What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-07 compared with 2024-11-05 · 142 added, 284 removed, 118 unchanged (78% of the section changed)

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Forward-Looking Statements

This Quarterly Report on Form 10-Q for the quarter ended September 30, 2024 (this “Form 10-Q”), including but not limited to:

This Quarterly Report on Form 10-Q for the quarter ended March 31, 2025 (this “Form 10-Q”), including but not limited to:

(i) the section of this Form 10-Q entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations;” (ii) information concerning our business prospects or future financial performance, anticipated revenues, expenses, profitability or other financial items;

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We undertake no obligation to release publicly the results of any revisions to these forward-looking statements, which may be made to reflect events or circumstances after the date thereon, including without limitation, changes in our business strategy or planned capital expenditures, or store growth plans, or to reflect the occurrence of unanticipated events.

This section includes a discussion of our operations for the three and nine months ended September 30, 2024 and 2023.

This section includes a discussion of our operations for the three months ended March 31, 2025 and 2024.

The following discussion and analysis provide information that management believes is relevant to an assessment and understanding of our financial condition and results of operations.

The discussion should be read in conjunction with the Company’s 2024 Annual Report, the unaudited condensed consolidated financial statements, and the related Notes thereto included in Part I, Item 1 of this report.

Use of Non-U.S.

GAAP Financial Measures

Within this management discussion and analysis, we use supplemental measures of our performance, which are derived from our interim condensed consolidated financial information, but which are not presented in our interim condensed consolidated financial statements prepared in accordance with U.S.

We believe that providing these non-GAAP financial measures adds a meaningful presentation of our operating and financial performance, liquidity, and leverage.

Our non-GAAP financial measures should be considered in addition to, but not as a substitute for, the most directly comparable GAAP measures.

Other companies, including companies in our industry, may calculate non-GAAP financial measures differently than we do, limiting the usefulness of those measures for comparative purposes.

GAAP Financial Measures for further details.

Critical Accounting Policies and Estimates

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Economic Conditions

and other world economies are currently experiencing high interest rates and high levels of inflation, coupled with commodity price risk, mainly associated with the market price of precious metals and diamonds which have the potential to impact consumer discretionary spending behavior.

Impacts of High Interest Rates and Inflation

and other world economies are currently experiencing high interest rates and elevated levels of inflation, coupled with commodity price risk, mainly associated with variations in the market price of precious metals and diamonds, which have the potential to impact consumer discretionary spending behavior.

Furthermore, adverse macroeconomic conditions can also impact demand for resale technology assets.

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

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

We continuously monitor our inventory positions and associated working capital to respond to market conditions and to meet seasonal business cycles and expansionary plans.

These economic cycles may from time to time require the business to utilize its line of credit or seek additional capital.

Impacts of Tariffs

government has recently adopted new approaches to trade policy, and announced tariffs on certain foreign goods, certain global tariffs, and the possibility of significant additional tariff increases or expansions of tariffs.

The timing and scope of such tariffs by the U.S.

and retaliatory tariffs by other countries in response to such tariffs are currently uncertain.

The impacts of tariffs on each of our reportable segments are detailed below:

Consumer Segment

The Company’s consumer segment does not source inventory from or sell it into international markets, so it is not directly impacted by tariffs.

However, global market uncertainty caused by tariffs can increase commodity costs on safe-haven metals such as gold and silver, which may increase working capital requirements.

The Company mitigates increased working capital requirements by monitoring its inventory position and turnover, and maintaining disciplined buying practices to maintain margin.

Commercial Segment

The Company’s commercial segment periodically purchases limited quantities of personal technology assets for resale and replacement parts from international markets.

Tariffs may increase costs for original equipment manufacturers, retailers, and parts distributors and, as a result, may require the Company to pay more for the purchase of personal technology assets for resale and replacement parts, thus increasing the Company’s required working capital requirements.

The Company mitigates increased working capital requirements by monitoring its inventory position and turnover, maintaining disciplined buying practices, and using optimal domestic and international sales channels to maintain margins.

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

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

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

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 reportable segments:

commercial and consumer.

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.

Commercial Segment

Our commercial segment specializes in the de-manufacturing of end-of-life electronic assets to reclaim commodities and other materials, while also engaging in the (“IT”) asset disposition (“ITAD”) industry.

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 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 environmental sustainability.

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

Segment Activities

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Our strategy is to expand both organically and through acquisitions.

The Company has taken considerable steps to bolster its management team and operating systems to position itself for growth.

Our production facilities are capable of managing the expansion of existing relationships and consolidation of acquisition targets within relative geographic proximity to our existing facilities.

Change in Disclosure of Results of Operations

The Company previously disaggregated revenue and gross margin by resale and recycle for each segment within the results of operations.

The Company’s revenue and gross margin are now comprised of more diverse revenue and gross margin streams associated with service offerings and as such to continue reporting under the prior disclosure methodology would be less representative of how the business operates.

The Company believes that this change has no material impact on the interpretation of our results of operations.

Recent Accounting Pronouncements

See Note 3 - Accounting Policies and Estimates for further details.

GAAP Financial Measures

Adjusted EBITDA

Adjusted EBITDA is defined as the sum of net income (loss) of the Company, adjusted for additions (deductions) of interest expense, other (income) expense, income tax expense (benefit), and depreciation and amortization.

Adjusted EBITDA is a key performance measure that management uses to assess our operating performance.

