What changed in this filing

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Item 1. Financial Statements

2025-05-07 compared with 2024-11-05 · 191 added, 311 removed, 342 unchanged (59% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Cost of goods sold

7 unchanged sentences

Income tax expense

( 1,581,162 )

( 1,534,187 )

Basic earnings per share:

4 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

Current assets:

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Intangible assets, net

Deferred tax asset

Liabilities and stockholders’ equity

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Total current liabilities

Deferred tax liability

Notes payable, less current portion

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60,000,000 shares authorized;

26,924,631 shares issued and 26,008,034 shares outstanding as of September 30, 2024;

26,924,631 shares issued and 25,995,201 shares outstanding as of March 31, 2025;

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

Treasury stock at cost, 916,597 and 415,973 shares, as of September 30, 2024 and December 31, 2023, respectively

Treasury stock at cost, 929,430 and 928,930 shares, as of March 31, 2025 and December 31, 2024, respectively

( 4,571,449 )

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended September 30,

Three Months Ended March 31,

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

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( 2,476,259 )

( 4,295,072 )

Prepaid expenses

2 unchanged sentences

Operating leases

( 1,585,642 )

( 1,420,605 )

Other liabilities

1 unchanged sentence

Purchase of property and equipment

( 2,955,024 )

( 1,563,612 )

Purchase of intangible assets

Investment in notes receivable

Acquisition, Kretchmer Transaction

Proceeds from (investment in) notes receivable

Net cash (used in) investing

( 3,260,717 )

( 1,085,362 )

Payments on notes payable

Purchase of treasury stock

( 2,348,995 )

( 1,318,351 )

Net cash (used in) financing

( 1,216,915 )

( 2,249,209 )

Net change in cash and cash equivalents

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Cash paid during the period for:

Noncash investing and financing activities

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

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

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

Kretchmer Transaction, addition to notes payable, addition to goodwill

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

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Stockholders’

Three Months Ended September 30, 2023

Balance as of July 1, 2023

Shares repurchased

( 1,123,531 )

Balance as of September 30, 2023

( 1,318,351 )

Treasury Stock

Preferred Stock

Stockholders’

Three Months Ended September 30, 2024

Balance as of July 1, 2024

( 3,775,534 )

Shares repurchased

Balance as of September 30, 2024

( 4,504,044 )

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

ENVELA CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Treasury Stock

Preferred Stock

Stockholders’

Nine Months Ended September 30, 2023

Three Months Ended March 31, 2024

Balance as of January 1, 2024

Shares repurchased

( 2,155,049 )

( 1,318,351 )

Balance as of September 30, 2023

Shares repurchased

Balance as of March 31, 2024

( 3,060,195 )

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Stockholders’

Nine Months Ended September 30, 2024

Three Months Ended March 31, 2025

Balance as of January 1, 2025

1 unchanged sentence

Shares repurchased

( 2,348,995 )

Balance as of September 30, 2024

Balance as of March 31, 2025

( 4,571,449 )

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

ENVELA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 — BASIS OF PRESENTATION

These unaudited interim condensed consolidated financial statements of Envela Corporation, a Nevada corporation, and its subsidiaries (together with its subsidiaries, the “Company” or “Envela”), included herein have been prepared in accordance with accounting principles generally accepted (“GAAP”) in the United States (“U.S.”) for interim financial information and with the instructions to Quarterly Reports on Form 10-Q and Article 10 of Regulation S-X prescribed by the Securities and Exchange Commission (the “SEC”).

GAAP”) for interim financial information and with the instructions to Quarterly Reports on Form 10-Q and Article 10 of Regulation S-X prescribed by the Securities and Exchange Commission (the “SEC”).

Pursuant to the SEC’s rules and regulations, Quarterly Reports do not include all of the information and notes required by U.S.

In the opinion of management, all adjustments, which are of a normal and recurring nature except those which have been disclosed elsewhere in this Quarterly Report on Form 10-Q (“Form 10-Q”), necessary for a fair presentation of the consolidated financial statements for these interim periods, have been included.

