What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-11-05 compared with 2024-08-07 · 190 added, 135 removed, 463 unchanged (41% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended June 30,

Six Months Ended June 30,

$ 100,905,409

Three Months Ended September 30,

Nine Months Ended September 30,

Cost of goods sold

15 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

Current assets:

3 unchanged sentences

Prepaid expenses

Other current assets

Total current assets

2 unchanged sentences

Intangible assets, net

Deferred tax asset

Liabilities and stockholders’ equity

4 unchanged sentences

Accrued expenses

Other liabilities

Other current liabilities

Total current liabilities

10 unchanged sentences

60,000,000 shares authorized;

26,924,631 shares issued and 26,155,229 shares outstanding as of June 30, 2024;

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

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

Treasury stock at cost, 769,402 and 415,973 shares, as of June 30, 2024 and December 31, 2023, respectively

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

( 4,504,044 )

7 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended June 30,

Nine Months Ended September 30,

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

7 unchanged sentences

( 5,927,057 )

( 4,295,072 )

Prepaid expenses

3 unchanged sentences

( 1,585,642 )

( 1,420,605 )

Other liabilities

2 unchanged sentences

( 2,955,024 )

( 1,563,612 )

Purchase of intangible assets

Investment in notes receivable

Net cash (used in) by investing

Acquisition, Kretchmer Transaction

Net cash (used in) investing

( 3,260,717 )

( 1,085,362 )

Payments on notes payable

1 unchanged sentence

( 2,348,995 )

( 1,318,351 )

Net cash (used in) financing

( 3,290,701 )

( 2,249,209 )

Net change in cash and cash equivalents

3 unchanged sentences

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.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Three Months ended June 30, 2023 and 2024

Treasury Stock

1 unchanged sentence

Stockholders’

Balance as of April 1, 2023

Three Months Ended September 30, 2023

Balance as of July 1, 2023

Shares repurchased

Balance as of June 30, 2023

( 1,123,531 )

Balance as of September 30, 2023

( 1,318,351 )

Treasury Stock

1 unchanged sentence

Stockholders’

Balance as of April 1, 2024

Three Months Ended September 30, 2024

Balance as of July 1, 2024

( 3,775,534 )

Shares repurchased

Balance as of June 30, 2024

Balance as of September 30, 2024

( 4,504,044 )

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Six Months ended June 30, 2023 and 2024

Treasury Stock

1 unchanged sentence

Stockholders’

Nine Months Ended September 30, 2023

Balance as of January 1, 2023

Shares repurchased

Balance as of June 30, 2023

( 1,318,351 )

Balance as of September 30, 2023

( 1,318,351 )

Treasury Stock

1 unchanged sentence

Stockholders’

Nine Months Ended September 30, 2024

Balance as of January 1, 2024

3 unchanged sentences

( 2,348,995 )

Balance as of June 30, 2024

Balance as of September 30, 2024

( 4,504,044 )

2 unchanged sentences

NOTE 1 — BASIS OF PRESENTATION

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

Pursuant to the SEC’s rules and regulations, they do not include all of the information and notes required by accounting principles generally accepted in the U.S.

GAAP”) for complete financial statements.

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”).

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.

Operating results presented for these interim periods are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2024 (“Fiscal 2024”).

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”).

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, 2023 (“Fiscal 2023”) filed with the SEC on March 21, 2024 (“2023 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.

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

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

GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.

Actual results could differ from those estimates.

NOTE 2 — PRINCIPLES OF CONSOLIDATION AND NATURE OF OPERATIONS

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

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

Our operations are organized into two operating and reportable segments:

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.

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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.

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

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.

For additional information on the consumer and commercial segments, see “Item 1.

Business – How We Organize Our Business” in the Company’s 2023 Annual Report.

The interim condensed consolidated financial statements have been prepared in accordance with U.S.

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

All intercompany transactions and balances have been eliminated.

NOTE 3 — ACCOUNTING POLICIES AND ESTIMATES

Financial Instruments

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

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

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

Actual results could differ from those estimates and assumptions.

Revenue Recognition

7 unchanged sentences

Consumer Segment

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

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

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

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

The Company offers the option of third-party financing for customers wishing to borrow money for their purchase.

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

The Company offers third-party financing for retail customers.

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

Commercial Segment

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

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

The commercial segment recognizes refining revenue when our inventory arrives at the destination port and the performance obligation is satisfied by transferring the control of the promised goods that are identified in the customer contract.

1 unchanged sentence

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 is 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.

5 unchanged sentences

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

See Note 10 – Revenue for further detail.

See Note 10 – Revenue for further details.

Sales Returns and Allowances

2 unchanged sentences

Our allowance for estimated returns is based on our review of historical returns experience and reduces our reported revenues accordingly.

As of June 30, 2024, and December 31, 2023, the consumer segment’s allowance for returns was $ 50,281 and $ 28,402 , respectively.

As of June 30, 2024, and December 31, 2023, the commercial segment’s allowance for returns was $ 10,769 and $ 0 , respectively.

