 

 

256,766

 

 

 

336,174

 

 

 

101,434

 

 

 

178,082

 

 

 

279,516

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,552,381

 

 

 

6,146,347

 

 

 

8,698,728

 

 

 

2,354,343

 

 

 

5,125,906

 

 

 

7,480,249

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

1,542,261

 

 

 

521,058

 

 

 

2,063,319

 

 

 

1,834,241

 

 

 

2,163,510

 

 

 

3,997,751

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income/expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (1)

 

 

23,929

 

 

 

129,723

 

 

 

153,652

 

 

 

9,397

 

 

 

12,004

 

 

 

21,401

 

Interest expense

 

 

58,209

 

 

 

56,479

 

 

 

114,688

 

 

 

61,663

 

 

 

59,379

 

 

 

121,042

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

1,507,981

 

 

 

594,302

 

 

 

2,102,283

 

 

 

1,781,975

 

 

 

2,116,135

 

 

 

3,898,110

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

 

339,672

 

 

 

158,902

 

 

 

498,574

 

 

 

15,391

 

 

 

34,861

 

 

 

50,252

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$1,168,309

 

 

$435,400

 

 

$1,603,709

 

 

$1,766,584

 

 

$2,081,274

 

 

$3,847,858

 

 

(1) Starting January 1, 2023, expenses previously classified as other expenses related to the Company’s corporate campus overhead have been included in selling, general, and administrative expenses. Since the presentation of these expenses changed January 1, 2023, management believes the presentation of the 2022 corporate campus overhead should be reclassified to selling, general, and administrative expense for comparison purposes for the three and six months ended June 30, 2022.

 

 
15

Table of Contents

 

The following separates the consumer and the commercial financial results of operations for the six months ended June 30, 2023 and 2022:

 

 

 

For The Six Months Ended June 30,

 

 

 

2023

 

 

2022

 

 

 

Consumer

 

 

Commercial

 

 

Consolidated

 

 

Consumer

 

 

Commercial

 

 

Consolidated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales

 

$76,345,831

 

 

$22,346,736

 

 

$98,692,567

 

 

$66,121,999

 

 

$23,932,817

 

 

$90,054,816

 

Cost of goods sold

 

 

68,266,221

 

 

 

8,254,397

 

 

 

76,520,618

 

 

 

57,709,953

 

 

 

11,155,829

 

 

 

68,865,782

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

8,079,610

 

 

 

14,092,339

 

 

 

22,171,949

 

 

 

8,412,046

 

 

 

12,776,988

 

 

 

21,189,034

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses (1)

 

 

4,868,998

 

 

 

11,398,859

 

 

 

16,267,857

 

 

 

4,433,466

 

 

 

9,412,238

 

 

 

13,845,704

 

Depreciation and amortization

 

 

177,542

 

 

 

512,983

 

 

 

690,525

 

 

 

208,397

 

 

 

363,066

 

 

 

571,463

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,046,540

 

 

 

11,911,842

 

 

 

16,958,382

 

 

 

4,641,863

 

 

 

9,775,304

 

 

 

14,417,167

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

3,033,070

 

 

 

2,180,497

 

 

 

5,213,567

 

 

 

3,770,183

 

 

 

3,001,684

 

 

 

6,771,867

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income/expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (1)

 

 

47,463

 

 

 

316,968

 

 

 

364,431

 

 

 

24,014

 

 

 

24,027

 

 

 

48,041

 

Interest expense

 

 

117,827

 

 

 

113,925

 

 

 

231,752

 

 

 

122,904

 

 

 

121,377

 

 

 

244,281

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

2,962,706

 

 

 

2,383,540

 

 

 

5,346,246

 

 

 

3,671,293

 

 

 

2,904,334

 

 

 

6,575,627

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

 

657,513

 

 

 

558,707

 

 

 

1,216,220

 

 

 

28,568

 

 

 

51,976

 

 

 

80,544

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$2,305,193

 

 

$1,824,833

 

 

$4,130,026

 

 

$3,642,725

 

 

$2,852,358

 

 

$6,495,083

 

 

(1) Starting January 1, 2023, expenses previously classified as other expenses related to the Company’s corporate campus overhead have been included in selling, general, and administrative expenses. Since the presentation of these expenses changed January 1, 2023, management believes the presentation of the 2022 corporate campus overhead should be reclassified to selling, general, and administrative expense for comparison purposes for the three and six months ended June 30, 2022. 