The results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of the results to be expected for the fiscal year ended December 31, 2024 (“Fiscal 2024”).

The results of operations for the three months ended March 31, 2025 are not necessarily indicative of the results to be expected for the fiscal year ended December 31, 2025 (“Fiscal 2025”).

Management suggests these unaudited condensed consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024 (“Fiscal 2024”) filed with the SEC on March 26, 2025 (“2024 Annual Report”).

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

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

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

All intercompany transactions and balances have been eliminated.

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.

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Throughout this document, Envela Corporation is referred to as “we,” “us,” “our,” “Envela,” or the “Company.”

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

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.

Our operations are organized into two operating and reporting segments:

consumer and commercial, which additionally are the Company’s reporting units.

Significant business activities within our reportable segments are detailed below:

Consumer Segment

Our consumer segment operates in the jewelry industry, specializing in the online and brick-and-mortar sale of authenticated high-end luxury goods, fine jewelry, watches, and bullion.

Our diamonds and gemstones are recycled, meaning they were previously set and then unset to become a new design – allowing for a truly low-carbon, ethical origin.

The company focuses on buying and selling pre-owned luxury items, ethically sourced diamonds, gemstones, and precious metals, catering to consumers seeking environmentally responsible options for engagement rings, wedding bands, and other fine jewelry.

Our 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.

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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.

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

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

The Company offers services that manage the entire lifecycle of technology products to ensure data security, regulatory compliance, and

ENVELA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

environmental sustainability.

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

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

See Note 3 – Accounting Policies and Estimates and Note 9 – Segment Information for further details.

NOTE 3 — ACCOUNTING POLICIES AND ESTIMATES

Financial Instruments

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

Notes payable approximate fair value due to the market interest rate charged.

Use of Estimates

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

The preparation of unaudited condensed 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.

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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.

An adjustment to revenue is made once the underlying weight and any precious metal spot price movement are resolved, which is usually around six weeks.

Any adjustment from the resolution of the underlying uncertainty is netted with the settlement due from the original contract.

Historically, these amounts have not been material.

ENVELA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The commercial segment also provides recycling services according to a Scope of Work (“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 asset or material movements to our facilities.

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, product is shipped, and title is transferred.

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

See Note 10 – Revenue for further details.

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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.

In certain instances, 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 September 30, 2024, and December 31, 2023, the consumer segment’s allowance for returns was $ 69,372 and $ 28,402 , respectively.

As of September 30, 2024, and December 31, 2023, the commercial segment’s allowance for returns was $ 55,501 and $ 0 , respectively.

As of March 31, 2025, and December 31, 2024, the consumer segment’s allowance for returns was $ 8,929 and $ 11,942 , respectively.

As of March 31, 2025, and December 31, 2024, the commercial segment’s allowance for returns was $ 53,458 and $ 48,569 , respectively.

Concentrations and Credit Risk

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

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

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 nine months ended September 30, 2024, two customers aggregated 40.0 % of our sales and represented 0.0 % of our accounts receivable balance.

For the nine months ended September 30, 2023, three customers aggregated 38.5 % of our sales and represented 0.0 % of our accounts receivable balance.

For the three months ended March 31, 2025, two customers accounted for 51.3 % of our sales and represented 0.0 % of our accounts receivable balance.

For the three months ended March 31, 2024, one customer accounted for 34.1 % of our sales and represented 0.0 % 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

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

For the three months ended September 30, 2024 and 2023, the consumer segment’s outbound shipping and handling costs were $ 17,223 and $ 3,846 , respectively.

For the three months ended September 30, 2024 and 2023, the commercial segment’s outbound shipping and handling costs were $ 1,128,553 and $ 1,096,423 , respectively.

For the nine months ended September 30, 2024 and 2023, the consumer segment’s outbound shipping and handling costs were $ 67,013 and $ 9,083 , respectively.

