What changed in this filing

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Item 1. Financial Statements

2022-11-02 compared with 2022-08-03 · 168 added, 156 removed, 431 unchanged (43% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

$ 135,252,502

Cost of goods sold

3 unchanged sentences

Operating income

Other income (expense), net

Interest expense

Other income (expense):

Gain on forgiveness of Federal Loan

Write-off of notes receivable and accrued interest receivable

Other income (expense), net

Income before income taxes

6 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

Current assets:

7 unchanged sentences

Intangible assets, net

Operating lease right-of-use assets

Operating lease right-of-use assets, less current portion

Other long-term assets

Liabilities and stockholders’ equity

27 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

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

1 unchanged sentence

Bad debt expense

Gain on forgiveness of Federal Loan

( 1,668,200 )

Write-off of note receivables and accrued interest receivable

Changes in operating assets and liabilities:

4 unchanged sentences

Prepaid expenses

( 1,213,187 )

Intangible Assets

Accounts payable and accrued expenses

4 unchanged sentences

Purchase of property and equipment

( 3,064,277 )

Acquisition of CExchange assets and liabilities, net of cash acquired

4 unchanged sentences

Payments on notes payable

Proceeds from notes to purchase property

Payments on line of credit

( 1,700,000 )

Net cash used in financing

Net cash provided by (used in) financing

( 2,450,347 )

Net change in cash and cash equivalents

( 1,086,924 )

Cash and cash equivalents, beginning of period

4 unchanged sentences

Acquisition of CExchange assets and liabilities

Adjustment to the Avail Transaction purchase price allocation

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, 2021 and 2022

For the Three Months ended September 30, 2021 and 2022

Preferred Stock

Stockholders'

Balances at March 31, 2021

$ ( 20,855,532 )

Balances at June 30, 2021

$ ( 18,702,420 )

Balances at September 30, 2021

$ ( 15,596,019 )

Preferred Stock

Stockholders'

Balances at March 31, 2022

$ ( 10,167,704 )

Balances at June 30, 2022

$ ( 6,319,846 )

Balances at September 30, 2022

$ ( 3,002,137 )

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

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Six Months ended June 30, 2021 and 2022

For the Nine Months ended September 30, 2021 and 2022

Preferred Stock

2 unchanged sentences

$ ( 22,863,804 )

Balances at June 30, 2021

Balances at September 30, 2021

$ ( 15,596,019 )

3 unchanged sentences

$ ( 12,814,929 )

Balances at June 30, 2022

Balances at September 30, 2022

$ ( 3,002,137 )

8 unchanged sentences

The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year.

Certain reclassifications were made to the prior year's consolidated financial statements to conform to the current year presentation.

The information provided as of June 30, 2022 in these notes to the interim condensed consolidated financial statements is unaudited.

The information provided as of September 30, 2022 in these notes to the interim condensed consolidated financial statements is unaudited.

NOTE 2 — PRINCIPLES OF CONSOLIDATION AND NATURE OF OPERATIONS

16 unchanged sentences

Echo focuses on end-of-life electronics recycling and sustainability and ITAD USA provides IT equipment disposition, including compliance and data sanitization services.

Teladvance, CEX and Avail operate as value-added resellers by providing offerings and services to companies looking either to upgrade capabilities or dispose of equipment.

Teladvance, CEX and Avail operate as value-added resellers by providing offerings and services to companies looking either to upgrade capabilities or dispose of electronic equipment.

Like DGSE, ECHG also maintains relationships with refiners or recyclers to which it sells valuable materials it extracts from electronics and IT equipment that are not appropriate for resale or reuse.

7 unchanged sentences

Financial Instruments

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

Notes payable and line of credit approximate fair value due to the market interest rate charged.

6 unchanged sentences

ECHG has its own, separate financial information to perform goodwill impairment testing at least annually or if events indicate that those assets may be impaired.

As a result of the current market and economic conditions related to the coronavirus pandemic (“COVID-19”) and the war between Ukraine and Russia, in accordance with step 1 of the guidelines set forth in ASC 350-20-35-3A, the Company concluded there were no impairments of goodwill that resulted from those triggering events as of June 30, 2022.