Because Adjusted EBITDA facilitates internal comparisons of our historical operating performance on a more consistent basis, we use this measure as an overall assessment of our performance, to evaluate the effectiveness of our strategies and for planning purposes.

The following table provides a reconciliation of net income to Adjusted EBITDA for the three months ended September 30, 2024 and 2023:

Three Months Ended September 30,

Adjusted EBITDA Reconciliation:

Net income (loss)

Addition (deduction):

Depreciation and amortization

Interest expense

Income tax expense (benefit)

The following table provides a reconciliation of net income to Adjusted EBITDA for the nine months ended September 30, 2024 and 2023:

Nine Months Ended September 30,

Adjusted EBITDA Reconciliation:

Net income (loss)

Addition (deduction):

Depreciation and amortization

Interest expense

Income tax expense (benefit)

Net Cash is defined as the difference between (i) cash and cash equivalents and (ii) the sum of debt obligations.

We believe that presenting Net Cash is useful to investors as a measure of our liquidity and leverage profile, as cash and cash equivalents can be used, among other things, to repay indebtedness.

The following table depicts the Company’s Net Cash:

September 30,

debt obligations

Our production facilities are capable of managing the expansion of existing relationships and consolidation of acquisition targets within relative geographic proximity into our existing facilities.

Results of Operations

Comparison of the Three Months Ended September 30, 2024 and 2023

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

Three Months Ended September 30,

Comparison of the Three Months Ended March 31, 2025 and 2024

The following table depicts our disaggregated condensed consolidated statements of income for the three months ended March 31, 2025 and 2024:

Three Months Ended March 31,

% of Sales (1)

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Total operating expenses

Operating income (loss)

Operating income

Other income (expense):

Interest expense

Income (loss) before income taxes

Income tax (expense) benefit

Net income (loss)

Income before income taxes

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 individual segments reported the following for the three months ended September 30, 2024 and 2023:

Three Months Ended September 30,

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

The individual segments reported the following for the three months ended March 31, 2025 and 2024:

Three Months Ended March 31,

% of consolidated sales

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% of commercial sales

Sales increased by $10,023,073, or 27.2%, during the three months ended September 30, 2024, to $46,899,559, as compared to $36,876,486 during the same period in Fiscal 2023.

Sales increased by $8,398,049, or 21.1%, during the three months ended March 31, 2025, to $48,255,829, as compared to $39,857,780 during the same period in Fiscal 2024.

Consumer Segment

Sales in the consumer segment increased by $6,875,398, or 25.6%, during the three months ended September 30, 2024, to $33,756,600, as compared to $26,881,202 during the same period in Fiscal 2023.

The change was primarily attributed to an increase in revenue from our wholesale channel and incrementally from our stores and online business.

Underlying the aforementioned results was the impact from historically high gold and silver prices.

Albeit, the third quarter of Fiscal 2024 was favorable to the comparative period the consumer segment has also built inventory as to ensure our new Arizona and Texas stores were adequately stocked.

Our Arizona stores were operating for the entire third quarter of Fiscal 2024, while one of our Texas stores soft opened in the later part of the third quarter of Fiscal 2024 and the other opened early in the fourth quarter of Fiscal 2024.

It is anticipated that as our new stores ramp up our inventory position should normalize, and inventory will return to being relieved in the normal course of operations.

Sales in the consumer segment increased by $8,544,587, or 30.3%, during the three months ended March 31, 2025, to $36,770,604, as compared to $28,226,017 during the same period in Fiscal 2024.

The change was primarily attributed to stronger volumes and pricing on scrap grade precious metals transactions and bullion.

Our sales of scrap grade precious metals and bullion were favorably impacted by exceptional inbound material flow from our in-store buying programs, which was sustained from the fourth quarter of Fiscal 2024.

Our online and retail stores business also achieved favorable results.

In the Fiscal 2024 comparative period, we were building an inventory position in preparation for the opening of our new stores, which is now beginning to be relieved in the normal course of operations.

Commercial Segment

Sales in the commercial segment increased by $3,147,675, or 31.5%, during the three months ended September 30, 2024, to $13,142,959, as compared to $9,995,284 during the same period in Fiscal 2023.

The change was primarily attributed to the strong performance of our ITAD business and incrementally from the sale of personal technology assets and shredded electronic scrap grades and associated recoveries.

Our ITAD business was impacted by strong inbound volumes from a new client that we were able to recognize sales on during third quarter of Fiscal 2024.

Sales in the commercial segment decreased by $146,538, or 1.3%, during the three months ended March 31, 2025, to $11,485,225, as compared to $11,631,763 during the same period in Fiscal 2024.

The change was primarily attributed to lower sales volumes of inventory associated with ITAD settlements and from our trade-in business partners but was almost fully offset by sales of our electronic scrap grades and associated recoveries, and from continued growth in our product returns service business.

Inbound material flows resumed from a key supplier of electronic scrap grades that had reduced shipping during the fourth quarter of Fiscal 2024.

Cost of Goods Sold

Three Months Ended September 30,

Three Months Ended March 31,

% of consolidated sales

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% of commercial sales

Cost of goods sold increased by $8,293,116, or 30.6%, during the three months ended September 30, 2024, to $35,435,320, as compared to $27,142,204 during the same period in Fiscal 2023.

Cost of goods sold increased by $6,750,709, or 22.9%, during the three months ended March 31, 2025, to $36,287,805, as compared to $29,537,096 during the same period in Fiscal 2024.