For the nine months ended September 30, 2024 and 2023, the commercial segment’s outbound shipping and handling costs were $ 3,716,832 and $ 4,308,906 , respectively.

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

For the three months ended March 31, 2025 and 2024, the consumer segment’s shipping and handling costs were $ 16,686 and $ 439 , respectively.

For the three months ended March 31, 2025 and 2024, the commercial segment’s shipping and handling costs were $ 991,324 and $ 1,394,077 , respectively.

ENVELA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Advertising Costs

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

For the three months ended September 30, 2024 and 2023, the consumer segment’s advertising costs were $ 357,151 and $ 162,713 , respectively.

For the three months ended September 30, 2024 and 2023, the commercial segment’s advertising costs were $ 59,714 and $ 10,803 , respectively.

For the nine months ended September 30, 2024 and 2023, the consumer segment’s advertising costs were $ 930,132 and $ 713,840 , respectively.

For the nine months ended September 30, 2024 and 2023, the commercial segment’s advertising costs were $ 192,691 and $ 32,042 , respectively.

For the three months ended March 31, 2025 and 2024, the consumer segment’s advertising costs were $ 279,246 and $ 247,903 , respectively.

For the three months ended March 31, 2025 and 2024, the commercial segment’s advertising costs were $ 80,218 and $ 71,095 , respectively.

We determine if an arrangement is a lease at inception.

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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 three and nine months ended September 30, 2024 and 2023.

The Company did no t have a deferred tax asset as of September 30, 2024, or December 31, 2023, and as such, there was no valuation allowance.

As of September 30, 2024, the Company had a deferred tax liability of $ 34,187 .

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

We have not taken a tax position that, if challenged, would have a material effect on the consolidated financial statements or the effective tax rate for the three months ended March 31, 2025 and 2024.

As of March 31, 2025, the Company had a deferred tax asset of $ 66,186 .

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

The Company did no t have a valuation allowance as of March 31, 2025, or December 31, 2024.

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.

For the periods presented in these condensed consolidated financial statements, the Company’s CODM was identified as the Chief Executive Officer.

ENVELA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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.

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

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 9 – Segment Information for further details.

Earnings Per Share

Basic earnings per share of our common stock, par value $ 0.01 per share (our “Common Stock”), is computed by dividing net earnings available to holders of the Company’s Common Stock by the weighted average number of shares of Common Stock outstanding for the reporting period.

Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts requiring the Company to issue Common Stock were exercised or converted into Common Stock.

Basic earnings per share of our common stock, par value $ 0.01 per share (our “Common Stock”) is computed by dividing net earnings available to holders of our Common Stock by the weighted average number of shares of Common Stock outstanding for the reporting period.

Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue Common Stock were exercised or converted into Common Stock.

For the calculation of diluted earnings per share, the basic weighted average number of shares is increased by the dilutive effect of stock options and warrants outstanding determined using the treasury stock method.

See Note 12 – Basic and Diluted Average Shares for further details.

Stock-Based Compensation

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.

In addition, to the extent that the Company receives an excess tax benefit upon the exercise of an award, such benefit is reflected in cash flow from financing activities within the condensed consolidated statement of cash flows.

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

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The Company’s policy is to present taxes collected from customers and remitted to governmental authorities on a net basis.

The Company records the amounts collected as a current liability and relieves such liability upon remittance to the taxing authority without impacting revenue or expenses.

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 condensed 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, cash and cash equivalents exceed federally insured limits.

Cash and Cash Equivalents

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Accounts Receivable, Net of Allowances

Accounts receivable represent amounts primarily due from customers on products and services.

Accounts receivable represents 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 the 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.

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

ENVELA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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 September 30, 2024, and December 31, 2023, the consumer segment’s allowance for credit losses was $ 0 and $ 0 , respectively.

As of September 30, 2024, and December 31, 2023, the commercial segment’s allowance for credit losses was $ 415,593 and $ 260,858 , respectively.

As of March 31, 2025, and December 31, 2024, the consumer segment’s allowance for credit losses was $ 0 and $ 0 , respectively.

