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Item 8. Financial Statements and Supplementary Data

2025-03-26 compared with 2024-03-21 · 570 added, 523 removed, 137 unchanged (89% of the section changed)

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID 726 )

CONSOLIDATED STATEMENTS OF INCOME

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED STATEMENTS OF CASH FLOWS

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

BASIS OF PRESENTATION

PRINCIPLES OF CONSOLIDATION AND NATURE OF OPERATIONS

ACCOUNTING POLICIES AND ESTIMATES

CHANGES IN BUSINESS

PROPERTY AND EQUIPMENT, NET

INTANGIBLE ASSETS, NET

ACCRUED EXPENSES

SEGMENT INFORMATION

BASIC AND DILUTED AVERAGE SHARES

STOCK-BASED COMPENSATION

RELATED PARTY TRANSACTIONS

CONTINGENCIES

DEFINED CONTRIBUTION PLANS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Envela Corporation and Subsidiaries

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Envela Corporation and Subsidiaries (the “Company”) as of December 31, 2024 and 2023, and the related consolidated statements of income, stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on these financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

We determined that there are no critical audit matters.

/s/ Whitley Penn LLP

We have served as the Company’s auditor since 2012.

Dallas, Texas

March 26, 2025

ENVELA CORPORATION AND SUBSIDIARIES

CONSOLIDATED INCOME STATEMENTS

CONSOLIDATED STATEMENTS OF INCOME

Year Ended December 31,

$ 182,685,854

Cost of goods sold

Selling, General & Administrative Expenses

Selling, general and administrative

Depreciation and amortization

1 unchanged sentence

Operating income

Other income (expense):

Interest expense

Income before income taxes

Income tax expense (benefit)

Income tax expense

( 1,992,121 )

Earnings per share:

( 1,873,918 )

Basic earnings per share:

Diluted earnings per share:

Weighted average shares outstanding:

4 unchanged sentences

Cash and cash equivalents

Trade receivables, net of allowances

Notes receivable, net of allowance

Accounts receivable, net of allowances

Notes receivable

Prepaid expenses

2 unchanged sentences

Property and equipment, net

Right-of-use assets from operating leases

Intangible assets, net

Deferred tax asset

Operating lease right-of-use assets

Other assets, less current portion

Liabilities and stockholders’ equity

Current liabilities:

Accounts payable-trade

Accounts payable

Notes payable

Current operating lease liabilities

Operating lease liabilities

Accrued expenses

Customer deposits and other liabilities

Other current liabilities

Total current liabilities

3 unchanged sentences

Total liabilities

Commitments and contingencies

Contingencies (Note 17)

Stockholders’ equity:

1 unchanged sentence

5,000,000 shares authorized;

0 shares issued and outstanding

no shares issued and outstanding

Common stock, $ 0.01 par value;

60,000,000 shares authorized;

26,924,631 shares issued;

26,508,658 and 26,924,631 shares outstanding, respectively

Treasury stock at cost, 415,973 and 0 shares, respectively

26,924,631 shares issued and 25,995,701 shares outstanding as of December 31, 2024;

26,924,631 shares issued and 26,508,658 shares outstanding as of December 31, 2023

Treasury stock at cost, 928,930 and 415,973 shares, as of December 31, 2024 and December 31, 2023, respectively

( 4,568,823 )

( 2,155,049 )

Additional paid-in capital

4 unchanged sentences

ENVELA CORPORATION AND SUBSIDIARIES

CONSOLIDATED CASH FLOW STATEMENTS

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended December 31,

4 unchanged sentences

Non-cash lease expense

Income tax valuation allowance reduction

( 1,488,258 )

Reserve reduction of notes receivable and accrued interest receivable

Loss on disposal of equipment

Changes in operating assets and liabilities:

Trade receivables

Accounts receivable

( 2,559,347 )

1 unchanged sentence

Prepaid expenses

Accounts payable and accrued expenses

Accounts payable

Accrued expenses

Operating leases

1 unchanged sentence

( 1,899,365 )

Customer deposits and other liabilities

Other liabilities

Net cash provided by operations

Payments from note receivable

Purchase of property and equipment

( 3,459,506 )

Acquisition of Kretchmer Inc's stock

Additional cash payment for Avail Recovery Solutions' assets

( 2,047,036 )

Purchase of intangible assets

Investment in notes receivable

Acquisition, Scottsdale Transaction

Net cash (used in) investing

( 3,760,404 )

( 1,759,861 )

Payments on notes payable

1 unchanged sentence

( 1,243,914 )

Payments on line of credit

Purchase of treasury stock

( 2,413,774 )

Acquisition of treasury stock

( 2,155,049 )

7 unchanged sentences

Cash paid during the period for:

Non-cash activities:

Transfer Avail goodwill to intangibles

Finance acqusition of Kretchmer Inc's stock

Noncash investing and financing activities

Scottsdale Transaction measurement period adjustment, addition to intangible assets, reduction to goodwill

Scottsdale Transaction measurement period adjustment, addition to property and equipment, reduction to goodwill

Scottsdale Transaction measurement period adjustment, reduction to notes payable, reduction to goodwill

Scottsdale Transaction, addition to notes payable, addition to goodwill

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

ENVELA CORPORATION AND SUBSIDIARIES

CONSOLIDATED STOCKHOLDERS’ EQUITY STATEMENTS

Retained Earnings

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Treasury Stock

1 unchanged sentence

Stockholders’

Balance at January 1, 2022

$ ( 12,814,929 )

Balance at December 31, 2022

Year Ended December 31, 2023

Balance as of January 1, 2023

Shares repurchased

1 unchanged sentence

( 2,155,049 )

Balance at December 31, 2023

Balance as of December 31, 2023

( 2,155,049 )

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — ACCOUNTING POLICIES AND NATURE OF OPERATIONS

A summary of the significant accounting policies applied in the preparation of the accompanying consolidated financial statements follows.

References to fiscal years below are denoted with the word “Fiscal” and the associated year.

Principles of Consolidation and Nature of Operations

Envela and its subsidiaries engage in diverse business activities within the re-commerce sector.

These activities include being one of the nation’s premier authenticated re-commerce retailers of luxury hard assets;

providing end-of-life asset recycling;

offering data destruction and IT asset management;

and providing products, services, and solutions to industrial and commercial companies.

Envela operates primarily via two segments.

Its commercial-services segment is led by subsidiary ECHG, LLC ("ECHG"), and its direct-to-consumer segment is led by subsidiary DGSE, LLC ("DGSE").

Envela reports its revenue and operating expenses based on these two operating segments.

We also include segment information in the notes to our financial statements.

Envela is a Nevada corporation, headquartered in Irving, Texas.

Envela primarily makes a resale marketplace for previously-owned products via its two business segments, a direct-to-consumer business (DGSE) and a commercial services business (ECHG).

Our direct-to-consumer portfolio primarily operates multiple brick-and-mortar and online marketplaces.

Our commercial services portfolio offers custom re-commerce solutions to meet the needs of diverse clients, including Fortune 500 companies.

For additional business operations for both the consumer and commercial segments, see Note 10 – Segment Information.

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

GAAP”) and include the accounts of the Company and its subsidiaries.

All material intercompany transactions and balances have been eliminated.

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.

The consumer segment’s inventory is valued at the lower of cost or net realizable value (“NRV”).

The Company acquires a majority of its inventory from individual customers, including pre-owned jewelry, watches, bullion, rare coins and collectibles.

The Company acquires these items based on its own internal estimate of the fair market value of the items at the time of purchase.

The consumer segment considers factors such as the current spot market price of precious metals and current market demand for the items being purchased.

The consumer segment supplements these purchases from individual customers with inventory purchased from wholesale vendors.

These wholesale purchases of new merchandise can take the form of full asset purchases, or consigned inventory.

Consigned inventory is accounted for on the Company’s consolidated balance sheet with a fully offsetting contra account so that consigned inventory has a net zero balance.