Consumer Segment

Cost of goods sold in the consumer segment increased by $6,548,346, or 28.1%, during the three months ended September 30, 2024, to $29,840,285, as compared to $23,291,939 during the same period in Fiscal 2023.

The change was primarily attributed to the relief of inventory on the lower margin scrap grade precious metals which were sold through our wholesale channel.

The greater mix of lower margin scrap grade precious metals being relieved from inventory resulted in the higher cost of goods sold as a percent of sales.

Cost of goods sold in the consumer segment increased by $7,882,873, or 31.9%, during the three months ended March 31, 2025, to $32,559,701, as compared to $24,676,828 during the same period in Fiscal 2024.

The change was primarily attributed to the aforementioned volumes and impacts of rising gold prices.

Cost of goods sold as a percentage of sales was 88.5% during the three months ended March 31, 2025, as compared to 87.4% during the three months ended March 31, 2024.

The change was primarily attributed to product mix, as the relief of inventory associated with scrap grade precious metals and bullion improved as a result of selling into a rising gold market during the first quarter of Fiscal 2025.

Commercial Segment

Cost of goods sold in the commercial segment increased by $1,744,770, or 45.3%, during the three months ended September 30, 2024, to $5,595,035, as compared to $3,850,265 during the same period in Fiscal 2023.

The change was primarily attributed to ITAD revenue sharing settlements and incrementally from the relief of inventory and settlements associated with lower margin shredded electronic scrap grades and from the relief of inventory associated with personal technology assets.

The greater mix of lower margin shredded electronic scrap grades resulted in the higher cost of goods sold as a percent of sales.

Three Months Ended September 30,

Cost of goods sold in the commercial segment decreased by $1,132,164, or 23.3%, during the three months ended March 31, 2025, to $3,728,104, as compared to $4,860,268 during the same period in Fiscal 2024.

The change was primarily attributed to reduced sales associated with ITAD settlements and from personal technology assets originating from our trade in business.

In comparative terms, our trade in business had greater asset flow from business partners in the first quarter of Fiscal 2024, resulting in stronger outbound sales in that period.

Cost of goods sold as a percentage of sales was 32.5% during the three months ended March 31, 2025, as compared to 41.8% during the three months ended March 31, 2024.

The change was primarily attributed to the settlement of a large high margin ITAD settlement with a recurring customer and from strategic initiatives associated with margin expansion from sales channels associated with personal technology assets, and from a greater mix of revenue from service fees from our product returns business, which has no associated cost of goods sold.

Three Months Ended March 31,

% of consolidated sales

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% of commercial sales

Gross margin increased by $1,729,957, or 17.8%, during the three months ended September 30, 2024, to $11,464,239, as compared to $9,734,282 during the same period in Fiscal 2023.

Gross margin increased by $1,647,340, or 16.0%, during the three months ended March 31, 2025, to $11,968,024, as compared to $10,320,684 during the same period in Fiscal 2024.

Consumer Segment

Gross margin in the consumer segment increased by $327,052, or 9.1%, during the three months ended September 30, 2024, to $3,916,315, as compared to $3,589,263 during the same period in Fiscal 2023.

Gross margin in the consumer segment increased by $661,714, or 18.6%, during the three months ended March 31, 2025, to $4,210,903, as compared to $3,549,189 during the same period in Fiscal 2024.

The net impact of the aforementioned increase in sales of $8,544,587 and increase in cost of goods sold of $7,882,873 resulted in the $661,714 increase in gross margin.

Commercial Segment

Gross margin in the commercial segment increased by $1,402,905, or 22.8%, during the three months ended September 30, 2024, to $7,547,924, as compared to $6,145,019 during the same period in Fiscal 2023.

The net impact of the aforementioned increase in sales of $3,147,675 and increase in cost of goods sold $1,744,770 resulted in the $1,402,905 increase in gross margin.

Gross margin in the commercial segment increased by $985,626, or 14.6%, during the three months ended March 31, 2025, to $7,757,121, as compared to $6,771,495 during the same period in Fiscal 2024.

The net impact of the aforementioned decrease in sales of $146,538 and decrease in cost of goods sold $1,132,164 resulted in the $985,626 increase in gross margin.

Selling, General and Administrative

Three Months Ended September 30,

Three Months Ended March 31,

% of consolidated sales

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% of commercial sales

Selling, general and administrative expense increased by $1,582,608, or 21.3%, during the three months ended September 30, 2024, to $9,028,988, as compared to $7,446,380 during the same period in Fiscal 2023.

Selling, general and administrative expense increased by $767,286, or 10.0%, during the three months ended March 31, 2025, to $8,404,262, as compared to $7,636,976 during the same period in Fiscal 2024.

Consumer Segment

Selling, general and administrative expense in the consumer segment increased by $1,337,353, or 51.7%, during the three months ended September 30, 2024, to $3,925,981, as compared to $2,588,628 during the same period in Fiscal 2023.

change was primarily attributed to incurring operational cost structures from our new Arizona and Texas stores along with travel costs associated with preparing the new Texas stores for opening.

Selling, general and administrative expense in the consumer segment increased by $636,416, or 19.6%, during the three months ended March 31, 2025, to $3,887,906, as compared to $3,251,490 during the same period in Fiscal 2024.

The change was primarily attributed to cost structures associated with our new Phoenix and San Antonio stores, but was incrementally offset by the reduction of costs associated with new store openings.

During the first quarter of Fiscal 2024 the business was heavily focused on bringing our Phoenix stores online, resulting in significant costs associated with travel, onboarding employees and training.