As a result of the current market and economic conditions related to the coronavirus pandemic (“COVID-19”), surging inflation and the war between Ukraine and Russia, in accordance with step 1 of the guidelines set forth in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 350-20-35-3A, the Company concluded there were no impairments of goodwill that resulted from those triggering events for the three and nine months ended September 30, 2022.

The Company will continue to evaluate goodwill for the ECHG segment.

1 unchanged sentence

ECHG goodwill was allocated in connection with three acquisitions of the assets now held by Echo on May 20, 2019 (the “Echo Transaction”), of the assets now held by Teladvance on June 9, 2021 (the “CExchange Transaction”) and of the assets now held by Avail on October 29, 2021 (the “Avail Transaction”).

The preliminary goodwill associated with the Avail Transaction was $ 3,491,285 .

There was an adjustment made to goodwill concerning the Avail Transaction from an additional cash payment made during the three months ending June 30, 2022 of $ 216,988 , bringing the total goodwill for the Avail Transaction to $ 3,708,273 as of June 30, 2022.

The preliminary goodwill associated with the Avail Transaction was $ 3,491,285 , which was the initial purchase price less the approximate fair value of the net assets purchased.

There have been several adjustments made to goodwill concerning the Avail Transaction during the nine months ended September 30, 2022.

On May 31, 2022, an additional cash payment was made of $ 216,988 due to certain conditions being met concerning the cash balance upon a certain date.

The cash payment increased goodwill for the Avail Transaction to $ 3,708,273 .

During the three months ended September 30, 2022, a third party valuation company identified $ 2,736,000 of intangibles that were not initially included in the fair value of Avail’s net assets that reduced the Avail Transaction goodwill to $ 972,272 .

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

As of June 30, 2022 and December 31 2021, goodwill was $ 6,357,453 and $ 6,140,465 , respectively.

As of September 30, 2022 and December 31, 2021, goodwill was $ 3,621,453 and $ 6,140,465 , respectively.

Recent Accounting Pronouncements

4 unchanged sentences

The Company is evaluating the financial statement implications of ASU 2016-13.

There were no other new accounting standards that had a material impact on the Company’s consolidated financial statements during the six-month period ended June 30, 2022, and there were no other new accounting standards or pronouncements that were issued but not yet effective as of June 30, 2022 that the Company expects to have a material impact on its consolidated financial statements.

There were no other new accounting standards that had a material impact on the Company’s consolidated financial statements during the nine-month period ended September 30, 2022, and there were no other new accounting standards or pronouncements that were issued but not yet effective as of September 30, 2022 that the Company expects to have a material impact on its consolidated financial statements.

NOTE 4 — INVENTORIES

A summary of inventories is as follows:

September 30,

NOTE 5 — ACQUISITION

On October 29, 2021, ECHG entered into the Avail Transaction to purchase all of the assets, liabilities and rights and interests of Avail for $ 4,500,000 .

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

The purchase was facilitated by an initial payment of $ 2,500,000 at closing, with the remaining $ 2,000,000 represented by an installment note (the “Avail Installment Note”) made by ECHG to the seller to be paid out by 12 quarterly payments starting April 1, 2022, of $ 166,667 each.

See Note 14 to our consolidated financial statements for more information on this loan.

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

As part of the Avail Transaction, goodwill was preliminarily recorded as $ 3,491,284 , which is the purchase price less the approximate fair value of the net assets and liabilities purchased.

On May 31, 2022, an additional cash payment of $ 216,988 was made in connection with the Avail Transacton adjusting the goodwill and purchase price amount as shown in the preliminary purchase price allocation in the following table.

The additional payment is not part of the installment note payable of $2,000,000 from the initial Avail Transaction.

The Avail Installment Note for the Avail Transaction does not bear interest but the imputed interest rate was determined to be 3.1 %.

As part of the Avail Transaction, goodwill was preliminarily recorded as $ 3,491,284 , which was the purchase price less the approximate fair value of the net assets purchased.

On May 31, 2022, an additional cash payment of $ 216,988 was made due to certain conditions being met concerning the cash balance upon a certain date.

The additional cash payment was not part of the Avail Installment Note of $ 2,000,000 from the initial closing of the Avail Transaction.

The additional cash payment increased goodwill and the purchase price amount by $ 216,988 , thereby increasing goodwill for the Avail Transaction to $ 3,708,273 .