The majority of the Company’s 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 the Company’s inventory and could positively or negatively impact the profitability of the Company.

The Company regularly monitors these fluctuations to evaluate any necessary impairment to its inventory.

The commercial segment’s 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.

The inventory listed in Note 3, and for the time period until November 15, 2026, is pledged as collateral against the available $ 3,500,000 Farmers State Bank of Oakley Kansas ("FSB") line of credit and the FSB notes with the consumer and commercial segments.

For the FSB notes, see Note 9 – Long-Term Debt.

Property and Equipment

Property and equipment are stated at cost.

Depreciation on property and equipment is provided for using the straight-line method over the anticipated economic useful lives of the related property.

The Company uses the following standard useful life for our property and equipment;

39 years for buildings, 7 years for furniture and fixtures, 3 years for computer equipment, 5 years for vehicles and 5 years for warehouse equipment.

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.

If circumstances require a long-lived asset or asset group be tested for possible impairment, we first compare undiscounted cash flows expected to be generated by the asset or asset group to its carrying value.

If the carrying value of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent the carrying value exceeds its fair value.

Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values, and third-party independent appraisals, as considered necessary.

There were no impairments recorded as of December 31, 2023 and 2022.

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.

When assets are sold or retired, the cost and accumulated depreciation are removed from the accounts and any gain or loss is recorded to current operating income.

Impairment of Long-Lived Assets, Amortized Intangible Assets and Goodwill

The Company performs impairment evaluations of its long-lived assets, including property, equipment, and intangible assets with finite lives whenever business conditions or events indicate that those assets may be impaired.

When the estimated future undiscounted cash flows to be generated by the assets are less than the carrying value of the long-lived assets, the assets are written down to fair market value and a charge is recorded to current operations.

Based on the Company’s evaluations, no impairment was required as of December 31, 2023 or 2022.

Goodwill is evaluated for impairment annually in the fourth quarter, or when there is reason to believe that the value has been diminished or impaired.

Evaluations for possible impairment are based upon a comparison of the estimated fair value of the reporting segment to which the goodwill has been assigned, versus the sum of the carrying value of the assets and liabilities of that segment including the assigned goodwill value.

Goodwill is tested at the segment level and is the only intangible asset with an indefinite life on the consolidated balance sheets.

Financial Instruments

The carrying amounts reported in the consolidated balance sheets for cash equivalents, accounts receivable, accounts payable and accrued expenses approximate fair value because of the immediate or short-term maturity of these financial instruments.

The carrying amounts reported for the notes receivable and notes payable approximate fair value because the underlying instruments have an interest rate that reflects current market rates.

None of these instruments are held for trading purposes.

Advertising Costs

The consumer segment’s advertising costs are expensed as incurred and amounted to $ 945,340 and $ 723,889 for Fiscal 2023 and Fiscal 2022, respectively.

The commercial segment’s advertising costs are expensed as incurred and amounted to $ 37,110 and $ 49,977 for Fiscal 2023 and Fiscal 2022, respectively.

Accounts Receivable and Allowance for Credit Losses

The consumer segment generally has a low risk level of accounts receivable.

Given the generally low level of the consumer segment’s accounts receivables, the company uses a simplified approach to calculate a general provision for credit losses.

An allowance is calculated for each aging “bucket,” based on the risk profile of that bucket.

For example, based on our historical experience, we have chosen to not place any reserve on amounts that are less than 60 days past due.

From there the reserve amount escalates:

10% reserve on amounts over 60 but less than 90 days past due, 25% on amounts over 90 but less than 120 days past due, and 75% on amounts over 120 days past due .

No accounts receivable was determined to be uncollectable, therefore there were no write offs against the allowance for bad debt.

Managing bad debt risk for the consumer segment is based on accounts that are expected to be past due.

The consumer’s wholesale customer base is small, and we have a good relationship and history with each one.

Based on the new ASU 2016-13 guideline established by the Financial Accounting Standards Board ("FASB"), an allowance adjustment is based on the current expected credit losses methodology for estimating allowances for credit losses.

The new methodology is based on expected losses rather than incurred losses.

The reserve warranted, based on the new expected credit losses methodology, as of December 31, 2023 is $0.

For Fiscal 2023 and 2022, besides the normal timing to clear credit cards and financing collections, the consumer’s accounts receivable balance consisted of wholesale dealers that are current and expected to be collected.

Once a reserve is established, and an amount is considered to be uncollectable it is to be written off against the reserve.

We revisit the reserve periodically, but no less than annually, with the same analytical approach in order to determine if the reserve needs to be increased or decreased, based on the risk profile of open accounts receivable for expected credit losses.

The commercial segment has a more sizable accounts receivable balance of $ 4,399,658 on December 31, 2023 and $ 7,110,535 as of December 31, 2022.

The commercial segment uses a different methodology for expected credit losses, except for Avail who uses the same methodology as the consumer segment.

For the commercial segment, excluding Avail, customers are generally larger and terms are farther out.

Once we determine that a balance is an expected credit loss, we reserve that balance but still pursue payment.

Percentages were developed based on management’s historical knowledge of past companies, the industry and the location in which the company operates.

On the occasion we determine a balance is uncollectable we write off the balance against the reserve.

During Fiscal 2023, $ 91,307 of accounts receivables was determined to be uncollectable, therefore written off against the allowance for bad debt.

As of December 31, 2023, management considered $ 111,656 , of accounts receivables, excluding Avail, is expected to be uncollectable, but still under pursuit, as warranted by the current expected credit losses methodology (“CECL”) guidelines to be reserved, as compared to a reserve balance, excluding Avail, of $ 51,734 as of December 31, 2022.

Avail has more customers with smaller balances that occasionally become delinquent more in relation to the consumer segment’s accounts receivables, and they are analyzed in accordance with the consumer segment’s delinquency approach.

Avail’s expected reserve as of December 31, 2023, according to the expected credit losses guidelines and using the consumer’s segment’s methodology approach, was determined to be $ 149,202 , as compared to Avail’s reserve balance of $ 0 as of December 31, 2022.

A summary of the Allowance for Credit Losses is presented below:

Beginning Balance

Provision for credit losses (+)

Receivables written off (-)

Ending Balance

We record leases, which consist primarily of operating leases, on the Consolidated Balance Sheets as operating lease ROU assets and operating lease liabilities.

The operating lease liabilities include Current and Noncurrent Portions, whereas, the ROU assets are listed as Noncurrent.

Operating lease liabilities are initially recognized based on the net present value of the fixed portion of our lease payments from lease commencement through the lease term.

To calculate the net present value, we apply an incremental borrowing rate.

The incremental borrowing rate is determined using a portfolio approach based on the rate of interest we would pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term.

We use quoted interest rates obtained from financial institutions as an input to derive our incremental borrowing rate as the discount rate for the lease.

We recognize ROU assets based on operating lease liabilities reduced by property incentives received from landlords.

We lease the land and buildings for many of our consumer stores and land and warehouse facilities for our commercial segment.

Notes Receivable

The commercial segment held two notes receivable from CExchange as of December 31, 2022.

During Fiscal 2021, management learned the two notes may not have been recoverable.

Management reserved the full amount of the outstanding and unpaid notes receivable of $ 900,000 and wrote-off the outstanding and unpaid accrued interest associated with the notes receivable of $ 49,174 .

The notes receivable of $ 900,000 and $ 49,174 of accrued interest receivable were charged to other expense during Fiscal 2021.

Subsequent to reserving the note of $ 900,000 during Fiscal 2021, a partial payment was received of $ 61,353 , reducing the amount of the reserve to $ 838,647 , as of December 31, 2021.

On October 25, 2022, the commercial segment received $ 260,397 of the reserved $ 838,647 notes receivable.

Upon receipt of the partial payment, management believed, from the information available, that the remaining and unpaid notes receivable of $ 578,250 , would probably be received in full.