Commercial Segment

Selling, general and administrative expense in the commercial segment increased by $245,255, or 5.0%, during the three months ended September 30, 2024, to $5,103,007, as compared to $4,857,752 during the same period in Fiscal 2023.

The change was primarily attributed to a marginal increase in labor costs associated with a new service-based client along with labor costs from increased processing volumes of shredded electronic scrap grades.

In addition, the cost of supplies increased on higher processing and shipping volumes.

Selling, general and administrative expense in the commercial segment increased by $130,870, or 3.0%, during the three months ended March 31, 2025, to $4,516,356, as compared to $4,385,486 during the same period in Fiscal 2024.

The change was primarily attributed to human capital costs associated with our services business which were offset by variable-cost production expenses that scale with sales volumes of inventory.

Depreciation and Amortization

Three Months Ended September 30,

Three Months Ended March 31,

% of consolidated sales

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% of commercial sales

Depreciation and amortization expense increased by $77,066, or 22.8%, during the three months ended September 30, 2024, to $414,779, as compared to $337,713 during the same period in Fiscal 2023.

Depreciation and amortization expense increased by $101,776, or 29.6%, during the three months ended March 31, 2025, to $445,341, as compared to $343,565 during the same period in Fiscal 2024.

Consumer Segment

Depreciation and amortization expense in the consumer segment increased by $74,815, or 98.6%, during the three months ended September 30, 2024, to $150,657, as compared to $75,842 during the same period in Fiscal 2023.

The change was primarily attributed to our Arizona stores that were placed into service in the later part of the second quarter of Fiscal 2024 along with one of our new Texas stores that went into service in the later part of the third quarter of Fiscal 2024 as well as from the depreciation and amortization expense related to the assets acquired in the Kretchmer Transaction.

Depreciation and amortization expense in the consumer segment increased by $86,956, or 92.8%, during the three months ended March 31, 2025, to $180,632, as compared to $93,676 during the same period in Fiscal 2024.

The change was primarily attributed to the depreciation of assets placed into service related to our new stores.

Commercial Segment

Depreciation and amortization expense in the commercial segment increased by $2,251, or 0.9%, during the three months ended September 30, 2024, to $264,122, as compared to $261,871 during the same period in Fiscal 2023.

Depreciation and amortization expense in the commercial segment increased by $14,820, or 5.9%, during the three months ended March 31, 2025, to $264,709, as compared to $249,889 during the same period in Fiscal 2024.

There was no material impact from assets capitalized or reaching maturity in each comparative period and as such no discussion point.

Other Income (Expense)

Three Months Ended September 30,

Three Months Ended March 31,

% of consolidated sales

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% of commercial sales

Other income increased by $147,914, or 76.9%, during the three months ended September 30, 2024, to $340,351, as compared to $192,437 during the same period in Fiscal 2023.

Other income decreased by $32,923, or 13.8%, during the three months ended March 31, 2025, to $205,605, as compared to $238,528 during the same period in Fiscal 2024.

Consumer Segment

Other income in the consumer segment increased by $39,651, or 173.5%, during the three months ended September 30, 2024, to $62,502, as compared to $22,851 during the same period in Fiscal 2023.

The change was primarily attributed to the proportional allocation of the proceeds from a settlement related to repairs to our corporate headquarters and to the consumer segment’s higher working capital requirements from the aforementioned launching of our Arizona and Texas stores which has decreased the excess cash flow available to sweep into an interest-bearing account.

The impact on interest income is referenced below.

Interest income comprised $2 and $21,741 of other income during the three months ended September 30, 2024 and 2023, respectively.

Other income in the consumer segment decreased by $7,156, or 89.4%, during the three months ended March 31, 2025, to $849, as compared to $8,005 during the same period in Fiscal 2024.

The change was primarily attributed to rental income being present in our first quarter Fiscal 2024 results.

Interest income comprised $0 and $6 of other income during the three months ended March 31, 2025 and 2024, respectively.

Commercial Segment

Other income in the commercial segment increased by $108,263, or 63.8%, during the three months ended September 30, 2024, to $277,849, as compared to $169,586 during the same period in Fiscal 2023.

The change was primarily attributed to the proportional allocation of the proceeds from a settlement related to repairs to our Company’s corporate headquarters and to the continued focus on reducing working capital which has increased the excess cash flow available to sweep into an interest bearing account.

The impact on interest income is referenced below.

Interest income comprised $203,251 and $140,274 of other income during the three months ended September 30, 2024 and 2023, respectively.

Other income in the commercial segment decreased by $25,767, or 11.2%, during the three months ended March 31, 2025, to $204,756, as compared to $230,523 during the same period in Fiscal 2024.

The change was primarily attributed to a reduction in earned interest rates associated with our interest bearing account and from rental income being present in our first quarter Fiscal 2024 results.

Interest income comprised $144,331 and $196,562 of other income during the three months ended March 31, 2025 and 2024, respectively.

Interest Expense

Three Months Ended September 30,

Three Months Ended March 31,

% of consolidated sales

1 unchanged sentence

% of commercial sales

Interest expense decreased by $11,027, or 9.4%, during the three months ended September 30, 2024, to $106,139, as compared to $117,166 during the same period in Fiscal 2023.

Interest expense decreased by $14,533, or 12.0%, during the three months ended March 31, 2025, to $106,321, as compared to $120,854 during the same period in Fiscal 2024.

Consumer Segment

Interest expense in the consumer segment decreased by $8,145, or 13.7%, during the three months ended September 30, 2024, to $51,486, as compared to $59,631 during the same period in Fiscal 2023.

