What changed in this filing

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Item 1. Business

2023-03-16 compared with 2022-03-16 · 106 added, 199 removed, 21 unchanged (94% of the section changed)

Envela’s mission is to empower recommerce buyers and sellers to extend the useful life of goods by reselling previously owned or used goods, or recycling goods’ materials, elements or components for sale and reuse.

Envela is a holding company owning subsidiaries engaged in the recommercialization of goods.

Envela’s recommerce operations in each subsidiary reconditions previously owned or used goods for resale, or recycles products’ value by extracting materials, elements or components that can be sold.

Envela’s recommerce businesses are conducted on both a retail basis and a wholesale basis through distributors, resellers, brick-and-mortar stores and online.

Envela’s subsidiaries also operate a number of other related businesses and brands engaged in a variety of activities, as identified herein.

Envela is domiciled in the state of Nevada, and its corporate headquarters are located in Irving, Texas.

OPERATING SEGMENTS

Envela operates through two recommerce business segments represented by its two direct subsidiaries.

DGSE, LLC (“DGSE”) focuses on the recommercialization of luxury hard assets, and ECHG, LLC (“ECHG”) focuses on the recommercialization of business IT equipment and consumer electronic devices.

DGSE operates the Dallas Gold & Silver Exchange, Charleston Gold & Diamond Exchange and Bullion Express brands and primarily buys and resells or recycles luxury hard assets like jewelry, diamonds, gemstones, fine watches, rare coins and related collectibles, precious-metal bullion products, gold, silver and other precious-metals.

Buying and selling items for their precious-metal content is a major method by which DGSE markets itself.

DGSE also offers jewelry repair services, custom-made jewelry and consignment items, and maintains relationships with refiners for precious-metal items that are not appropriate for resale.

ECHG owns and operates Echo Environmental Holdings, LLC (“Echo”), ITAD USA Holdings, LLC (“ITAD USA”), Teladvance, LLC (“Teladvance”), CEX Holdings, LLC (“CEX”) and Avail Recovery Solutions, LLC, a Delaware limited liability company (“Avail DE”), through which it primarily buys and resells or recycles consumer electronic components and IT equipment.

Echo focuses on end-of-life electronics recycling and sustainability, ITAD USA provides IT equipment disposition, including compliance and data sanitization services, Teladvance, CEX and Avail DE operate as value-added resellers by providing offerings and services to companies looking either to upgrade capabilities or dispose of 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.

During the first quarter of fiscal year 2020, Envela revised the way it reviews its financial information to align more closely with its strategy to engage in diverse recommerce activities through the two principal business segments mentioned above—DGSE and ECHG.

Although our Company’s overall strategy is recommerce, we feel there are distinct segments within recommerce.

DGSE buys luxury hard assets, and ECHG buys consumer electronics and IT equipment, either for resale or recycling .

Envela will continue to report its revenue and operating expenses based on its DGSE and ECHG operating segments.

Envela includes segment information in the notes to the financial statements.

The objective of segment reporting is to provide a management approach that identifies different types of businesses within Envela and how it has organized the segments to make financial decisions.

DGSE buys to resell or recycle luxury hard assets, including jewelry, diamonds, fine watches, rare coins and currency, precious-metal bullion as well as items for their precious-metals content, and other valuables.

DGSE reconditions items for resale as a whole good or component parts, or recycles them by selling recovered precious metals to refiners.

These metals include gold, silver, platinum and palladium, with gold constituting the majority of our purchases and resales.

DGSE resells through its retail locations or wholesale contacts.

Where resale or wholesale is not appropriate, such as for crafted precious-metal items at the end of their useful lives, the items are sent to a third-party refiner and analyzed for metal content, after which they can be recycled and either sold or recrafted into new jewelry or bullion products.

In addition to purchase and resale, DGSE offers on-site jewelry and watch repair and restoration services at its Dallas flagship location, located at 13022 Preston Road, Dallas, Texas 75240, and also partners with a number of consignment vendors which expands offerings at DGSE’s retail locations.

DGSE also designs and offers custom bridal and fashion jewelry.

As referenced above, DGSE also purchases items for their precious-metal content.

Buying and selling precious metal is a major method by which DGSE markets itself.

For over 40 years, DGSE has been a destination location for those seeking value and liquidity in reselling or trading jewelry, and in recycling the precious metals of items it determines are not appropriate to sell as a whole good or as component parts.

DGSE’s in-house staff of experts, including horologists, gemologists and authenticators, inspect items for authenticity and value, and share their market knowledge with its customers.

DGSE operates seven retail locations:

six Dallas Gold & Silver Exchange stores throughout the Dallas/Fort Worth Metroplex and one Charleston Gold & Diamond Exchange store in Mt Pleasant, South Carolina.

In the fourth quarter of 2020, DGSE moved its Southlake, Texas location to Grapevine, Texas, and opened a new location in Lewisville, Texas—both suburbs of Dallas.

DGSE purchased its Grapevine and Lewisville buildings.

During 2021, DGSE purchased and renovated its newest retail location in Frisco, Texas—also a suburb of Dallas.

The Frisco location was opened during the first quarter of Fiscal 2022.

DGSE leases its store in Charleston, South Carolina and three other locations in the Dallas/Fort Worth Metroplex.

DGSE’s Dallas flagship location offers on-site jewelry-repair and watch-restoration services.

We believe that the most successful DGSE locations will be those that can sustain our full retail “exchange” model:

engaging in both buying and selling luxury hard assets and maintaining a robust and diverse inventory across all jewelry categories, fine watches and monetary collectibles.