 

NOTE 10 — REVENUE RECOGNITION

 

ASC 606 provides guidance to identify performance obligations for revenue-generating transactions. The initial step is to identify the contract with a customer created with the sales invoice or a repair ticket. Secondly, to identify 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 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 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 revenue as each performance obligation is satisfied.

 

The following disaggregation of total revenue is listed by sales category and segment for the three months ended June 30, 2023 and 2022:

 

CONSOLIDATED

 

Three Months Ended June 30,

 

 

 

2023

 

 

2022

 

 

 

Revenues

 

 

Gross Profit

 

 

Margin

 

 

Revenues

 

 

Gross Profit

 

 

Margin

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Resale

 

$36,645,641

 

 

$3,353,835

 

 

 

9.2%

 

$28,165,026

 

 

$3,719,954

 

 

 

13.2%

Recycled

 

 

2,995,793

 

 

 

740,807

 

 

 

24.7%

 

 

2,174,101

 

 

 

468,630

 

 

 

21.6%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subtotal

 

 

39,641,434

 

 

 

4,094,642

 

 

 

10.3%

 

 

30,339,127

 

 

 

4,188,584

 

 

 

13.8%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Resale

 

 

7,566,236

 

 

 

5,051,337

 

 

 

66.8%

 

 

9,102,001

 

 

 

5,566,507

 

 

 

61.2%

Recycled

 

 

3,095,857

 

 

 

1,616,068

 

 

 

52.2%

 

 

3,198,590

 

 

 

1,722,909

 

 

 

53.9%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subtotal

 

 

10,662,093

 

 

 

6,667,405

 

 

 

62.5%

 

 

12,300,591

 

 

 

7,289,416

 

 

 

59.3%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$50,303,527

 

 

$10,762,047

 

 

 

21.4%

 

$42,639,718

 

 

$11,478,000

 

 

 

26.9%

 

 
16

Table of Contents

 

The following disaggregation of total revenue is listed by sales category and segment for the six months ended June 30, 2023 and 2022:

 

CONSOLIDATED

 

Six Months Ended June 30,

 

 

 

2023

 

 

2022

 

 

 

Revenues

 

 

Gross Profit

 

 

Margin

 

 

Revenues

 

 

Gross Profit

 

 

Margin

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Resale

 

$70,365,601

 

 

$6,658,767

 

 

 

9.5%

 

$61,842,159

 

 

$7,462,806

 

 

 

12.1%

Recycled

 

 

5,980,230

 

 

 

1,420,843

 

 

 

23.8%

 

 

4,279,840

 

 

 

949,240

 

 

 

22.2%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subtotal

 

 

76,345,831

 

 

 

8,079,610

 

 

 

10.6%

 

 

66,121,999

 

 

 

8,412,046

 

 

 

12.7%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Resale

 

 

16,124,326

 

 

 

10,850,463

 

 

 

67.3%

 

 

18,681,858

 

 

 

10,140,775

 

 

 

54.3%

Recycled

 

 

6,222,410

 

 

 

3,241,876

 

 

 

52.1%

 

 

5,250,959

 

 

 

2,636,213

 

 

 

50.2%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subtotal

 

 

22,346,736

 

 

 

14,092,339

 

 

 

63.1%

 

 

23,932,817

 

 

 

12,776,988

 

 

 

53.4%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$98,692,567

 

 

$22,171,949

 

 

 

22.5%

 

$90,054,816

 

 

$21,189,034

 

 

 

23.5%

 

For the consumer segment, revenue for monetary transactions (i.e., cash and receivables) with wholesale dealers and the retail public are recognized when the merchandise is delivered, and payment has been made either by immediate payment or through a receivable obligation at one of our over-the-counter retail stores. Revenue is recognized upon the shipment of goods when retail and wholesale customers have 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.

 

Cra