On September 30, 2022, a third party valuation company identified $ 2,736,000 of intangibles as part of the Avail Transaction not initially included in the fair value of Avail’s net assets.

The intangibles identified of $ 2,736,000 , decreases goodwill by $2,736,000 to $ 972,272 , as shown in the purchase price allocation table below.

The Avail Transaction was initially recorded as preliminary, but with the third party valuation complete, the purchase price allocation below is considered final.

The Company’s goodwill is related to the ECHG segment.

2 unchanged sentences

For tax purposes, goodwill is amortized and deductible over 15 years.

The following table compares the results of Avail as part of the Company's financial results for the three months ended June 30, 2022, and the Company's results of operations as if they were combined for the three months ended June 30, 2021:

Consolidated Statement

For the Three Months Ended

The purchase price allocation of the Avail Transaction is listed below:

Account receivables

Prepaid expenses

Intangible assets - Trademarks/Tradenames

Intangible assets - Customer Relationships

Fixed assets - net

Right-of-use assets

Account payables

Accrued liabilities

Operating lease liabilities

Total Purchase Price

The following table compares the results of Avail as part of Company’s financial results for the three months ended September 30, 2022, and the Company’s results of operations as if they were combined for the three months ended September 30, 2021:

Consolidated Statement of

Proforma Combined

For the Three Months Ended

June 30, 2022

June 30, 2021

For the Three Months Ended

September 30, 2022

September 30, 2021

Income from continuing operations

1 unchanged sentence

Diluted net income per common share

The following table compares the results of Avail as part of the Company's financial results for the six months ended June 30, 2022, and the Company's results of operations as if they were combined for the six months ended June 30, 2021:

Consolidated Statement

For the Six Months Ended

The following table compares the results of Avail as part of the Company’s financial results for the nine months ended September 30, 2022, and the Company’s results of operations as if they were combined for the nine months ended September 30, 2021:

Consolidated Statement of

Proforma Combined

For the Six Months Ended

June 30, 2022

June 30, 2021

For the Nine Months Ended

September 30, 2022

September 30, 2021

$ 135,252,502

$ 102,710,504

Income from continuing operations

1 unchanged sentence

Diluted net income per common share

The purchase price allocation of the Avail transaction is listed below and is considered to be a preliminary allocation and is subject to change.

The preliminary purchase price is allocated as follows:

Account receivables

Prepaid expenses

Fixed assets - net

Right-of-use assets

Account payables

Accrued liabilities

Operating lease liabilities

Total Purchase Price

NOTE 6 — GOODWILL

The changes in goodwill is as follows:

September 30,

Opening balance

Additions (1)

(1) Additions ending December 31, 2021 totaling $ 4,773,356 are a combination of the CExchange Transaction on June 9, 2021, of $ 1,282,072 , and the Avail Transaction on October 29, 2021, of $ 3,491,284 .

The addition ending June 30, 2022 is the additional cash payment concerning the Avail Transaction made on May 31, 2022.

Additions/(Reductions) (1)

( 2,519,012 )

(1) Additions ending December 31, 2021 totaling $ 4,773,356 is a combination of the CExchange Transaction on June 9, 2021 of $ 1,282,072 and the Avail Transaction’s preliminary purchase price allocation on October 29, 2021, of $ 3,491,284 .

The reduction in goodwill of $ 2,519,012 for the nine months ending September 30, 2022, is a combination of an additional cash payment made on May 31, 2022 of $ 216,988 , which increased goodwill for the Avail Transaction, offset by the effect of the third party valuation report identifying $ 2,736,000 of intangible assets that were not initially included in the fair value of Avail’s net assets, reducing goodwill and increasing intangible assets.

NOTE 7 — PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

September 30,

Building and improvements

14 unchanged sentences

Intangible assets consist of the following:

September 30,

Point of sale system

4 unchanged sentences

Customer Relationships (2)

Trademarks/Tradenames (3)

Customer Relationships (3)

accumulated amortization

( 1,429,530 )

Software development

accumulated amortization

(1) Intangibles relate to the Echo Transaction on May 20, 2019.

(2) Intangibles relate to the CExchange Transaction on June 9, 2021.