Interest expense in the consumer segment decreased by $10,354, or 16.1%, during the three months ended March 31, 2025, to $54,047, as compared to $64,401 during the same period in Fiscal 2024.

There was no material impact from debt additions or amortization in each comparative period and as such no discussion point.

Commercial Segment

Interest expense in the commercial segment decreased by $2,882, or 5.0%, during the three months ended September 30, 2024, to $54,653, as compared to $57,535 during the same period in Fiscal 2023.

There was no material impact from amortization in each comparative period and as such no discussion point.

Income Tax (Expense) Benefit

Three Months Ended September 30,

Interest expense in the commercial segment decreased by $4,179, or 7.4%, during the three months ended March 31, 2025, to $52,274, as compared to $56,453 during the same period in Fiscal 2024.

There was no material impact from debt additions or amortization in each comparative period and as such no discussion point.

Income Tax Expense

Three Months Ended March 31,

% of consolidated sales

1 unchanged sentence

% of commercial sales

NM – Not Meaningful

Income tax expense increased by $251,678, or 79.2%, during the three months ended September 30, 2024, to $569,645, as compared to $317,967 during the same period in Fiscal 2023.

Currently, the Company has a deferred tax liability reflecting a future obligation to pay taxes.

Income tax expense increased by $174,080, or 31.6%, during the three months ended March 31, 2025, to $724,358, as compared to $550,278 during the same period in Fiscal 2024.

Currently, the Company has a deferred tax asset reflecting a future tax benefit that the Company expects to receive.

The Company has a federal tax rate of approximately 21.0%, in addition to other state and local taxes, on net income.

The effective income tax rate was 25.3% and 18.6% for the three months ended September 30, 2024 and 2023, respectively.

The effective income tax rate was 22.5% and 22.4% for the three months ended March 31, 2025 and 2024, respectively.

Differences between our effective income tax rate and the U.S.

federal statutory rate are the result of state taxes and non-deductible expenses, as was the Company’s case for the increase for the three months ended September 30, 2024, compared to the three months ended September 30, 2023.

Net Income (Loss)

Three Months Ended September 30,

federal statutory rate are the result of state taxes and non-deductible expenses, as was the Company’s case for the increase for the three months ended March 31, 2025, compared to the three months ended March 31, 2024.

Three Months Ended March 31,

% of consolidated sales

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% of commercial sales

NM – Not Meaningful

Net income decreased by $22,454, or 1.3%, during the three months ended September 30, 2024, to $1,685,039, as compared to $1,707,493 during the same period in Fiscal 2023.

Refer to the aforementioned attributes discussed within the Comparison of the Three Months Ended September 30, 2024 and 2023 for further details.

Net income increased by $585,808, or 30.7%, during the three months ended March 31, 2025, to $2,493,347, as compared to $1,907,539 during the same period in Fiscal 2024.

Refer to the aforementioned attributes discussed within the Comparison of the Three Months Ended March 31, 2025 and 2024 for further details.

Consumer Segment

Net income (loss) decreased in the consumer segment by $794,219, during the three months ended September 30, 2024, to a net loss of $26,843, as compared to net income of $767,376 during the same period in Fiscal 2023.

Refer to the aforementioned attributes discussed within the Comparison of the Three Months Ended September 30, 2024 and 2023 for further details.

Net income decreased in the consumer segment by $19,382, or 21.9%, during the three months ended March 31, 2025, to $69,094, as compared to $88,476 during the same period in Fiscal 2024.

Refer to the aforementioned attributes discussed within the Comparison of the Three Months Ended March 31, 2025 and 2024 for further details.

Commercial Segment

Net income increased in the commercial segment by $771,765, or 82.1%, during the three months ended September 30, 2024, to $1,711,882, as compared to $940,117 during the same period in Fiscal 2023.

Refer to the aforementioned attributes discussed within the Comparison of the Three Months Ended September 30, 2024 and 2023 for further details.

Net income increased in the commercial segment by $605,190, or 33.3%, during the three months ended March 31, 2025, to $2,424,253, as compared to $1,819,063 during the same period in Fiscal 2024.

Refer to the aforementioned attributes discussed within the Comparison of the Three Months Ended March 31, 2025 and 2024 for further details.

Earnings Per Share

The following table depicts the Company’s earnings per share:

Three Months Ended September 30,

Basic and diluted earnings per share attributable to holders of our Common Stock remained at $0.06 during the three months ended September 30, 2024, as compared to the same period in Fiscal 2023.

Comparison of the Nine Months Ended September 30, 2024 and 2023

The following table depicts our 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

Operating income

Other income (expense):

Interest expense

Income (loss) before income taxes

Income tax (expense) benefit

Net income (loss)

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

The individual segments reported the following for the nine months ended September 30, 2024 and 2023:

Nine Months Ended September 30,

% of consolidated sales

% of consumer sales

% of commercial sales

Sales decreased by $5,727,554 or 4.2%, during the nine months ended September 30, 2024, to $132,054,341, as compared to $137,781,895 during the same period in Fiscal 2023.

Consumer Segment

Sales in the consumer segment decreased by $9,254,388, or 9%, during the nine months ended September 30, 2024, to $93,972,645, as compared to $103,227,033 during the same period in Fiscal 2023.

The change was primarily attributed to softness in the demand for bullion, tempered by the impact from historically high gold and silver prices, coupled with continued inventory carry associated with our Arizona and Texas stores which was incrementally offset in the third quarter of Fiscal 2024 by the relief of lower margin scrap grade precious metals inventory through our wholesale channel.