The reserve was reduced to $ 0 , recording $ 838,647 as other income, thereby restoring the balance of the notes receivable, net to $ 578,250 , as of December 31, 2022.

The full payment of the remaining $ 578,250 was received on January 17, 2023.

Interest receivable, in the amount of $ 49,174 , that was written off against the reserve in Fiscal 2021 was received plus we received additional interest, in the amount of $ 44,941 .

The total interest received, in 2023 of $ 94,115 , was recorded as other income for the commercial segment.

Short-Term Financing

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 with a maturity date of November 23, 2024 .

As of December 31, 2023, and December 31, 2022, the line of credit had a principal and outstanding balance of $ 0 , with accrued and unpaid interest balance of $ 0 as of December 31, 2023 and 2022.

Income taxes are accounted for under the asset and liability method prescribed by U.S.

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The effect 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 of deferred tax assets unless it is more likely than not such assets will be realized.

The Company accounts for its position in tax uncertainties in accordance with U.S.

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.

GAAP requires a two-step process to determine the amount of tax benefit to be recognized in the financial statements.

First, the Company must determine whether any amount of the tax benefit may be recognized.

Second, the Company determines how much of the tax benefit should be recognized (this would only apply to tax positions that qualify for recognition).

The Company has not taken a tax position that, if challenged, would have a material effect on the financial statements or the effective tax rate during the years ended December 31, 2023 and 2022.

The Company currently believes that its significant filing positions are highly certain and that all of its other significant income tax filing positions and deductions would be sustained upon audit or the final resolution would not have a material effect on the consolidated financial statements.

Therefore, the Company has not established any significant reserves for uncertain tax positions.

The Company recognizes accrued interest and penalties resulting from audits by tax authorities in the provision for income taxes in the consolidated statements of operations.

During Fiscal 2023 and Fiscal 2022, the Company did not incur any federal income tax interest or penalties.

Revenue Recognition

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Topic 606 - Revenue from Contracts with Customers.

Topic 606 is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

It also requires additional disclosures about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts, including significant judgements and changes in judgements and assets recognized from cost incurred to obtain or fulfill a contract.

Topic 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 Company has no contract assets, and the only contract liability is customer deposits.

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

Accounts Receivable

Contract Assets

Contract Liabilities

Opening balance - 1/1/2022

Closing balance - 12/31/2022

Opening balance - 1/1/2022

Closing balance - 12/31/2022

Accounts Receivable

Contract Assets

Contract Liabilities

Opening balance - 1/1/2023

Closing balance - 12/31/2023

Opening balance - 1/1/2023

Closing balance - 12/31/2023

The following disaggregation of total revenue is listed by sales category and segment for the years ended December 31, 2023 and 2022:

For the Years Ended

December 31, 2023

December 31, 2022

Treasury Stock

Preferred Stock

Stockholders’

Year Ended December 31, 2024

Balance as of January 1, 2024

( 2,155,049 )

Shares repurchased

( 2,413,774 )

Balance as of December 31, 2024

( 4,568,823 )

For the consumer segment, revenue for monetary transactions (i.e., cash and receivables) with 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.

Crafted-precious-metal items at the end 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 sale based on the ratio of monetary assets received to monetary and non-monetary assets received multiplied by the cost of the assets surrendered.

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 the promise of the financing company to pay and delivery or shipment of the product.

The consumer segment’s 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.

The consumer segment has established an allowance for estimated returns related to sales, which is based on our review of historical returns experience and reduces our reported revenues and cost of sales accordingly.

As of December 31, 2023 and 2022, our allowance for returns remained the same at approximately $ 28,000 for both years.

A significant amount of revenue (16.5%) stems from sales to one precious metals partner, which relationship constitutes Envela’s single largest source of revenues for Fiscal 2023.

However, the Company believes that the products it sells is marketable to numerous sources at competitive prices.

The commercial segment has several 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 is transferred.

Once the price is established and the terms are agreed to and the product is shipped and the 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.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — BASIS OF PRESENTATION

The consolidated financial statements include the accounts of Envela and its wholly owned subsidiaries.

The accounting for the accompanying consolidated financial statements has been prepared in accordance with United States Generally Accepted Accounting Principles (“U.S.

GAAP”) and, in the opinion of management, reflects all adjustments necessary to state fairly the Company’s financial position, results of operations, stockholders’ equity, and cash flows for the periods presented.

The Company’s operations are located within the contiguous U.S.

and its functional and reporting currency is the U.S.

Dollar (“$”).

Envela files annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements, and other information with the SEC.

Such information and amendments to reports previously filed or furnished are available on the Company’s corporate website, www.envela.com, as soon as reasonably practicable after such materials are filed with or furnished to the SEC.

The SEC also maintains an internet site at www.sec.gov that contains the Company’s filings.

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.”

Principles of Consolidation

Envela serves as a holding company, conducting its operations via subsidiaries engaged in various businesses and activities within the recommerce and recycling sectors.

The Company does not have any variable interest entities requiring consolidation.

All intercompany transactions and balances have been eliminated.

Nature of Operations

The products and services we offer are delivered by our subsidiaries under their distinct brands, rather than directly by Envela itself.

Significant business activities within our reportable segments are detailed below:

Consumer Segment

Our consumer segment primarily operates in the jewelry industry, specializing in the online and brick-and-mortar sale of authenticated high-end luxury goods, including pre-owned fine jewelry, diamonds and gemstones, luxury watches, along with secondary market bullion.

We incorporate recycled diamonds and gemstones into our new designs meaning they were previously set and unset, producing a low-carbon and ethical origin product.

The Company caters to consumers seeking environmentally responsible options for engagement rings, wedding bands, and other fine jewelry at accessible prices.

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.

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 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 offers services that manage the entire lifecycle of technology products to ensure data security, regulatory compliance, and environmental sustainability.

We are proud of our role in supporting a circular economy through responsible reuse and recycling of electronic devices.

See Note 10 – Segment Information for further details.

NOTE 3 — ACCOUNTING POLICIES AND ESTIMATES

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S.

GAAP requires management to 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 performance obligations, variable consideration, and other obligations such as product returns and refunds;

loss contingencies;

the fair value of and/or potential impairment of goodwill and intangible assets for the 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 recognized on our consolidated financial statements or tax returns.

Actual results could differ from those estimates and assumptions.

Revenue Recognition

Accounting Standards Codification (“ASC”) 606, Revenue Recognition provides guidance to identify performance obligations for revenue-generating transactions.

The Company applies a five-step approach in determining the amount and timing of revenue to be recognized:

(1) identifying the contract with a customer;

(2) identifying the performance obligations in the contract;

(3) determining the transaction price;

(4) allocating the transaction price to the performance obligations in the contract;

and (5) recognizing revenue when the corresponding performance obligation is satisfied.

Consumer Segment

For the consumer segment, revenue from monetary transactions (e.g., cash and accounts receivable) with wholesale customers is recognized when the merchandise is delivered or at the point of sale for retail customers, and consideration for the transaction has been made either by immediate payment or through a receivable obligation.

For e-commerce, revenue is recognized when the customer has fulfilled their obligation to pay or promise to pay and goods have been shipped.

Revenue on precious metals requiring an assay is recognized upon transfer of title, based on the determination of the underlying weight and price of the associated metals.

The Company offers third-party financing for retail customers.

Revenue is recognized upon transfer of title, with the promise of the third-party financing company to pay.

Commercial Segment

The commercial segment recognizes revenue at an amount that reflects the consideration to which we expect to be entitled to in exchange for transferring goods or services to the customer.

The commercial segment 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 initial invoice is recognized in full when our performance obligation is satisfied.

Under the guidance of ASC 606, an estimate of the variable consideration that we are expected to be entitled to 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 once the underlying weight and any precious metal spot price movement is resolved, which is usually around six weeks.

Historically, these amounts have not been material.

The commercial segment also provides recycling services according to a Scope of Work (“SOW”).