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.

Concentrations and Credit Risk

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

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

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.

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 six months ended June 30, 2024, two customers aggregated 21.0 % of our sales and represented 0.0 % of our accounts receivable balance.

For the six months ended June 30, 2023, three customers aggregated 39.1 % of our sales and represented 0.0 % of our accounts receivable balance.

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.

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.

1 unchanged sentence

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 June 30, 2024, and June 30, 2023, the consumer segment’s outbound shipping and handling costs were $ 49,350 and $ 5,237 , respectively.

For the three months ended June 30, 2024, and June 30, 2023, the commercial segment’s outbound shipping and handling costs were $ 1,194,203 and $ 1,522,542 , respectively.

For the six months ended June 30, 2024, and June 30, 2023, the consumer segment’s outbound shipping and handling costs were $ 49,789 and $ 5,237 , respectively.

For the six months ended June 30, 2024, and June 30, 2023, the commercial segment’s outbound shipping and handling costs were $ 2,588,280 and $ 3,212,483 , respectively.

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.

Advertising Costs

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

For the three months ended June 30, 2024, and June 30, 2023, the consumer segment’s advertising costs were $ 325,079 and $ 345,052 , respectively.

For the three months ended June 30, 2024, and June 30, 2023, the commercial segment’s advertising costs were $ 61,882 and $ 6,686 , respectively.

For the six months ended June 30, 2024, and June 30, 2023, the consumer segment’s advertising costs were $ 572,982 and $ 551,127 , respectively.

For the six months ended June 30, 2024, and June 30, 2023, the commercial segment’s advertising costs were $ 132,977 and $ 21,239 , respectively.

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.

We determine if an arrangement is a lease at inception.

14 unchanged sentences

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 six months ended June 30, 2024, and June 30, 2023.

As of June 30, 2024, the Company had a deferred tax asset of $ 6,715 .

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 .

The Company did not have a valuation allowance as of June 30, 2024, or December 31, 2023.

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.

The Company’s financial performance is based on the following segments:

consumer and commercial.

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

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

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.

Earnings Per Share

5 unchanged sentences

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

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

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

Taxes Collected from Customers

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Our allowance for credit losses is primarily determined by an analysis of our accounts receivable aging, using the expected losses methodology.

The allowance for credit losses is determined based on historical experience of collecting past due amounts, based on the degree of their aging.

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.

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

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

As of June 30, 2024, and December 31, 2023, the commercial segment’s allowance for credit losses was $ 429,908 and $ 260,858 , respectively.

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.

Consumer Segment

9 unchanged sentences

Our technology assets are valued utilizing the retail cost method.

See Note 4 – Inventories for further detail.

See Note 5 – 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 six months ended June 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 have been no other adjustments to goodwill in any of the periods presented.

See Note 5 – Goodwill for further detail.

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.

See Note 6 – Goodwill for further details.

Property and Equipment, Net

4 unchanged sentences

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

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

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

Intangible Assets, Net

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

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

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

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 – Intangibles, net for further detail.

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

Correction of Immaterial Error

2 unchanged sentences

The following table summarizes the correction of immaterial error:

For the Three Months Ended

Three Months Ended

September 30,

$ 171,674,088

Correction of immaterial error

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

See Note 10 – Revenue for further detail.

See Note 11 – Revenue for further details.

Changes in Disclosure

The Company has elected to discontinue reporting the disaggregation of inventory and revenue by resale and recycle.

The Company 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 inventory held at each segment and associated risk factors provides a sufficient understanding of its impact on our business.

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

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 Cash Flow Statements was updated to present "non-cash lease expense" as a separate line item, previously included within "changes in operating assets and liabilities – operating leases.” The Company has elected to reclassify $ 946,598 from operating leases to non-cash lease expense in the Condensed Consolidated Cash Flow Statement for the six months ended June 30, 2023.

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

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 detail.

See the condensed consolidated balance sheets for further details.

The Company previously did not disclose construction in progress and intangible assets under development.

1 unchanged sentence

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

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

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 intangibles, net.

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

See Note 7 – Intangibles, net for further detail.

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

Recent Accounting Pronouncements

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

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

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 5 — INVENTORIES

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

September 30,

Trade inventories

2 unchanged sentences

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

September 30,

Opening balance

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Additions (reductions)

(1) The increase in goodwill of $ 300 thousand for the year ended December 31, 2023, relates to the Company’s acquisition of Steven Kretchmer, Inc.

on September 12, 2023 (“Kretchmer Transaction”).

The Kretchmer Transaction remains within the measurement period of ASC 805, Business Combinations.

The measurement period is the one-year period after the acquisition date during which the acquirer may adjust the provisional amounts recognized for a business combination.

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.

NOTE 7 — PROPERTY AND EQUIPMENT, NET

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

September 30,

Reclassification

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accumulated depreciation

$ ( 191,075 )

(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 intangibles, net.

See Note 7 – Intangible, Net for further details.

(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 .