As of March 31, 2025, and December 31, 2024, the commercial segment’s allowance for credit losses was $ 454,491 and $ 433,159 , respectively.

Consumer Segment

The consumer segment values inventory at the lower of cost or net realizable value.

We acquire inventory based on our own internal estimate of the fair value of the items at the time of purchase.

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.

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The majority of our inventory has some component of its value that is based on the spot market price of precious metals.

Because the overall market value for precious metals regularly fluctuates, we monitor these fluctuations for any adverse impact on the carrying value of our inventory.

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

Commercial Segment

Our inventory primarily includes processed and unprocessed base metals, electronic scrap materials, as well as technology assets being held for resale.

The processed and unprocessed base metals and electronic scrap materials are valued utilizing the average cost method.

Our technology assets are valued utilizing the retail cost method.

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

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

The cost of our processed and unprocessed inventory, primarily consisting of base metals and electronic scrap materials, is determined by 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 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 nine months ended September 30, 2024, requiring an interim goodwill impairment test, and the Company did not record a goodwill impairment charge in any of the periods presented.

There were no triggering events identified during the three months ended March 31, 2025, requiring an interim goodwill impairment test, and the Company did not record a goodwill impairment charge in any of the periods presented.

See Note 5 – 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.

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 the remaining useful life

Furniture and fixtures

Office technology

Leasehold improvements

Shorter of 15 years or the 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.

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

ENVELA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

See Note 6 – Property and Equipment, Net for further details.

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Finite-lived intangible assets are carried at cost less accumulated amortization and are amortized on a straight-line basis over the estimated useful lives of the assets;

except for assets under development which have not yet been placed into service.

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 7 – 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 renumeration.

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 the reporting of disaggregated 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 type of 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 presentation of the operations section within its consolidated statements of cash flows was updated to present “non-cash lease expense” as a separate line item, previously included within “changes in operating assets and liabilities – operating leases.” The Company has elected to reclassify $ 1,418,928 from operating leases to non-cash lease expense in the condensed consolidated statements of cash flows for the nine months ended September 30, 2023.

See the condensed consolidated statements of cash flows for further details.

The Company has elected to reclassify $ 200 thousand in noncash activities associated with the acquisition of Steven Kretchmer, Inc.

which were presented in the Company’s Form 10-Q for the quarterly period ended September 30, 2023, as an investing cash outflow of $ 300 thousand for “Acquisition of Steven Kretchmer, Inc.,” and a financing cash inflow of $ 200 thousand for “Proceeds from note payable, Steven Kretchmer, Inc.

acquisition.” The investing outflow for the

acquisition of Steven Kretchmer, Inc.

was $ 100 thousand.

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

See the condensed consolidated statements of cash flows and Note 4 – Changes in Business for further details.

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 condensed 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.

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

Recent Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which will require the Company to disclose segment expenses that are significant and regularly provided to the CODM.

In addition, ASU 2023-07 will require the Company to disclose the title and position of its CODM and how the CODM uses segment profit or loss information in assessing segment performance and deciding how to allocate resources.

ASU 2023-07 will be effective for fiscal years beginning January 1, 2024, Form 10-K, and interim periods within fiscal years beginning on January 1, 2025.

The standard will be adopted beginning January 1, 2024, for the fiscal year and adopted for the interim periods beginning January 1, 2025, by using a modified retrospective transition approach.

The Company does not expect adoption to have a material impact on its consolidated financial statements.

In December 2023, the FASB issued Accounting Standards Update 2023-09 (“ASU 2023-09”), Income Taxes (Topic 740):

Improvement to Income Tax Disclosures, amending income tax disclosure requirements for the effective tax rate reconciliation and income taxes paid.

The amendments in ASU 2023-09 will be effective for fiscal years beginning January 1, 2025.

The standard will be adopted beginning January 1, 2025, for the fiscal year on a prospective basis.

Early adoption and retrospective application of the amendments are permitted.