Commercial Segment

Sales in the commercial segment increased by $3,526,834, or 10.2%, during the nine months ended September 30, 2024, to $38,081,696, as compared to $34,554,862 during the same period in Fiscal 2023.

The change was primarily attributed to continued favorable performance of the sale of personal technology assets, shredded electronic scrap grades and associated recoveries as well as from stronger growth in our ITAD business which was more pronounced in the third quarter of Fiscal 2024.

We also experienced growth in our retail returns service business which is small but growing portion of our diversified revenue streams.

Cost of Goods Sold

Nine Months Ended September 30,

% of consolidated sales

% of consumer sales

% of commercial sales

Cost of goods sold decreased by $6,995,703, or 6.6%, during the nine months ended September 30, 2024, to $98,879,961, as compared to $105,875,664 during the same period in Fiscal 2023.

Consumer Segment

Cost of goods sold in the consumer segment decreased by $9,072,348, or 9.9%, during the nine months ended September 30, 2024, to $82,485,812, as compared to $91,558,160 during the same period in Fiscal 2023.

The change was primarily attributed to the aforementioned softness in the demand for bullion and continued inventory carry which resulted in less inventory costs to be recognized.

In terms of cost of goods sold as a percent of sales it was primarily impacted by a greater mix of higher margin retail inventory being relieved during the first and second quarter of Fiscal 2024 and was tempered by lower margin scrap grade precious metals being relieved in the third quarter of Fiscal 2024.

Commercial Segment

Cost of goods sold in the commercial segment increased by $2,076,645, or 14.5%, during the nine months ended September 30, 2024, to $16,394,149, as compared to $14,317,504 during the same period in Fiscal 2023.

The change was primarily attributed to the relief of inventory related to personal technology assets and lower margin shredded electronic scrap grades and associated revenue sharing and incrementally from ITAD settlements.

ITAD settlements were more pronounced in the third quarter of Fiscal 2024.

The greater mix of the sale of personal technology assets and lower margin shredded electronic scrap grades and associated settlements resulted in a higher cost of goods sold as a percent of sales.

Nine Months Ended September 30,

% of consolidated sales

% of consumer sales

% of commercial sales

Gross margin increased by $1,268,149, or 4.0%, during the nine months ended September 30, 2024, to $33,174,380, as compared to $31,906,231 during the same period in Fiscal 2023.

Consumer Segment

Gross margin in the consumer segment decreased by $182,040, or 1.6%, during the nine months ended September 30, 2024, to $11,486,833, as compared to $11,668,873 during the same period in Fiscal 2023.

The net impact of the aforementioned decrease in sales of $9,254,388 and decrease in cost of goods sold of $9,072,348 resulted in the $182,040 decrease in gross margin.

Commercial Segment

Gross margin in the commercial segment increased by $1,450,189, or 7.2%, during the nine months ended September 30, 2024, to $21,687,547, as compared to $20,237,358 during the same period in Fiscal 2023.

The net impact of the aforementioned increase in sales of $3,526,834 and increase in cost of goods sold of $2,076,645 resulted in the $1,450,189 increase in gross margin.

Selling, General and Administrative

Nine Months Ended September 30,

% of consolidated sales

% of consumer sales

% of commercial sales

Selling, general and administrative expense increased by $2,069,775, or 8.7%, during the nine months ended September 30, 2024, to $25,784,012, as compared to $23,714,237 during the same period in Fiscal 2023.

Consumer Segment

Selling, general and administrative expense in the consumer segment increased by $3,729,311, or 50.0%, during the nine months ended September 30, 2024, to $11,186,939, as compared to $7,457,628 during the same period in Fiscal 2023.

The change was primarily attributed to incurring operational cost structures from our new Arizona and Texas stores along with

travel costs associated with preparing the new Arizona and Texas stores for opening.

Albeit, in the third quarter of Fiscal 2024 travel costs began to subside due to Arizona stores becoming fully operational and reduced travel associated with the opening of Texas based stores which are in relative geographic proximity to our headquarters.

Commercial Segment

Selling, general and administrative expense in the commercial segment decreased by $1,659,536, or 10.2%, during the nine months ended September 30, 2024, to $14,597,073, as compared to $16,256,609 during the same period in Fiscal 2023.

The change was primarily attributed to the operational focus on human capital costs and processing efficiencies at our production facilities, however, the commercial segment has experienced a recent incremental increase in select human capital costs associated with a new retail returns client and from processing higher volumes of shredded electronic scrap grades.

Three Months Ended March 31,

Basic and diluted earnings per share attributable to holders of our Common Stock increased by $0.03, or 42.9%, during the three months ended March 31, 2024, to $0.10, as compared to $0.07 same period in Fiscal 2024.

GAAP Financial Measures

Within this management discussion and analysis, we use supplemental measures of our performance, which are derived from our consolidated financial information, but which are not presented in our consolidated financial statements prepared in accordance with U.S.

We believe that providing these non-U.S.

GAAP financial measures adds a meaningful presentation of our operating and financial performance.

See the reconciliation of net income to adjusted earnings before interest, tax, depreciation, and amortization (“Adjusted EBITDA”) and Net Cash, in Non-U.S.

GAAP Financial Measures below.

Adjusted EBITDA

Adjusted EBITDA is a key performance measure that management uses to assess our operating performance.