The following table outlines the estimated future amortization expense related to intangible assets held as of June 30, 2022:

2022 (excluding the six months ending June 30, 2022)

(3) Intangibles relate to the Avail Transaction on October 29, 2021

The following table outlines the estimated future amortization expense related to intangible assets held as of September 30, 2022:

2022 (excluding the nine months ending September 30, 2022)

NOTE 9— ACCRUED EXPENSES

Accrued expenses consist of the following:

September 30,

Accrued interest

$ 12,079 $ 12,627

118,857 131,325

Property taxes

120,449 88,046

57,894 150,070

Other administrative expenss

339,279 382,068

Accrued interest

337,180 334,431

Unvouchered payables - inventory

252,020 461,481

Material & shipping costs (COGS)

500,326 78,647

Other accrued expenses

1,097,388 940,612

Accrued interest

25,642 25,175

Professional fees

125,617 220,101

43,400 84,920

Other administrative expenses

10,794 18,453

State income tax

92,226 109,682

305,127 466,686

$ 1,741,794 $ 1,789,366

NOTE 10 — SEGMENT INFORMATION

4 unchanged sentences

Pleasant, South Carolina.

The DGSE segment also includes the Bullion Express brand and the bullion-trading operation, which operates out of the DGSE stores.

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

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

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

We allocate a portion of certain corporate costs and expenses, including information technology as well as rental income and expenses relating to our corporate headquarters, to our business segments.

2 unchanged sentences

Allocation amounts are generally agreed upon by management and may differ from arms-length allocations.

The following separates DGSE’s and ECHG’s financial results of operations for the three months ended June 30, 2022 and 2021:

For The Three Months Ended June 30,

$ 30,339,127 $ 12,300,591 $ 42,639,718 $ 23,012,324 $ 10,711,682 $ 33,724,006

The following separates DGSE’s and ECHG’s financial results of operations for the three months ended September 30, 2022 and 2021:

For The Three Months Ended September 30,

Cost of goods sold

26,150,543 5,011,175 31,161,718 19,915,328 6,680,788 26,596,116

4,188,584 7,289,416 11,478,000 3,096,996 4,030,894 7,127,890

Selling, general and administrative expenses

2,194,494 4,889,409 7,083,903 1,889,895 2,941,330 4,831,225

Depreciation and amortization

101,434 178,082 279,516 97,435 118,784 216,219

2,295,928 5,067,491 7,363,419 1,987,330 3,060,114 5,047,444

Total operating expenses

Operating income

1,892,656 2,221,925 4,114,581 1,109,666 970,780 2,080,446

Interest expense

Other income (expense):

Gain on forgiveness of Federal Loan

Write-off of notes receivable and accrued interest receivable

Other income (expense), net

( 49,018 ) ( 46,411 ) ( 95,429 ) 119,460 163,595 283,055

Interest expense

61,663 59,379 121,042 68,692 109,012 177,704

Income before income taxes

1,781,975 2,116,135 3,898,110 1,160,434 1,025,363 2,185,797

Income tax expense

15,391 34,861 50,252 14,185 18,500 32,685

The following separates DGSE’s and ECHG’s financial results of operations for the nine months ended September 30, 2022 and 2021:

For The Nine Months Ended September 30,

$ 135,252,502

The following separates DGSE’s and ECHG’s financial results of operations for the six months ended June 30, 2022 and 2021:

For The Six Months Ended June 30,

Cost of goods sold

1 unchanged sentence

Depreciation and amortization

Total opeating expenses

Operating income

Interest expense

Other income (expense):

Gain on forgiveness of Federal Loan

Write-off of notes receivable and accrued interest receivable

Other income (expense), net

Interest expense

Income before income taxes

7 unchanged sentences

The final step in the guidance is to recognize revenue as each performance obligation is satisfied.