Services are recognized based on the number of units processed by a preset price per unit.

Activity reports are produced weekly with the counts and revenue is recognized based on the billing from the weekly reports.

Recycling services can be conducted at the ECHG facility, or the recycling services can be performed at the client’s facility.

The SOW will determine the charges and whether the service will be completed at the commercial segment’s facility or at the client’s facility.

Payment terms are also dictated in the SOW.

Revenue from recycling services is recognized upon completion of the SOW at a predetermined amount based on the number of units processed and a preset price per unit or weight measurement.

The commercial segment provides freight arrangement services related to inbound assets or material movements to our facilities.

Revenue from freight arrangement services is 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, the product is shipped, and the title is transferred.

See Note 11 – Revenue for further details.

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 accordingly.

As of December 31, 2024, and December 31, 2023, the consumer segment’s allowance for returns was $ 11,942 and $ 28,402 , respectively.

As of December 31, 2024, and December 31, 2023, the commercial segment’s allowance for returns was $ 48,569 and $ 0 , respectively.

Concentrations and Credit Risk

The Company is potentially subject to concentrations of counterparty credit risk.

The concentrations described herein pertain to certain domestic precious metals transactions requiring an assay that are short duration and settled on comparable terms.

Overall customer concentrations as a percentage of sales may vary as a result of the mix of products being sold within each comparative period.

Individual customer concentrations are also impacted by each customer’s production schedule and as such, the Company identifies the most appropriate sales outlet to ensure a timely transaction settlement.

For the year ended December 31, 2024, one customer aggregated 30.1 % of our sales and represented 6.8 % of our accounts receivable balance.

For the year ended December 31, 2023, one customer aggregated 29.5 % of our sales and represented 27.9 % of our accounts receivable balance.

The Company believes that no single customer is critical to its business as a result of having diverse revenue streams and the optionality of sales outlets primarily associated with base and precious metals.

Shipping and Handling Costs

Shipping and handling costs amounted to $ 2,109,574 and $ 3,193,742 , for 2023 and 2022, respectively.

Management has determined that shipping and handling costs should be included in the cost of goods sold since inventory is what is shipped to and from store locations or to and from vendors.

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 revenues or expenses.

Within the consumer and commercial segments, shipping and handling costs are accounted for as fulfillment costs within cost of goods sold.

For the years ended December 31, 2024, and December 31, 2023, the consumer segment’s shipping and handling costs were $ 95,765 and $ 13,076 , respectively.

For the years ended December 31, 2024, and December 31, 2023, the commercial segment’s shipping and handling costs were $ 4,840,381 and $ 5,686,236 , respectively.

Advertising Costs

The consumer and commercial segment’s advertising costs are expensed as incurred.

For the years ended December 31, 2024, and December 31, 2023, the consumer segment’s advertising costs were $ 1,309,013 and $ 945,340 , respectively.

For the years ended December 31, 2024, and December 31, 2023, the commercial segment’s advertising costs were $ 281,814 and $ 37,110 , respectively.

We 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 a 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 lessee would have to pay to borrow on a collateralized basis over a similar term in 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.

For leases one year or less, the Company has elected not to record lease liabilities and right-of-use assets and instead recognize the expense associated with the lease payments using the straight-line basis.

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 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.

The Company believes that its significant filing positions are highly certain and that all of its other significant income tax filing positions and deductions would be sustained upon audit or the final resolution would not have a material effect on the consolidated financial statements.

Therefore, the Company has not established any significant reserves for uncertain tax positions.

The Company recognizes accrued interest and penalties resulting from audits by tax authorities in the provision for income taxes in the consolidated statements of income.

During Fiscal 2024 and Fiscal 2023, the Company did not incur any federal income tax interest or penalties.

See Note 18 – Income Taxes for further details.

Valuation of Deferred Tax Assets

The Company’s deferred tax assets 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 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 and the need for valuation allowances on a quarterly basis, or more frequently if events indicate that a 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 years ended December 31, 2024, and December 31, 2023.

As of December 31, 2024, the Company had a deferred tax asset of $ 49,526 .

As of December 31, 2023, the Company had a deferred tax liability of $ 38,668 .

The Company did no t have a valuation allowance as of December 31, 2024, or December 31, 2023.

See Note 18 – Income Taxes for further details.

Segment Information

The accounting standards for reporting information about operating segments define 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.

As of December 31, 2024, the Company’s CODM was identified as the Chief Executive Officer.

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

Management’s Discussion and Analysis of Financial Condition and Results of Operations for further details.

See Note 2 – Principles of Consolidation and Nature of Operations and Note 10 – Segment Information for further details.

Earnings Per Share

2 unchanged sentences

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.

See Note 13 – Basic and Diluted Average Shares for further details.

Stock-Based Compensation

The Company accounts for stock-based compensation by measuring the cost of the 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.

The Company accounts for 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 the 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.

Stock-based compensation expense for Fiscal 2023 and Fiscal 2022 amounted to $ 0 for both years.

There were 15,000 stock options that remained unexercised as of December 31, 2023 and 2022.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S.

GAAP which requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses.

Examples of estimates and assumptions include:

for revenue recognition, determining the nature and timing of satisfaction of performance obligations, variable consideration, and other obligations such as product returns and refunds;

loss contingencies;

the fair value of and/or potential impairment of goodwill and intangible assets for the reporting units;

useful lives of our tangible and intangible assets;

allowances for credit losses valuation allowance;

the market value of, and demand for, our inventory and the potential outcome of uncertain tax positions that have been recognized on our consolidated financial statements or tax returns.

Actual results and outcomes may differ from management’s estimates and assumptions.

New Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments.

The ASU significantly changes how we will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income.

The most significant change in this standard is the shift from the incurred credit losses to expected credit losses which will be based on an estimate of current expected credit losses.

We are required to use a forward-looking expected credit loss methodology for accounts receivable, loans and other financial instruments requiring immediate recognition of management’s estimates of current expected credit losses.

The Company completed its review of its methodology based on expected losses and determined that there was no impact on our consolidated financial statements, results of operations or liquidity.

The standard was adopted beginning January 1, 2023 by using a modified retrospective transition approach to align the Company’s credit loss methodology with the new standard.

In November 2023, the FASB issued 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 Company’s chief operating decision maker (“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.

Topic 280 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.

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 2 — CONCENTRATION OF CREDIT RISK

See Note 15 – Stock-Based Compensation for further details.

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 revenues or expenses.

Financial Instruments

The carrying amounts reported in the consolidated balance sheets for cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate fair value because of the immediate or short-term maturity of these financial instruments.

The carrying amounts reported for the notes receivable and notes payable approximate fair value because the underlying instruments have an interest rate that reflects current market rates.

None of these instruments are held for trading purposes.

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and cash equivalents and accounts receivable.

At times, such amounts exceed federally-insured limits.

A significant amount of revenue stems from sales to one precious metals partner, which relationship constitutes Envela’s single largest source of revenues of 16.5% and 17.9% during Fiscal years 2023 and 2022, respectively.

However, the Company believes that the products we sell are marketable to numerous sources at competitive prices.

At times, cash and cash equivalents exceed federally insured limits.

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 products and services.

Our allowance for credit losses is primarily determined by an analysis of our accounts receivable 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.

Accounts receivables are considered delinquent when payment has not been made within contract terms.

Accounts receivables are written off when all efforts to collect have been exhausted and the potential for recovery is considered remote.

As of December 31, 2024, and December 31, 2023, the consumer segment’s allowance for credit losses was $ 0 and $ 0 , respectively.

As of December 31, 2024, and December 31, 2023, the commercial segment’s allowance for credit losses was $ 433,159 and $ 260,858 , respectively.

A summary of the allowance for credit losses is presented below:

Beginning Balance

Provision for credit losses (+)

Receivables written off (-)

Ending Balance

Consumer Segment

The consumer segment states its inventory at the lower of cost and net realizable value.