The following table provides a reconciliation of the Company’s net income to Adjusted EBITDA for the three months ended March 31, 2025 and 2024:

Three Months Ended March 31,

Adjusted EBITDA Reconciliation:

Addition (deduction):

Depreciation and amortization

Nine Months Ended September 30,

% of consolidated sales

% of consumer sales

% of commercial sales

Depreciation and amortization expense increased by $92,373, or 9.0%, during the nine months ended September 30, 2024, to $1,120,611, as compared to $1,028,238 during the same period in Fiscal 2023.

Consumer Segment

Depreciation and amortization expense in the consumer segment increased by $103,466, or 40.8%, during the nine months ended September 30, 2024, to $356,851, as compared to $253,385 during the same period in Fiscal 2023.

The change was primarily attributed to our Arizona stores that were placed into service in the second quarter of Fiscal 2024 along with one of our new Texas stores that went into service in the third quarter of Fiscal 2024 as well as the depreciation and amortization expense related to the assets acquired in the Kretchmer Transaction.

Commercial Segment

Depreciation and amortization expense in the commercial segment decreased by $11,093, or 1.4%, during the nine months ended September 30, 2024, to $763,760, as compared to $774,853 during the same period in Fiscal 2023.

There was no material impact from assets capitalized or reaching maturity in each comparative period and as such no discussion point.

Other Income (Expense)

Nine Months Ended September 30,

% of consolidated sales

% of consumer sales

% of commercial sales

Other income increased by $247,428, or 44.4%, during the nine months ended September 30, 2024, to $804,296, as compared to $556,868 during the same period in Fiscal 2023.

Consumer Segment

Other income in the consumer segment increased by $8,195, or 11.7%, during the nine months ended September 30, 2024, to $78,510, as compared to $70,315 during the same period in Fiscal 2023.

The impact on interest income is referenced below.

Interest income comprised $10 and $65,853 of other income during the nine months ended September 30, 2024 and 2023, respectively.

Commercial Segment

Other income in the commercial segment increased by $239,233, or 49.2%, during the nine months ended September 30, 2024, to $725,786, as compared to $486,553 during the same period in Fiscal 2023.

The impact on interest income is referenced below.

Interest income comprised $599,774 and $296,526 of other income during the nine months ended September 30, 2024 and 2023, respectively.

Interest expense

Nine Months Ended September 30,

% of consolidated sales

% of consumer sales

% of commercial sales

Interest expense decreased by $12,784, or 3.7%, during the nine months ended September 30, 2024, to $336,134, as compared to $348,918 during the same period in Fiscal 2023.

Consumer Segment

Interest expense in the consumer segment decreased by $5,874, or 3.3%, during the nine months ended September 30, 2024, to $171,584, as compared to $177,458 during the same period in Fiscal 2023.

There was no material impact from debt additions or amortization in each comparative period and as such no discussion point.

Commercial Segment

Interest expense in the commercial segment decreased by $6,910, or 4.0%, during the nine months ended September 30, 2024, to $164,550, as compared to $171,460 during the same period in Fiscal 2023.

There was no material impact from amortization in each comparative period and as such no discussion point.

Income Tax (Expense) Benefit

Nine Months Ended September 30,

% of consolidated sales

% of consumer sales

% of commercial sales

NM – Not Meaningful

Income tax expense increased by $46,975, or 3.1%, during the nine months ended September 30, 2024, to $1,581,162, as compared to $1,534,187 during the same period in Fiscal 2023.

Currently, the Company has a deferred tax liability reflecting a future obligation to pay taxes.

The Company has a federal tax rate of approximately 21.0%, in addition to other state and local taxes, on net income.

The effective income tax rate was 23.5% and 20.8% for the nine months ended September 30, 2024 and 2023, respectively.

Differences between our effective income tax rate and the U.S.

federal statutory rate are the result of state taxes and non-deductible expenses, as was the Company’s case for the increased for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023.

Net Income (Loss)

Nine Months Ended September 30,

% of consolidated sales

% of consumer sales

% of commercial sales

NM – Not Meaningful

Net income decreased by $680,762, or 11.7%, during the nine months ended September 30, 2024, to $5,156,757, as compared to $5,837,519 during the same period in Fiscal 2023.

Consumer Segment

Net income (loss) decreased in the consumer segment by $3,188,892, during the nine months ended September 30, 2024, to a net loss of $116,325, as compared to net income of $3,072,567 during the same period in Fiscal 2023.

Refer to the aforementioned attributes discussed within the Comparison of the Nine Months Ended September 30, 2024 and 2023 for further details.

Commercial Segment

Net income increased in the commercial segment by $2,508,130, or 90.7%, during the nine months ended September 30, 2024, to $5,273,082, as compared to $2,764,952 during the same period in Fiscal 2023.

Refer to the aforementioned attributes discussed within the Comparison of the Nine Months Ended September 30, 2024 and 2023 for further details.

Earnings Per Share

The following table depicts the Company’s earnings per share:

Nine Months Ended September 30,

Basic and diluted earnings per share attributable to holders of our Common Stock decreased by $0.02, or 9.1%, during the nine months ended September 30, 2024, to $0.20, as compared to $0.22 during the same period in Fiscal 2023.

Income tax expense

Net Cash is defined as the difference between (i) cash and cash equivalents and (ii) the sum of debt obligations.

We believe that presenting Net Cash is useful to investors as a measure of our liquidity and leverage profile, as cash and cash equivalents can be used, among other things, to repay indebtedness.