The following disaggregation of total revenue is listed by sales category and segment for the three months ended June 30, 2022 and 2021:

Three Months Ended June 30,

$ 28,165,026 $ 3,719,954 13.2 % $ 20,893,838 $ 2,678,640 12.8 %

2,174,101 468,630 21.6 % 2,118,486 418,356 19.7 %

30,339,127 4,188,584 13.8 % 23,012,324 3,096,996 13.5 %

9,102,001 5,566,507 61.2 % 8,595,910 3,019,685 35.1 %

3,198,590 1,722,909 53.9 % 2,115,772 1,011,209 47.8 %

12,300,591 7,289,416 59.3 % 10,711,682 4,030,894 37.6 %

The following disaggregation of total revenue is listed by sales category and segment for the three months ended September 30, 2022 and 2021:

Three Months Ended September 30,

The following disaggregation of total revenue is listed by sales category and segment for the nine months ended September 30, 2022 and 2021:

Nine Months Ended September 30,

$ 135,252,502

The following disaggregation of total revenue is listed by sales category and segment for the six months ended June 30, 2022 and 2021:

Six Months Ended June 30,

DGSE’s over-the-counter sales with the retail public and wholesale dealers are recognized when merchandise is delivered, and payment has been made either by immediate payment or through a receivable obligation at one of our retail locations.

25 unchanged sentences

We have established an allowance for estimated returns related to sales based on historical returns and reduced our reported revenues and cost of sales accordingly.

Our return allowance as of June 30, 2022 and December 31, 2021 remained the same for both periods, at approximately $ 28,000 .

Our return allowance as of September 30, 2022 and December 31, 2021 remained the same for both periods, at approximately $ 28,000 .

ECHG has several revenue streams and recognize revenue according to ASC 606 at an amount that reflects the consideration to which the entities expect to be entitled in exchange for transferring goods or services to the customer.

2 unchanged sentences

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

The Echo Entities have fulfilled their performance obligation with an agreed upon transaction price, payment terms and shipping the product.

Echo and ITAD USA (collectively, the “Echo Entities”) have fulfilled their performance obligation with an agreed upon transaction price, payment terms and shipping the product.

Echo 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.

Ninety percent (90%) of our refining revenue is generated from one refining partner that has an international refining facility.

This refining partner pays us sixty percent (60%) of an Invoice within five working days upon the receipt of the Ocean Bill of Lading issued by the Ocean Carrier.

Our initial Invoice is recognized in full when our performance obligation is satisfied, as stated in the first sentence.

This refining partner pays us sixty percent (60%) of our Invoice within five working days upon the receipt of the Ocean Bill of Lading issued by the Ocean Carrier.

Refining revenue from an invoice is recognized in full when our performance obligation is satisfied when the inventory arrives at the destination.

Under the guidance of ASC 606, an estimate of the variable consideration that we expect to be entitled is included in the transaction price stated at the current precious metal spot price and weight of the precious metal.

5 unchanged sentences

If payment is received on the last day of the month and shipment goes out the following day the payment received is deferred revenue and recognized the following month when the shipment is made.

Echo also provides recycling services according to a Scope of Work and services are recognized when promised services are rendered.

We have recycling services conducted at the Echo facility and another type of service is conducted at the client’s facility.

Echolso provides recycling services according to a Scope of Work where services are recognized when promised services are rendered.

We conduct recycling services at our Echo facility or at a client’s facility.

The Scope of Work will determine the charges and whether it is completed on campus or off campus.

8 unchanged sentences

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

DGSE had no allowance for doubtful accounts balance as of June 30, 2022 and December 31, 2021.

DGSE had no allowance for doubtful accounts balance as of September 30, 2022 and December 31, 2021.

Some of ECHG’s customers are on payment terms, and although low risk, occasionally the need arises to record an allowance for receivables that are deemed high risk to collect.

We established an allowance for estimated uncollectable receivables related to sales based on historical collections.

Our allowance as of June 30, 2022 and December 31, 2021 was $ 26,582 and $ 1,582 , respectively.

Our allowance as of September 30, 2022 and December 31, 2021 was $ 75,000 and $ 1,582 , respectively.

Income Taxes :

11 unchanged sentences

Second, we determine how much of the tax benefit should be recognized (this would only apply to tax positions that qualify for recognition.) No additional liabilities have been recognized as a result of the implementation.

We have not taken a tax position that, if challenged, would have a material effect on the financial statements or the effective tax rate for the three and six months ended June 30, 2022 and 2021.

We do not believe we have not taken a tax position that, if successfully challenged, would have a material effect on the financial statements or the effective tax rate for the three and nine months ended September 30, 2022 and 2021.

NOTE 12 — LEASES

In determining our right-of-use assets and lease liabilities, we apply a discount rate to the minimum lease payments within each lease agreement.