We cost our 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 the 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.

We monitor metals-based commodity markets to assess any adverse impact on the carrying value of our inventory.

Commercial Segment

The commercial segment states its inventory at the lower of cost and net realizable value.

The cost of our technology assets is determined utilizing the retail cost method.

The cost of our processed and unprocessed inventory, primarily consisteing of base metals and electronic scrap materials, is determined utilizing the weighted average cost method.

We monitor metals-based commodity markets to assess any adverse impact on the carrying value of our inventory.

See Note 4 – Inventories for further details.

Goodwill is not amortized but is 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 year ended December 31, 2024, and the Company did not record a goodwill impairment charge in any of the periods presented.

See Note 6 – Goodwill for further details.

Property and Equipment, Net

Property and equipment are carried at cost less accumulated depreciation and are 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.

The following table depicts the estimated useful lives of our property and equipment asset classes:

Automobiles and trucks

Building improvements

Shorter of 15 years or remaining useful life

Furniture and fixtures

Office technology

Leasehold improvements

Shorter of 15 years or remaining lease term

Production and material handling equipment

5 to 10 years

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 repairs and maintenance are expensed as incurred;

betterments that increase the value or materially extend the life of the related assets are capitalized.

See Note 7 – Property and Equipment, Net for further details.

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 that have not yet been placed into service.

The following table depicts the estimated useful lives of our property and equipment asset classes:

Customer lists

Enterprise resource planning systems

Finite-lived intangible 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 8 – Intangible Assets, Net for further details.

Correction of Immaterial Error

The Company’s commercial 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.

The following table summarizes the correction of immaterial error:

Three Months Ended

September 30,

Correction of immaterial error

Sales adjusted

Cost of goods sold

Correction of immaterial error

Cost of goods sold adjusted

The error had no impact on gross margin, operating income, net income, and basic and diluted earnings per share nor any other financial statement amount.

Further, these errors had no impact on the consolidated balance sheets, statements of stockholders’ equity, and statements of cash flows.

These corrections do not affect any of the metrics used to calculate and evaluate management’s compensation and have no impact on bonuses, commissions, stock-based compensation, or any other employee remuneration.

Historical amounts have been corrected and are presented on a comparable basis.

See Note 11 – Revenue for further details.

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 include 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, base and precious 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 5 – Inventories and Note 11 – Revenue for further details.

Reclassifications

For the Company’s 2023 Annual Report, the amount reported for other current assets within the Consolidated Balance Sheets is 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 as of December 31, 2023.

See the Consolidated Balance Sheets for further details.

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 as of December 31, 2023.

See Note 7 – Property and Equipment, Net for further details.

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 intangible assets, net.

The Company has elected to reclassify the historical presentation of the aforementioned as of December 31, 2023.

Cash expenditures for the enterprise resource planning system have been reclassified to “Purchases of intangible assets” within the Consolidated Statements of Cash Flows.

See Note 8 – Intangible Assets, Net for further details.

New Accounting Standards

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses (“ASU 2024-03”), which requires an entity to disclose additional information about specific expense categories.

The guidance is effective for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption and retrospective application permitted.

The Company is currently evaluating the potential impact of adopting this new guidance on the consolidated financial statements and related disclosures.

Recently Adopted Accounting Standards

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which requires disclosure of segment expenses that are significant and regularly provided to the CODM.

In addition, ASU 2023-07 requires 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.

The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

Retrospective application to all prior periods presented in the financial statements is required.

The Company adopted this guidance effective January 1, 2024.

As ASU 2023-07 applies to reportable segment disclosures, the adoption did not have a material impact on the Company’s consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvement to Income Tax Disclosures (“ASU 2023-09”), which updates income tax disclosures related to the effective income tax rate reconciliation and requires disclosure of income taxes paid by jurisdiction.

The guidance is effective for annual periods beginning after December 15, 2024, and may be applied prospectively or retrospectively, with early adoption permitted.

The Company adopted this guidance with retrospective application, effective January 1, 2024.

As ASU 2023-09 applies to income tax disclosures, the adoption did not have a material impact on the Company’s 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 — CHANGES IN BUSINESS

The Scottsdale Transaction qualified as a business combination for accounting purposes, which involves the application of the acquisition method described in ASC 805, Business Combinations.

The asset purchase agreement was entered into by a wholly-owned subsidiary of the Company.

The purchase price was $ 150 thousand.

The total purchase consideration transferred for the Scottsdale Transaction was $ 100 thousand in cash and a $ 50 thousand note payable obligation.

See Note 14 – Debt for further details.

The primary purpose of the Scottsdale Transaction was to broaden customer offerings with a complimentary brand and provide another outlet for the reuse of ethically sourced precious metals and gemstones in the manufacturing of new products.

The results of operations relating to the Scottsdale Transaction have been reflected in the Company’s consolidated financial statements from the initial date of acquisition.

The Scottsdale Transaction was not material to the Company’s consolidated financial statements, and therefore, pro forma operating results and other disclosures for the Scottsdale Transaction are not presented except as referenced below.

As part of the Scottsdale Transaction, on September 12, 2023 the consumer segment recorded goodwill of $ 300 thousand as part of the initial purchase price allocation.

During the year ended December 31, 2024, with the finalization of the terms of the Scottsdale Transaction, the Company made certain measurement period adjustments to the preliminary purchase price allocation, which resulted in a $ 300 thousand decrease to goodwill, a $ 150 thousand decrease due to the amendment of the purchase price, and a $ 150 thousand decrease due to the recognition of the assets acquired as part of the acquisition.

See Note 6 – Goodwill for further details.

In accordance with ASC 805, Business Combinations, the table presented below represents the final allocation of purchase price consideration.

The following table summarizes the fair values that were allocated to the Scottsdale Transaction:

Property and equipment, net

Intangible assets, net

NOTE 5 — INVENTORIES

Inventories consist of the following:

NOTE 4 — PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

Buildings and improvements

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

Trade inventories

NOTE 6 — GOODWILL

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

Opening balance

Additions (reductions) (1)(2)

Opening balance

Additions (reductions)

(1) The decrease in goodwill of $ 300 thousand for the year ended December 31, 2024, relates to the Company’s finalization of the allocation of fair values to assets acquired in the Scottsdale Transaction.

(2) The increase in goodwill of $ 300 thousand for the year ended December 31, 2023, relates to the Company’s acquisition of Scottsdale Transaction.

NOTE 7 — PROPERTY AND EQUIPMENT, NET

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

Reclassification

Building and improvements

( 1,443,207 )

Leasehold improvements

Machinery and equipment

Furniture and fixtures

Machinery and equipment

Construction in progress (1)(5)

accumulated depreciation

1 unchanged sentence

( 2,946,727 )

Leasehold improvements

Machinery and equipment

Furniture and fixtures

accumulated depreciation

Buildings and improvements

Machinery and equipment

Software development

Construction in progress (2)(5)

accumulated depreciation

Depreciation expense was $ 676,614 and $ 685,134 for Fiscal 2023 and Fiscal 2022, respectively.

NOTE 5 — ACQUISITIONS

On September 12, 2023, the consumer segment purchased all of the issued and outstanding stock of Steven Kretchmer, Inc., an Arizona corporation for $300,000 (the “Kretchmer Transaction”).

Based on the terms of the purchase, the Company has concluded the Kretchmer Transaction represents a business combination pursuant to FASB ASC Topic 805, Business Combinations.

The Kretchmer Transaction was incorporated into the consumer segment.

The full purchase price of the Kretchmer Transaction, $300,000, was allocated to goodwill and the assessment of identified assets and liabilities has not been finalized as of December 31, 2023 .

NOTE 6 — GOODWILL

The changes in the carrying amount of goodwill for the years ended December 31, 2023 and 2022, are as follows:

Year Ended December 31,

Opening balance

Additions (reductions) (1)

( 1,112,694 )

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 , which increased goodwill for the Avail Transaction, offset by the reduction of goodwill related to the Avail Transaction by management identifying $ 2,736,000 of intangible assets that were not initially included in the fair value of Avail’s net assets, reducing goodwill and increasing intangible assets.