The Company does not expect adoption to have a material impact on its consolidated financial statements.

New Accounting Standards Pronouncements

In November 2024, the FASB issued Accounting Standards Update (“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.

No other recently issued or effective ASUs had, or are expected to have, a material impact on our financial position and results of operations.

NOTE 4 — CHANGES IN BUSINESS

On September 12, 2024, the consumer segment entered into a purchase agreement relating to the acquisition of the assets of Steven Kretchmer, Inc.

(the “Kretchmer Transaction”), which amended, restated, and replaced the original terms and conditions of the stock purchase agreement entered into on September 12, 2023.

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

The new asset purchase agreement was entered into by Steven Kretchmer, LLC a 100 % owned subsidiary of the Company.

Along with a change in the nature of the acquisition, the purchase price was amended

from $ 300 thousand to $ 150 thousand.

The purchase consideration transferred for the Kretchmer Transaction was $ 100 thousand in cash, paid on September 12, 2023, and the remaining $ 50 thousand through a note payable obligation.

See Note 14 – Debt for further details.

The primary purpose of the Kretchmer 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 Kretchmer Transaction have been reflected in the Company’s consolidated financial statements from the initial date of acquisition.

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

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

During the three months ended September 30, 2024, with the finalization of the terms of the Kretchmer 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.

As of September 30, 2024, the accounting for the Kretchmer Transaction is complete.

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 Kretchmer Transaction:

Property and equipment, net

Intangible assets, net

The impacts of the measurement period adjustments to the Kretchmer Transaction as it pertains to the condensed consolidated statements of income were to depreciation and amortization expense, and are immaterial to the financial statements.

NOTE 4 — INVENTORIES

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

September 30,

Trade inventories

ENVELA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 5 — GOODWILL

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

September 30,

Opening balance

2 unchanged sentences

Additions (reductions)

The decrease in goodwill of $ 300 thousand for the nine months ended September 30, 2024, related to measurement period adjustments pertaining to the Kretchmer Transaction.

The decrease in goodwill of $ 300 thousand for the year ended December 31, 2024, related to measurement period adjustments pertaining to the acquisition of the assets of a bespoke fabricator of jewelry in Scottsdale, Arizona (the “Scottsdale Transaction”).

ENVELA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 6 — PROPERTY AND EQUIPMENT, NET

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

September 30,

Reclassification

Building and improvements

( 1,443,207 )

Leasehold improvements

5 unchanged sentences

( 3,287,437 )

( 2,946,727 )

Leasehold improvements

1 unchanged sentence

Machinery and equipment

Construction in progress (2)

accumulated depreciation

( 1,186,004 )

( 1,112,694 )

Building and improvements

Machinery and equipment

Enterprise resource planning system (3)

Construction in progress (1)

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 .

(1) As of March 31, 2025 and December 31, 2024, these assets are being constructed, have not yet been placed into service and are not yet depreciable.

ENVELA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 7 — INTANGIBLE ASSETS, NET

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

September 30,

Reclassification

Customer lists

7 unchanged sentences

( 2,877,855 )

( 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 September 30, 2024, these intangible assets are under development and 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 September 30, 2024:

(1) As of March 31, 2025 and December 31, 2024, these intangible assets are under development and 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 March 31, 2025:

ENVELA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 8 — ACCRUED EXPENSES

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

September 30,

Accrued interest

4 unchanged sentences

NOTE 9 — SEGMENT INFORMATION

The following table depicts the Company’s disaggregated condensed consolidated statements of income for the three months ended September 30, 2024 and 2023:

Three Months Ended September 30,

% of Sales (1)

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 three months ended March 31, 2025 and 2024:

Three Months Ended March 31,

Cost of goods sold

1 unchanged sentence

Depreciation and amortization

Total operating expenses

Operating income

Other income (expense):

Interest expense

Income before income taxes

Income tax (expense) benefit:

Income tax expense

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

Due to rounding, percentages presented may not add up precisely to the totals provided.