ASC 842 requires us to use the interest rate that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.

If we cannot readily determine the discount rate implicit in lease agreements, we utilize our incremental borrowing rate.

The Company has seven operating leases as of June 30, 2022—five in the Dallas/Fort Worth Metroplex, one in Charleston, South Carolina and one in Chandler, Arizona.

The lease for DGSE’s flagship store located at 13022 Preston Road, Dallas, Texas expires on January 31, 2027, with an option to extend the lease for an additional five years, at market rate as determined by the prevailing market rate for comparable space in comparable buildings in the vicinity.

The Company has seven operating leases as of September 30, 2022—five in the Dallas/Fort Worth Metroplex, one in Mt.

Pleasant, South Carolina and one in Chandler, Arizona.

The lease for DGSE’s flagship store located at 13022 Preston Road, Dallas, Texas expires on January 31, 2027, with an option to extend the lease for an additional five years, at the prevailing market rate for comparable space in comparable buildings in the vicinity.

The lease for DGSE’s Grand Prairie, Texas location was renewed starting July 1, 2022, expiring June 30, 2027, with an option to extend the lease for an additional five years.

The lease for DGSE’s Mt Pleasant, South Carolina location expires April 30, 2025, with no additional renewal options.

The lease for DGSE’s Mt.

Pleasant, South Carolina location expires April 30, 2025, with no additional renewal options.

The lease for DGSE’s Euless, Texas location expires June 30, 2025, with an option to extend the lease for an additional five years.

3 unchanged sentences

The lease for ECHG’s Avail location in Chandler, Arizona expires May 31, 2025.

All of the Company’s seven leases as of June 30, 2022 are triple net, for which it pays its proportionate share of common area maintenance, property taxes and property insurance.

Leasing costs for the three months ended June 30, 2022 and 2021 was $ 659,860 and $ 588,896 respectively.

Leasing costs for the six months ended June 30, 2022 and 2021 was $ 1,282,723 and $ 895,433 , respectively, comprised of a combination of minimum lease payments and variable lease costs.

As of June 30, 2022, the weighted average remaining lease term and weighted average discount rate for operating leases was 3.75 years and 4.4 %, respectively.

For the three months ended June 30, 2022 and 2021, the Company’s cash paid for operating lease liabilities was $ 650,606 and $ 588,026 , respectively.

For the six months ended June 30, 2022 and 2021, the Company’s cash paid for operating lease liabilities was $ 1,266,703 and $ 923,253 , respectively.

Future annual minimum lease payments as of June 30, 2022:

2022 (excluding the six months ending June 30, 2022)

All of the Company’s seven leases as of September 30, 2022 are triple net, for which it pays its proportionate share of common area maintenance, property taxes and property insurance.

Leasing costs for the three months ended September 30, 2022 and 2021 was $ 655,669 and $ 620,829 respectively.

Leasing costs for the nine months ended September 30, 2022 and 2021 was $ 1,938,392 and $ 1,516,262 , respectively, comprised of a combination of minimum lease payments and variable lease costs.

As of September 30, 2022, assuming none of the extension options are exercised the weighted average remaining lease term and weighted average discount rate for operating leases was 2.5 years and 4.4 %, respectively.

The remaining lease term and discount rate are being averaged compared to the total leases.

For the three months ended September 30, 2022 and 2021, the Company’s cash paid for operating lease liabilities was $ 654,471 and $ 619,584 , respectively.

For the nine months ended September 30, 2022 and 2021, the Company’s cash paid for operating lease liabilities was $ 1,934,791 and $ 1,496,524 , respectively.

Future annual minimum lease payments as of September 30, 2022:

2022 (excluding the nine months ending September 30, 2022)

2026 and thereafter

2 unchanged sentences

DGSE Sub-Total

2022 (excluding the six months ending June 30, 2022)

2022 (excluding the nine months ending September 30, 2022)

2026 and thereafter

4 unchanged sentences

NOTE 13 — BASIC AND DILUTED AVERAGE SHARES

A reconciliation of basic and diluted weighted average common shares for the three months ended June 30, 2022 and 2021 is as follows:

A reconciliation of basic and diluted weighted average common shares for the three months ended September 30, 2022 and 2021 is as follows:

For the Three Months Ended

September 30,

Basic weighted average shares

1 unchanged sentence

Diluted weighted average shares

A reconciliation of basic and diluted weighted average common shares for the six months ended June 30, 2022 and 2021 is as follows:

For the six Months Ended

A reconciliation of basic and diluted weighted average common shares for the nine months ended September 30, 2022 and 2021 is as follows:

For the 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, 2022 and 2021, there were 15,000 common stock options, warrants, and Restricted Stock Units (RSUs) unexercised, respectively.