The increase in goodwill of $ 300,000 for Fiscal 2023 is the purchase price of the Kretchmer Transaction.

The Company’s goodwill is related to both the consumer and commercial segments.

Goodwill is evaluated for impairment annually in the fourth quarter, or when there is reason to believe that the value has been diminished or impaired.

Based on the Company’s evaluations, no impairment was required as of December 31, 2023 and 2022.

There have been no other adjustments or impairment charges to goodwill.

As of December 31, 2023, and December 31, 2022, goodwill as reported in the consolidated balance sheets was $ 3,921,453 and $ 3,621,453 , respectively.

NOTE 7 — INTANGIBLE ASSETS

Intangible assets consist of:

Point of sale system

Building and improvements

Machinery and equipment

Enterprise resource planning system (3)

Construction in progress (4)(5)

accumulated depreciation

(1) The reclassification primarily related to the build-out of our Arizona retail stores, which were placed into service in the second quarter of Fiscal 2024.

(2) The reclassification related to the build-out of production equipment, which was placed into service in the second quarter of Fiscal 2024.

(3) Reclassified amount to Intangible Assets, Net.

See Note 8 – Intangible Assets, Net for further details.

(4) The reclassification related to improvements to our corporate headquarters, which were placed into service in the second quarter of Fiscal 2024.

(5) As of December 31, 2024 and December 31, 2023, these assets are being constructed, have not yet been placed into service and are not yet depreciable.

NOTE 8 — INTANGIBLE ASSETS, NET

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

Reclassification

Customer lists

Assets under development (2)

accumulated amortization

Trademarks (1)

Customer Contracts (1)

Trademarks/tradenames

Customer Relationships (2)

Trademarks/Tradenames (3)

Customer contracts

Customer relationships

2 unchanged sentences

( 2,248,405 )

Intangibles relate to the asset purchase agreement of the Echo Legacy Entities on May 20, 2019.

Intangibles relate to the purchase of the assets of CExchange, LLC a Texas limited liability company, on June 9, 2021 (the “CExchange Transaction”).

Intangibles relate to the Avail Transaction on October 29, 2021.

Amortization expense was $ 685,450 and $ 766,700 for Fiscal years 2023 and 2022, respectively.

The estimated aggregate amortization expense for each of the five succeeding fiscal years follows:

( 2,248,405 )

Assets under development (1)(2)

accumulated amortization

(1) The reclassification related to the initial development of our enterprise resource planning system, which was placed into service in the first quarter of Fiscal 2024.

(2) As of December 31, 2024 and December 31, 2023, these intangible assets are under development, have not yet been placed into service and are not yet amortizable.

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

NOTE 9 — ACCRUED EXPENSES

Accrued expenses consist of the following:

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

Accrued interest

Other administrative expenses

Accrued interest

Other accrued expenses

Unvouchered payables - inventory

Material & shipping costs (COGS)

Unvouchered inventory payments

Accrued interest

Professional fees

Federal income tax

State income tax

NOTE 9 — LONG-TERM DEBT

Long-term debt consists of the following:

Outstanding Balance

Interest Rate

Note payable, FSB (1)

November 15, 2026

Note payable, Trust Bank (2)

Note payable, Texas Bank & Trust (3)

September 14, 2025

Note payable, Texas Bank & Trust (4)

July 30, 2031

Kretchmer Transaction note payable (5)

October 1, 2025

DGSE Sub-Total

Note payable, FSB (1)

November 15, 2026

Line of Credit (6)

November 15, 2024

Avail Transaction note payable (7)

April 1, 2025

ECHG Sub-Total

Note payable, Texas Bank & Trust (8)

November 4, 2025

Current portion

On November 23, 2021, FSB refinanced prior related party notes held by both Company segments.

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 at 3.1 % annual interest rate.

The note has monthly principal and interest payments of $ 15,555 .

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 %, payable to Truist Bank (f/k/a BB&T Bank).

The note has monthly interest and principal payments of $ 5,645 .

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 %, payable to Texas Bank & Trust.

The note has monthly interest and principal payments of $ 2,941 .

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 , ten-year loan (the “TB&T Frisco Loan”), bearing an annual interest rate of 3.75 %, payable to Texas Bank and Trust.

The note has monthly interest and principal payments of $ 10,509 .

On September 12, 2023, the consumer segment entered into the Kretchmer Transaction to purchase all of the issued and outstanding common stock for $ 300,000 .

The purchase was facilitated by an initial payment of $100,000 at closing, and the remaining $200,000 to be paid out by eight quarterly payments starting January 1, 2024, of $25,000 each .

The installment note payable for the Kretchmer Transaction is imputed at 3.1 %.

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.

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 $ 4,500,000 .

The purchase was facilitated by an initial payment of $2,500,000 at closing, and the remaining $2,000,000 to be paid out by 12 quarterly payments starting April 1, 2022, of $166,667 each.

The installment note payable for the Avail Transaction is imputed at 3.1%

On November 4, 2020, 1901 Gateway Holdings, LLC, a wholly owned subsidiary of Envela Corporation, closed on the purchase of its corporate office building located at 1901 Gateway Drive, Irving, Texas for approximately $ 3,521,000 million.

The building was partially financed through a $ 2,960,000 , five-year loan, bearing an interest rate of 3.25 %, payable to Texas Bank & Trust.

The note has monthly interest and principal payments of $ 16,792 .

Future scheduled principal payments of our note payables as of December 31, 2023 are as follows:

Note payable, Farmers State Bank - DGSE

Year Ending December 31,

Note payable, Truist Bank - DGSE

Year Ending December 31,

Note payable, Texas Bank & Trust - DGSE

Year Ending December 31,

Note payable, Texas Bank & Trust - DGSE

Year Ending December 31,

Note payable, Farmers Bank - ECHG

Year Ending December 31,

Note payable - Justin and Tami Tinkle

Year Ending December 31,

Note payable - Kretchmer

Year Ending December 31,

Note payable, Texas Bank & Trust - Envela

Year Ending December 31,

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

Scheduled Principal Payments and Maturities by Year:

2029 and thereafter

NOTE 10 — SEGMENT INFORMATION

We determine our business segments based upon an internal reporting structure.

The financial results are based on the following segments:

consumer and commercial.

The consumer segment operates Dallas Gold & Silver Exchange, which has six retail stores in DFW, Steven Kretchmer, Inc.

has one retail location in Scottsdale, Arizona and Charleston Gold & Diamond Exchange, has one retail store in Mt.

Pleasant, South Carolina.

The consumer segment has total assets of $ 38,897,373 as of December 31, 2023, and $ 36,966,711 as of December 31,2022.

During Fiscal 2023, the consumer segment had $ 1,856,507 of capital expenditures, of which $ 1,327,532 was for building and building improvements, $ 184,673 was for land, $ 146,188 was to purchase machinery and equipment and $ 198,114 was to purchase furniture and fixtures.

During Fiscal 2022, the consumer segment had $ 134,419 of capital expenditures, of which $ 34,446 was for building improvements, $ 22,280 purchased machinery and equipment and $ 77,693 purchased furniture and fixtures.

The commercial segment includes Echo, ITAD USA, CEX, Teladvance and Avail.

These five companies are involved in recycling and the reuse of electronic waste.

The commercial segment has total assets of $ 34,576,856 as of December 31, 2023, and $ 34,310,498 as of December 31, 2022.

During Fiscal 2023, the commercial segment had $ 184,327 of capital expenditures, of which $ 60,705 purchased machinery and equipment and $ 123,622 was to purchase vehicles.

During Fiscal 2022, the commercial segment had capital expenditures of $ 87,486 , of which $ 16,156 was for leasehold improvements and $ 71,330 was to purchase machinery and equipment.