The following table depicts the Company’s disaggregated condensed consolidated statements of income for the nine months ended September 30, 2024 and 2023:

Nine Months Ended September 30,

% of Sales (1)

Cost of goods sold

Selling, general and administrative

Depreciation and amortization

Total operating expenses

ENVELA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following table depicts the reconciliation of the Company’s segment operating income to income before income taxes for the three months ended March 31, 2025 and 2024:

Three Months Ended March 31,

Operating income

Other income (expense):

Interest expense

Income before income taxes

Income tax (expense) benefit:

( 1,614,868 )

Income tax expense

( 1,581,162 )

( 1,534,187 )

Due to rounding, percentages presented may not add up precisely to the totals provided.

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 three months ended March 31, 2025 and 2024:

Three Months Ended March 31,

The following table depicts the Company’s total assets:

September 30, 2024

March 31, 2025

December 31, 2024

NOTE 10 — REVENUE

The following table depicts the Company’s disaggregation of total sales and gross margin for the three months ended September 30, 2024 and 2023

Three Months Ended September 30,

Correction of immaterial error (1)

Commercial adjusted

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

The following table depicts the Company’s disaggregation of total sales and gross margin for the nine months ended September 30, 2024 and 2023:

Nine Months Ended September 30,

Correction of immaterial error (1)

Commercial adjusted

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

The following table depicts the Company’s disaggregation of total sales and gross margin for the three months ended March 31, 2025 and 2024:

Three Months Ended March 31,

ENVELA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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

8 unchanged sentences

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

ENVELA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 11 — LEASES

The following table depicts the Company’s future minimum lease payments as of September 30, 2024:

The following table depicts the Company’s future minimum lease payments as of March 31, 2025:

Total minimum lease payments

3 unchanged sentences

current portion

All of the Company’s leased facilities as of September 30, 2024, are non-cancellable.

All of the Company’s leased facilities as of March 31, 2025, 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.

Lease costs are comprised of a combination of minimum lease payments and variable lease costs.

Lease costs for the three months ended September 30, 2024 and 2023 were $ 846,602 and $ 686,354 , respectively.

Lease costs for the nine months ended September 30, 2024 and 2023 were $ 2,399,239 and $ 2,048,238 , respectively.

As of September 30, 2024, the weighted average remaining lease term and weighted average discount rate for operating leases were 2.8 years and 3.7 %.

As of September 30, 2023, the weighted average remaining lease term and weighted average discount rate for operating leases were 2.3 years and 4.4 %.

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

Three Months Ended March 31,

Non-cash activities:

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

ENVELA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following table depicts the Company’s leasing costs for the three months ended March 31, 2025 and 2024:

Three Months Ended March 31,

Operating lease cost

Variable lease cost

Short-term lease cost

As of March 31, 2025, the weighted average remaining lease term and weighted average discount rate for operating leases were 3.2 years and 4.0 %.

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

NOTE 12 — BASIC AND DILUTED AVERAGE SHARES

The following table is a reconciliation of the Company’s basic and diluted weighted average common shares for the three months ended September 30, 2024 and 2023:

The following table is a reconciliation of the Company’s basic and diluted weighted average common shares for the three months ended March 31, 2025 and 2024:

Three Months Ended

September 30,

Basic weighted average shares

1 unchanged sentence

Diluted weighted average shares

The following table is a reconciliation of the Company’s basic and diluted weighted average common shares for the nine months ended September 30, 2024 and 2023:

Nine Months Ended

September 30,

Basic weighted average shares

Effect of potential dilutive securities

Diluted weighted average shares

For three and nine months ended September 30, 2024 and 2023, there was a total of 15 thousand common stock options unexercised.

For the three and nine months ended September 30, 2024 and 2023, there were no anti-dilutive shares.

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

For three months ended March 31, 2025 and 2024, there were 0 and 15 thousand Common Stock options unexercised, respectively.

For the three months ended March 31, 2025 and 2024, there were no anti-dilutive shares.