For the three and six months ended June 30, 2022 and 2021, there were no anti-dilutive shares.

For the three and nine months ended September 30, 2022 and 2021, there were 15,000 common stock options outstanding and unexercised and no warrants or and Restricted Stock Units (RSUs) outstanding and unexercised.

NOTE 14 — LONG-TERM DEBT

1 unchanged sentence

Outstanding Balance

September 30,

Interest Rate

11 unchanged sentences

November 15, 2024

Avail Transaction note (6)

Avail Transaction note payable (6)

April 1, 2025

4 unchanged sentences

(1) On May 20, 2019, in connection with the Echo Transaction, the Company entered into two loan agreements with John R.

Loftus, the Company’s CEO, President and Chairman of the Board.

ECHG, LLC executed a five-year, $ 6,925,979 note for the Echo Transaction, amortized over 20 years at a 6 % annual interest rate.

Loftus, the Company’s CEO, President and Chairman of the Company’s Board of Directors (the “Board”).

ECHG executed a five-year, $ 6,925,979 note for the Echo Transaction, amortized over 20 years at a 6 % annual interest rate.

The interest and principal payment due monthly was $ 49,646 .

3 unchanged sentences

On November 23, 2021, the ECHG and DGSE notes, with remaining principal balances of $ 6,309,962 and $ 2,781,087 , respectively, were refinanced by Farmers State Bank of Oakley, Kansas with annual interest rates of 3.1 %.

The ECHG and DGSE notes have monthly interest and principal payments of $ 35,292 and $ 15,555 , respectively.

(the “FSB ECHG Loan” and “FSB DGSE Loan”, respectively).

The FSB ECHG Loan and FSB DGSE Loan have monthly interest and principal payments of $ 35,292 and $ 15,555 , respectively.

(2) On July 9, 2020, DGSE closed the purchase of a retail building located at 610 E.

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(5) On November 23, 2021, the Company secured a 36-month line of credit from Farmers State Bank of Oakley, Kansas (“FSB Facility”) for $ 3,500,000 at a 3.1 % annual interest rate.

(6) On October 29, 2021, ECHG entered into the Avail Transaction to purchase all of the assets, liabilities and rights and interests of Avail AZ, for $ 4.5 million.

The purchase was facilitated by an initial payment of $2.5 million at closing, and the remaining $2.0 million to be paid out by 12 quarterly payments starting April 1, 2022, of $166,667 each.

The Installment note payable for the Avail Transaction imputed at 3.1%

(6) On October 29, 2021, ECHG entered into the Avail Transaction to purchase all of the assets, liabilities and rights and interests of Avail for $ 4,500,000 .

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

The Avail Installment Note for the Avail Transaction does not bear interest but the purchase price imputed at an annual 3.1% interest.

(7) On November 4, 2020, 1901 Gateway Holdings, LLC, a wholly owned subsidiary of the Company, closed on the purchase of an office building located at 1901 Gateway Drive, Irving, Texas for $ 3.521 million.

The building was partially financed through a $ 2,960,000 , 5 -year loan (the “TB&T Irving Loan”), bearing an interest rate of 3.25 %, amortized over 20 years, payable to Texas Bank and Trust.

The building was partially financed through a $ 2,960,000 , 5-year loan (the “TB&T Irving Loan”), bearing an annual interest rate of 3.25 %, amortized over 20 years, payable to Texas Bank and Trust.

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

Future scheduled principal payments of our notes payable and notes payable, related party, as of June 30, 2022 are as follows:

Future scheduled principal payments of our notes payable and notes payable, related party, as of September 30, 2022 are as follows:

Note payable, Farmers State Bank - DGSE

Year Ending December 31,

2022 (excluding the six months ended June 30, 2022)