The Company’s corporate costs and expenses are allocated to the business segments.

The corporate building’s expenses are included in selling, general and administrative expenses since the building is part of the Company’s operations.

Depreciation and amortization, other income from rental income, interest expense and income tax expense are also allocated to the Company’s business segments.

Although the company’s depreciation expense is allocated to the segments, the capital expenditures are not.

The corporate capital expenditures, for Fiscal 2023 was $ 197,277 , of which $ 3,500 was for building improvements and $ 193,777 was software development.

The capital expenditures for Fiscal 2022, totaled $ 50,843 , all of which was to purchase equipment.

Management evaluates the operating performance of each segment and makes decisions about the allocation of resources to each segment.

The allocations are generally amounts agreed upon by management, which may differ from an arms-length transaction.

The following table segments the financial results of the consumer and commercial groups for the years ended December 31, 2023 and 2022:

For the Years Ended

December 31, 2023

December 31, 2022

$ 129,413,669

$ 171,674,088

$ 131,107,433

$ 182,685,854

The CODM uses operating income to evaluate the performance of the overall business, make investing decisions, and allocate resources.

The following table depicts the Company’s segment results of operations, including significant expenses that are regularly reviewed by the CODM, for the years ended December 31, 2024 and 2023:

Year Ended December 31,

Cost of goods sold

Selling, general and administrative expenses

Selling, general and administrative

Depreciation and amortization

Operating income

Other income/expense :

The following table depicts a reconciliation from segment operating income to income before income taxes for the years ended December 31, 2024 and 2023:

Year Ended December 31,

Operating income

Interest expense

Income before income taxes

Income tax expense (benefit)

( 1,426,697 )

( 1,309,606 )

Income from continuing operations

NOTE 11 — BASIC AND DILUTED AVERAGE SHARES

A reconciliation of basic and diluted average common shares is as follows:

Other significant segment items that are regularly reviewed by the CODM are capital expenditures, which the Company defines as any purchases of property and equipment or intangible assets.

The following table depicts capital expenditures for the years ended December 31, 2024 and 2023:

Year Ended December 31,

The following table depicts the Company’s total assets:

December 31, 2024

December 31, 2023

NOTE 11 — REVENUE

The following table depicts the Company’s disaggregation of total sales and gross margin for the years ended December 31, 2024 and 2023:

Year Ended December 31,

Correction of immaterial error (1)

Commercial adjusted

(1) Correction of immaterial error relating to freight arrangement services, see Note 3 – Accounting Policies and Estimates for further details.

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

Opening Balance - 1/1/2023

Closing Balance - 12/31/2023

Opening Balance - 1/1/2023

Closing Balance - 12/31/2023

Opening Balance - 1/1/2024

Closing Balance - 12/31/2024

Opening Balance - 1/1/2024

Closing Balance - 12/31/2024

The Company has no contract assets, and the only contract liabilities are customer deposits and gift cards, which are reported within other liabilities in the consolidated balance sheets.

NOTE 12 — LEASES

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

Total minimum lease payments

imputed interest

Total minimum lease payments

imputed interest

current portion

All of the Company’s leased facilities as of December 31, 2024, are non-cancellable.

The leases are a combination of triple net leases, for which the Company pays its proportionate share of common area maintenance, property taxes, and property

insurance, and modified gross leases, for which the Company directly pays for common area maintenance and property insurance.

The following table depicts supplemental cash flow information related to operating leases:

Year Ended December 31,

December 31, 2024

December 31, 2023

Non-cash activities:

Right-of-use operating lease assets obtained in exchange for new operating lease liabilities

The following table depicts the Company’s leasing costs for the years ended December 31, 2024 and 2023:

Year Ended December 31,

December 31, 2024

December 31, 2023

Operating lease cost

Variable lease cost

Short-term lease cost

As of December 31, 2024, the weighted average remaining lease term and weighted average discount rate for operating leases were 3.0 years and 3.9 %.

As of December 31, 2023, the weighted average remaining lease term and weighted average discount rate for operating leases were 2.0 years and 4.4 %.

NOTE 13 — BASIC AND DILUTED AVERAGE SHARES

The following table is a reconciliation of the Company’s basic and diluted weighted average common shares for the years ended December 31, 2024 and 2023:

Basic weighted average shares

1 unchanged sentence

Diluted weighted average shares

For the years ended December 31, 2023 and 2022, there were 15,000 Common Stock options, warrants, and Restricted Stock Units (RSUs) unexercised.

For the years ended December 31, 2023 and 2022, there were no anti-dilutive shares.

NOTE 12 — COMMON STOCK

In January 2014, the Company’s Board granted 112,000 RSUs to its officers and certain key employees.

As of December 31, 2023, no RSUs remain unexercised.

NOTE 13 — STOCK OPTIONS AND RESTRICTED STOCK UNITS

On June 21, 2004, our stockholders approved the adoption of the 2004 Employee Stock Option Plan (the “2004 Employee Stock Option Plan”) that provided for incentive stock options and nonqualified stock options to be granted to key employee and certain directors.

Each option vested on either January 1, 2004 or immediately upon issuance thereafter.

The exercise price of each option issued pursuant to the 2004 Plan is equal to the market value of our Common Stock on the date of grant, as determined by the closing bid price for our Common Stock on the Exchange on the date of grant or, if no trading occurred on the date of grant, on the last day prior to the date of grant on which our securities were listed and traded on the Exchange.

Of the options issued under the 2004 Employee Stock Option Plan, 15,000 remain outstanding.

Options issued pursuant to the 2004 Employee Stock Option Plan have no expiration date.

The Company previously determined there will be no additional grants under the 2004 Employee Stock Option Plan.

For the year ended December 31, 2024, there were no Common Stock options unexercised.

For the year ended December 31, 2023, there was a total of 15 thousand Common Stock options unexercised.

For the years ended December 31, 2024, and 2023, there were no anti-dilutive shares, nor warrants outstanding.

On March 14, 2023, a stock repurchase program was unanimously approved by the Company’s Board, which gave management authorization to purchase up to one million shares of the Company’s Common 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 for the year ended December 31, 2024:

Total Number of

Average Price

Shares Available

Fiscal Period

Shares Purchased

Paid per Share

Balance as of January 1, 2024

January 1 - 31, 2024

February 1 - 29, 2024

March 1 - 31, 2024

Balance as of March 31, 2024

April 1 - 30, 2024

May 1 - 31, 2024

June 1 - 30, 2024

Balance as of June 30, 2024

July 1 - 31, 2024

August 1 - 31, 2024

September 1 - 30, 2024

Balance as of September 30, 2024

October 1 - 31, 2024

November 1 - 30, 2024

December 1 - 31, 2024

Balance as of December 31, 2024

For the year ended December 31, 2024, the Company repurchased 512,957 shares for $ 2,413,774 , for an average price of $ 4.71 .

NOTE 14 — DEBT

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

Outstanding Balance

Note payable, FSB (1)

Note payable, Truist Bank (3)

Notes payable, TBT (4,5)

Note payable, Scottsdale Transaction (6)

Note payable, FSB (2)

Note payable, Avail Transaction (7)

Line of credit, FSB (8)

Note payable, TBT (9)

current portion

( 3,591,351 )

( 1,361,443 )

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

Note payable, FSB (1)

Note payable, Truist Bank (3)

Notes payable, TBT (4,5)

Note payable, Scottsdale Transaction (6)

Note payable, FSB (2)

Note payable, Avail Transaction (7)

Line of Credit, FSB (8)

Note payable, TBT (9)

(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 $ 956 thousand 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 $ 496 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 $ 1.772 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, 2024, the consumer segment entered into a $ 50 thousand secured amortizing note payable in relation to the Scottsdale Transaction.

The repayment of the note payable shall begin upon the fulfillment of certain terms and conditions under the asset purchase agreement entered into on September 12, 2024.

The note payable’s imputed interest is 3.10 % and matures on September 30, 2026.