NOTE 7 — INTANGIBLES, NET

NOTE 8 — INTANGIBLE ASSETS, NET

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

September 30,

Reclassification

Customer lists

Assets under development (2)

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(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 June 30, 2024, these intangible assets are under development, have not yet been placed into service and are not yet amortizable.

The following table depicts the Company’s estimated future amortization expense related to intangible assets as of June 30, 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:

NOTE 9 — ACCRUED EXPENSES

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

September 30,

Accrued interest

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NOTE 10 — SEGMENT INFORMATION

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

Three Months Ended June 30,

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)

8 unchanged sentences

Income before income taxes

Income tax (expense) benefit:

Income tax expense

1 unchanged sentence

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 six months ended June 30, 2024 and 2023:

Six Months Ended June 30,

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)

8 unchanged sentences

Income before income taxes

Income tax (expense) benefit:

( 1,614,868 )

Income tax expense

3 unchanged sentences

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

The following chart depicts the Company’s total assets:

June 30, 2024

The following table depicts the Company’s total assets:

September 30, 2024

December 31, 2023

NOTE 11 — REVENUE

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

For the Three Months Ended June 30,

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 freight arrangement services, see Note 3 – Accounting Policies and Estimates for further detail.

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

For the Six Months Ended June 30,

(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

$ 100,905,409

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

(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 lists the opening and closing balances of our contract assets and liabilities:

7 unchanged sentences

Closing Balance - 9/30/2024

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

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.

NOTE 12 — LEASES

The following table depicts the Company’s future annual minimum leases payments as of June 30, 2024:

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

Total minimum lease payments

Less imputed interest

imputed interest

Total minimum lease payments

Less imputed interest

imputed interest

current portion

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

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

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

Leasing costs for the three months ended June 30, 2024 and 2023 were $ 767,902 and $ 705,635 , respectively, comprised of a combination of minimum lease payments and variable lease costs.

Leasing costs for the six months ended June 30, 2024 and 2023 were $ 1,552,637 and $ 1,361,885 , respectively, comprised of a combination of minimum lease payments and variable lease costs.

As of June 30, 2024, the weighted average remaining lease term and weighted average discount rate for operating leases were 2.5 years and 3.8 %.

As of June 30, 2023, the weighted average remaining lease term and weighted average discount rate for operating leases were 2.8 years and 4.4 %.

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 %.

NOTE 13 — BASIC AND DILUTED AVERAGE SHARES

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

For the Three Months Ended

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:

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 six months ended June 30, 2024 and 2023:

For the Six Months Ended

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

1 unchanged sentence

Diluted weighted average shares

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

For the three and six months ended June 30, 2024, and 2023, there were no anti-dilutive 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.

The plan expires on March 31, 2026.

The following table lists the repurchase of Company shares for the three and six months ended June 30, 2024:

The following table lists the repurchase of Company shares for the three and nine months ended September 30, 2024:

Total Number of

13 unchanged sentences

Balance as of June 30, 2024

For the three months ended June 30, 2024, the Company repurchased 152,089 shares for $ 715,339 , for an average price of $ 4.70 .

For the six months ended June 30, 2024, the Company repurchased 353,429 shares for $ 1,620,485 , for an average price of $ 4.58 .

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 .

NOTE 14 — DEBT

1 unchanged sentence

Outstanding Balance

September 30,

Note payable, FSB (1)

8 unchanged sentences

( 1,361,443 )

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

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

Note payable, FSB (1)

10 unchanged sentences

The note payable bears interest at 3.10 % and matures on November 15, 2026.

(3) On July 9, 2020, the consumer segment entered into a $ 1.195 million secured amortizing note payable with Truist Bank.

(3) On July 9, 2020, the consumer segment entered into a $ 9 56 thousand secured amortizing note payable with Truist Bank.

The note payable bears interest at 3.65 % and matures on July 9, 2030.

4 unchanged sentences

(6) On September 12, 2024, the consumer segment entered into a $ 50 thousand secured amortizing note payable in relation to the Kretchmer Transaction.

The note payable’s imputed interest is 3.10% and matures on October 1, 2025 .

The consumer segment is restructuring the Kretchmer Transaction and the aforementioned terms and conditions and as such is electing to record the note payable in current liabilities.

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.

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

(7) On October 29, 2021, the consumer segment entered into a $ 2.000 million secured amortizing note payable in relation to the acquisition of Avail Recovery Solutions, LLC on October 29, 2021 (“Avail Transaction”).

The note payable’s imputed interest is 3.10% and matures on April 1, 2025 .

The note payable’s imputed interest is 3.10 % and matures on January 1, 2025.

(8) On November 23, 2021, the Company entered into a $ 3.500 million secured line of credit with FSB.

1 unchanged sentence

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.

(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 six months ended June 30, 2024, and June 30, 2023.

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

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:

Scheduled Principal Payments and Maturities by Year

NOTE 15 — STOCK-BASED COMPENSATION

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

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

NOTE 16 — 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 as of June 30, 2024, and June 30, 2023.

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

NOTE 17 — 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.

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