The following table depicts the Company’s Net Cash:

debt obligations

Liquidity and Capital Resources

The following table summarizes the Company’s condensed consolidated statement of cash flows:

Nine Months Ended September 30,

Three Months Ended March 31,

Net cash provided by (used in):

2 unchanged sentences

Financing activities

Net increase (decrease) in cash and cash equivalents

NM – Not Meaningful

Net increase in cash and cash equivalents

Operating Activities

Cash flows provided by operations increased by $2,979,773, or 85.9%, during the nine months ended September 30, 2024, to $6,449,764, as compared to $3,469,991 during the same period in Fiscal 2023.

The increase in cash provided by operations for the nine months ended September 30, 2024 was primarily attributed to the impacts of a decrease in net income, a decrease in non-cash charges relating to deferred taxes, along with a reduction in accounts receivable associated with the settlement of a large SOW with a recurring customer, an increased inventory position associated with the expansion of the consumer business, and an increase in other liabilities associated with customer deposits and gift cards.

Cash flows provided by operations decreased by $2,660,664, or 70.2%, during the three months ended March 31, 2025, to $1,131,057, as compared to $3,791,721 during the same period in Fiscal 2024.

The decrease in cash provided by operations was primarily attributed to an increase in net income, certain non-cash adjustments to reconcile net income to operating cash flow (as detailed in the condensed consolidated statements of cash flows), and the following significant net changes in operating assets and liabilities, from the three months ended March 31, 2024 to the same period during Fiscal 2025:

● Accounts receivable:

a $4,178,078 net decrease primarily attributed to our commercial segment, resulting from an increase in accounts receivable in the normal course of operations in the first quarter of Fiscal 2025 and from significant collections from a services customer that occurred in the first quarter of Fiscal 2024.

● Inventories:

a $2,057,692 net increase primarily attributed to our consumer segment from the stabilization of inventory purchases in the first quarter of Fiscal 2025, as our consumer segment was purchasing inventory for our new stores in the first quarter of Fiscal 2024.

● Accounts payable:

a $981,156 net decrease primarily attributed to our consumer segment, albeit in the normal course of operations.

● Accrued expenses:

a $377,022 net decrease primarily attributed to our commercial segment, resulting from a reduction in unvouchered inventory payments from the settlement of a large ITAD transaction in the first quarter of Fiscal 2025.

Investing Activities

Cash flows (used in) investing activities increased by $2,175,355, or 200.4%, during the nine months ended September 30, 2024, to $3,260,717, as compared to $1,085,362 during the same period in Fiscal 2023.

The increase in cash (used in) investing activities during the nine months ended September 30, 2024 was primarily attributed to the purchase of property and equipment, including real estate associated with one of our Arizona stores, the build-out of our Arizona and Texas stores, the purchase of production assets within our commercial recycling business, and the continued development of intangible assets associated with our enterprise resource planning system, and no net cash inflows from investments in notes receivable.

Cash flows (used in) investing activities decreased by $261,805, or 40.6%, during the three months ended March 31, 2025, to $382,987, as compared to $644,792 during the same period in Fiscal 2024.

The decrease in cash (used in) investing activities was primarily attributed to reduced spending associated with our enterprise resource planning system and from less spending on new store build-outs in the first quarter of Fiscal 2025.

Financing Activities

Cash flows (used in) financing activities increased by $1,041,492, or 46.3%, during the nine months ended September 30, 2024, to $3,290,701, as compared to $2,249,209 during the same period in Fiscal 2023.

The increase in cash (used in) financing activities during the nine months ended September 30, 2024, was primarily due to our share buyback plan as principal payments on debt were in relative parity.

Cash flows (used in) financing activities decreased by $888,107, or 73.0%, during the three months ended March 31, 2025, to $328,808, as compared to $1,216,915 during the same period in Fiscal 2024.

The decrease in cash (used in) financing activities was primarily reduced share buybacks in the first quarter of Fiscal 2025, as principal payments on debt were in relative parity.

Capital Resources

Although the Company has access to a line of credit our primary source of liquidity and capital resources currently consist of cash generated from our operating activities.

We do not anticipate the need to fund our operations via the line of credit and we do not have any amounts drawn as of September 30, 2024 .

Although the Company has access to a line of credit, our primary source of liquidity and capital resources currently consists of cash generated from our operating activities.

We do not anticipate the need to fund our operations via the line of credit, and we do not have any amounts drawn as of March 31, 2025 .

We have historically renewed, extended, or replaced short-term debt as it matures, and management believes that we will be able to continue to do so in the near future.

Capital Expenditures

In Fiscal 2024, the Company is deploying capital for additional growth, maintenance activity and enhancements to our enterprise resource planning system.

In Fiscal 2025, the Company is focused on optimizing our new store performance, along with the continued focus on growing our Commercial business organically and evaluating opportunities for strategic growth.

The Company continuously monitors the deployment of capital and primarily funds capital expenditures through cash flow from operating activities.

Where appropriate, the Company may use debt financing on select projects.

When this occurs, the Company further evaluates future cash flows of the project as to ensure the debt tenure and pay-back period are in alignment as well as the appropriateness of the rate of return.

When this occurs, the Company further evaluates future cash flows of the project to ensure the debt tenure and pay-back period are in alignment, as well as the appropriateness of the rate of return.

As of March 31, 2025, the Company had no commitments for capital expenditures.

Off-Balance Sheet Arrangements

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

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

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

1 unchanged sentence

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What changed 10-Q

Item 2. Management’s Discussion and Analysis