On March 14, 2023, a stock repurchase program was unanimously approved by the Company’s Board of Directors (the “Board”), which gave management authorization to purchase up to one million shares of the 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 three and nine months ended September 30, 2024:

On March 27, 2025, the Board unanimously approved the repurchase of an additional 100,000 shares of the Common Stock, bringing the total authorization under the existing repurchase program to 1,100,000 shares.

The following table lists the repurchase of Company shares for the three months ended March 31, 2025:

Total Number of

9 unchanged sentences

Balance as of March 31, 2025

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

For the three months ended September 30, 2024, the Company repurchased 147,195 shares for $ 728,510 , for an average price of $ 4.95 .

For the nine months ended September 30, 2024, the Company repurchased 500,624 shares for $ 2,348,995 , for an average price of $ 4.69 .

For the three months ended March 31, 2025, the Company repurchased 500 shares for $ 2,626 , for an average price of $ 5.25 .

ENVELA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 13 — DEBT

1 unchanged sentence

Outstanding Balance

September 30,

Note payable, FSB (1)

1 unchanged sentence

Notes payable, TBT (4,5)

Note payable, Kretchmer Transaction (6)

Note payable, Scottsdale Transaction (6)

Note payable, FSB (2)

4 unchanged sentences

( 3,399,409 )

The following table depicts the Company’s future principal payments on long-term debt obligations as of September 30, 2024:

Note payable, FSB (1)

Note payable, Truist Bank (3)

Notes payable, TBT (4,5)

Note payable, Kretchmer Transaction (6)

Note payable, FSB (2)

Note payable, Avail Transaction (7)

Line of Credit, FSB (8)

Note payable, TBT (9)

( 3,591,351 )

(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”).

8 unchanged sentences

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 Kretchmer Transaction.

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

(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.

ENVELA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(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.

The note payable’s imputed interest is 3.10 % and matured and was paid in full 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 3.10 % and matures on November 23, 2024.

This note was previously presented within our commercial segment and is now presented within corporate as the line of credit provides borrowing capacity for all segments.

See Note 18 – Subsequent Events for further details.

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.

(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 3, 2025.

The Company was in compliance with all of its debt obligation covenants for the three and nine months ended September 30, 2024 and 2023.

The following table depicts the Company’s future scheduled aggregate principal payments and maturities as of September 30, 2024:

The following table depicts the Company’s future principal payments on long-term debt obligations as of March 31, 2025:

Note payable, FSB (1)

Note payable, Truist Bank (3)

Notes payable, TBT (4,5)

Note payable, Scottsdale Transaction (6)

Note payable, FSB (2)

Line of credit, FSB (8)

Note payable, TBT (9)

The Company was in compliance with all of its debt obligation covenants for the three months ended March 31, 2025 and 2024.

The following table depicts the Company’s future scheduled aggregate principal payments and maturities as of March 31, 2025:

Scheduled Principal Payments and Maturities by Year

NOTE 14 — STOCK-BASED COMPENSATION

There was no stock-based compensation expense for the three and nine months ended September 30, 2024 and 2023.

There was no stock-based compensation expense for the three months ended March 31, 2025 and 2024.

ENVELA CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 15 — RELATED PARTY TRANSACTIONS

1 unchanged sentence

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.

There are no related party transactions subject to reporting for the three and nine months ended September 30, 2024 and 2023.

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 condensed consolidated financial statements.

NOTE 16 — CONTINGENCIES

2 unchanged sentences

However, the 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 three and nine months ended September 30, 2024 and 2023.

NOTE 18 — SUBSEQUENT EVENTS

On October 30, 2024, the Company received a commitment from FSB to renew its line of credit.

The renewal increases our line of credit from $ 3.500 million to $ 3.800 million, extends the maturity to November 23, 2027 with borrowings bearing interest at our rate of deposit plus 1.0 %.

The Company intends to renew its line of the credit with FSB.

There are no loss contingencies subject to reporting for the three months ended March 31, 2025 and 2024.

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-Q

Item 1. Financial Statements