(7) On October 29, 2021, the consumer segment entered into a $ 2.000 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 January 1, 2025.

(8) On November 8, 2024, the Company entered into a $ 3.800 million secured line of credit with FSB.

The line of credit bears interest at our rate of deposit + 1.00 % with a floor of 3.10 % and matures on November 23, 2027.

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 years ended December 31, 2024, and December 31, 2023.

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

Scheduled Principal Payments and Maturities by Year

NOTE 15 — STOCK-BASED COMPENSATION

On June 21, 2004, our shareholders approved the adoption of the 2004 Stock Option Plan (the “2004 Plan”), which reserved 1,700,000 shares of our Common Stock for issuance upon exercise of options to purchase our Common Stock.

Prior to 2012, the Company granted options to purchase an aggregate of 1,459,634 shares of our Common Stock under the 2004 Plan to certain of our officers, directors, key employees, and other individuals who provided us with goods and services.

As of December 31, 2024, of the options issued under the 2004 Plan, 845,634 had been exercised, 614,000 had expired, and zero (0) remain outstanding.

Since no further issuances can be made under the 2004 Plan and no options remain outstanding, the 2004 Plan has been formally terminated.

On December 7, 2016, stockholders of the Company approved the adoption of the 2016 Equity Incentive Plan (the “2016 Plan”), which reserved 1,100,000 shares for issuance pursuant to awards issued thereunder.

As of December 31, 2024, no awards had been made under the 2016 Plan.

The following table summarizes the activity in common shares subject to options and warrants:

Years Ended December 31,

average exercise

Outstanding at beginning or year

Outstanding at end of year

Options exercisable at end of year

The 15,000 options exercisable at the end of the year are potential dilutive shares.

Information about stock options outstanding at December 31, 2023 is summarized as follows:

Options Outstanding and Exercisable

Weighted average

contractual life

Exercise price

Number outstanding

exercise price

Options currently issued pursuant to the Company’s 2004 Employee Stock Option Plans have no expiration date.

The aggregate intrinsic values in the above table were based on the closing price of our Common Stock of $ 4.86 as of December 31, 2023.

During Fiscal years 2023 and 2022, there was $ 0 recognized in stock-based compensation expense.

The 2016 plan was never utilized and no equity awards were made, the 2016 Plan has been formally terminated.

NOTE 16 — RELATED PARTY TRANSACTIONS

The Company has a corporate policy governing the identification, review, consideration, and approval or ratification of transactions with related persons.

Under this policy, all 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.

The Company utilizes a space owned by a related party, for the secure processing and handling of materials before distribution.

No consideration is exchanged between the parties, but the Company estimates that, if costs were incurred, they would be immaterial to its consolidated financial statements.

NOTE 17 — CONTINGENCIES

We review the need to accrue for any loss contingency and establish a liability when, in the opinion of management, it is probable that 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 have a material adverse effect on financial position, results of operations, or liquidity.

outcomes of any currently pending lawsuits, claims, and proceedings cannot be predicted, and therefore, there can be no assurance that this will be the case.

There are no loss contingencies subject to reporting for the years ended December 31, 2024 and 2023.

NOTE 18 — INCOME TAXES

The income tax provision reconciled to the tax computed at the statutory from continuing operations Federal Statutory rate follows:

Tax Expense at Statutory Rate

Valuation Allowance

( 4,513,493 )

Correction to Deferreds

Non-Deductible Expenses and Other

State Taxes, Net of Federal Benefit

Income tax expense (benefit)

$ ( 1,309,606 )

( 1,488,258 )

$ ( 1,309,606 )

Deferred income taxes are comprised of the following at December 31, 2023 and 2022:

Deferred tax assets (liabilities):

Stock options and other

The Company’s income from continuing operations before income tax expense for Fiscal 2024 and Fiscal 2023 was $ 8,749,180 and $ 9,021,370 , respectively, and was derived entirely from domestic operations.

The following table summarizes the components of income tax expense, disaggregated by current and deferred, and by federal and state:

State and local

The following table provides a reconciliation of the Company’s federal tax rate to its effective tax rate:

Year Ended December 31,

Income tax expense at the federal tax rate

State and local taxes, net of federal income tax effect (1)

Nontaxable or nondeductible items

(1) State taxes, net of federal benefit are predominately due to activity in Texas as the majority of business activity of the Company is from that state.

The following table summarizes income taxes paid, net of any refunds received for the years ended December 31, 2024 and 2023:

State and local

The following table summarizes income taxes paid, net of any refunds received, disaggregated by individual jurisdictions in which income taxes paid, net of refunds received is equal to or greater than five percent of total income taxes paid, for the years ended December 31, 2024 and 2023:

(1) Taxes paid to the state of Arizona exceeded the five percent threshold for the year ended December 31, 2023, but not for the year ended December 31, 2024.

The following chart provides detail of the significant temporary differences giving rise to deferred tax assets and liabilities:

December 31, 2024

December 31, 2023

Deferred Tax Asset (Liability)

Contingencies and accruals

Property and equipment

Net operating loss carryforward

Goodwill and intangibles

Total deferred tax assets (liabilities), net

Valuation allowance

Net Deferred tax asset (liability)

No valuation allowance was recorded against the net deferred tax asset (liability) balance as of December 31, 2024 and December 31, 2023.

NOTE 15 — LEASES

The Company has ten operating leases, five in DFW, two in Mt.

Pleasant, South Carolina, two in Chandler, Arizona and one in Scottsdale, Arizona.

The commercial segment has two leases in Chandler, Arizona and two leases in DFW, with a total of approximately 246,000 square feet under lease.

The consumer segment has two leases in Mt.

Pleasant, South Carolina, three leases in DFW, and one lease in Scottsdale, Arizona, with a total of approximately 28,000 square feet under lease.

All ten leases are triple net leases that pay their proportionate amount of common area maintenance, property taxes and property insurance.

Leasing costs for Fiscal 2023 included minimum lease costs of $ 1,911,766 and variable lease costs of $ 834,793 , totaling $ 2,751,559 .

Leasing costs for Fiscal 2022 included minimum lease costs of $ 1,830,175 and variable lease costs of $ 767,353 , totaling 2,597,528 .

As of December 31, 2023, the weighted average remaining lease term and weighted average discount rate for operating leases was 2.00 years and 4.4 %, respectively.

The Company’s future operating lease obligations that have not yet commenced are immaterial.

The cash paid for operating lease liabilities for Fiscal 2023 and Fiscal 2022 was $ 2,755,496 and $ 2,564,815 , respectively.

Future annual minimum lease payments as of December 31, 2023:

2028 and thereafter

Total minimum lease payments

Less imputed interest

Consumer Sub-Total

2028 and thereafter

Total minimum lease payments

Less imputed interest

Commercial Sub-Total

Current portion

NOTE 16 — 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”).

Under this policy, all 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 and duration of the transaction, the nature and interest of the 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.

There were no related party transactions for Fiscal years 2023 and 2022.

NOTE 17 — DEFINED CONTRIBUTION PLAN

The Company sponsors a defined contribution 401(k) plan that is subject to the provisions of the Employee Retirement Income Security Act of 1974.

The plan covers substantially all employees who have completed one month of service.

Participants can contribute up to 15 % of their annual salary subject to Internal Revenue Service limitations.

The Company matched 10 % of the employee’s contribution up to 6 % of the employee’s salary for the Fiscal 2023 and Fiscal 2022 plans.

NOTE 18 — SUBSEQUENT EVENTS

Items 9, 9A, 9B, 9C

NOTE 19 — DEFINED CONTRIBUTION PLANS

The Company sponsors a defined contribution 401(k) plan (“DCP”).

Employee contributions under the DCP are fully vested, with employer matching contributions being subject to a service vesting schedule.

In Fiscal 2024 and 2023, the Company contributed $ 13,472 and $ 14,300 to the DCP, respectively.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data