Helping to extend the life of luxury goods, our stores offer repair and restoration services for jewelry and watches.

Examples of luxury hard assets that we buy and sell are estate and designer jewelry, fine timepieces, rare and numismatic coins, diamonds, gold, silver and other precious metals.

Management’s Discussion and Analysis—DGSE Precious Metals Pricing and Business Impact” for more information.

In recent years, DGSE has maintained brick-and-mortar stores throughout Dallas/Fort Worth Metroplex, making our experts accessible to provide our customers guidance and insight.

We are now focusing on bringing the DGSE experience to a wider customer base through an expanded footprint.

Brick-and-mortar expansion remains a top priority and strong growth opportunity for DGSE.

Purchasing the Lewisville, Grapevine and Frisco stores are part of that focus.

We want to continue adding new merchandise daily to an already inviting product selection and providing omnichannel and immersive consumer experiences to customers in existing and new locations.

We will continue to focus on evolving our business across the Dallas/Fort Worth Metroplex and in Charleston, South Carolina in an effort to drive efficiency across our geographical footprint and maximize profitability.

DGSE views e-commerce as a supplement, but not a replacement, to its retail locations and other operations.

For more information, see “—Sales and Marketing” below.

ECHG owns and operates Echo, ITAD USA, Teladvance and now through two asset purchases during Fiscal 2021, CEX Holdings, LLC (“CEX”) and Avail Recovery Solutions, LLC, a Delaware limited liability company (“Avail DE”).

through which it buys to resell or recycle consumer electronics and IT equipment from businesses and other organizations, such as school districts.

Items designated for resale as a whole or as component parts get extended operational life by first having any existing data erased and then being refurbished before resale.

ECHG recycles goods by removing usable components for resale as components, or by extracting the valuable metals (or other materials) for sale to downstream recycling and refining companies that further process the metal or other materials for subsequent resale.

Our customers include companies and organizations that are based both domestically and internationally.

A significant amount of ECHG’s refining revenue comes through Echo from a refining partner with an international refining facility.

ECHG’s goal is to extend the useful life of electronics through recommerce whenever possible.

Resale and reuse conserves energy and raw materials required to make new products and turns obsolete IT assets into revenue.

CEX was formed in connection with the purchase of the assets of CExchange, LLC a Texas limited liability company (“CExchange”), on June 9, 2021 (the “CExchange Transaction”).

Avail DE was formed in connection with the purchase of the assets of Avail Recovery Solutions, LLC, an Arizona limited liability company (“Avail AZ”) on October 29, 2021 (the “Avail Transaction”).

Echo operates out of a leased warehouse in Carrollton, Texas.

Teladvance, ITAD and CEX operate out of a separate warehouse in Carrollton, TX that was originally assigned in connection with the CExchange Transaction.

Avail DE operates in a leased warehouse in Chandler, Arizona.

This lease was assigned in connection with the Avail Transaction.

Through ECHG and its subsidiaries, Envela plays a larger role in environmental sustainability.

It is our mission to solve problems for our clients and leave the planet a better place than we found it.

The world is quickly shifting its priorities to better manage our global resources, and it is our drive to work with our customers to design a flexible, convenient, hassle-free recycling solution that accommodates their specific needs.

For more information about ECHG’s business drivers, see “Item 7.

Management’s Discussion and Analysis—DGSE Business Drivers and Impacts.”

CUSTOMER TYPES

DGSE Retail Business

DGSE’s products and services are marketed through seven retail locations in Texas and South Carolina.

As noted above, the brick-and-mortar retail locations operate under the Dallas Gold & Silver Exchange and Charleston Gold & Diamond Exchange brands.

DGSE markets bullion products online under the Bullion Express brand.

DGSE Wholesale Business

DGSE transacts a significant amount of business with wholesalers in its industry.

These wholesale transactions occur at industry-specific trade shows held periodically throughout the year, during in-person and telephonic sales calls, and through industry-trade websites.

ECHG Business

ECHG provides custom electronics recycling solutions to meet the needs of diverse clients, including Fortune 500 companies, municipalities, school districts, individual consumers and other organizations.

ECHG’s goal is to help consumers realize maximum value for their used electronics and in the process help protect the environment through responsible recycling.

PRODUCTS AND SERVICES

DGSE Buy Sell Trade

DGSE provides a marketplace that delivers what we believe to be unparalleled value and liquidity for those seeking to buy, sell or trade luxury hard assets like jewelry, watches and diamonds, as well as most numismatic items, discussed below.

DGSE buys and sells merchandise in every major jewelry category, including bridal jewelry, fashion jewelry, custom-made jewelry, diamonds and other gemstones, findings (jewelry components) and fine watches.

Much of our jewelry and fine-watch inventory is purchased directly from individual and wholesale customers at our retail locations.

We process these purchased items at a central location where expert jewelers, gemologists, precious metal dealers and watchmakers sort them into three main resale categories:

retail appropriate, wholesale appropriate and refiner appropriate.

Following a determination of retail appropriateness, jewelry and fine watches are cleaned, serviced and repaired by our experienced jewelers and watchmakers so they’re in like-new condition and suitable for resale.

Most of these items are then individually tagged and sent to one of our retail locations for sale.

Items determined to be not appropriate for our retail locations but suitable for wholesale are grouped into wholesale lots and liquidated through either wholesale contacts or via in-person dealer-to-dealer sales.

Items that are not appropriate for retail or wholesale are sold to a third-party refiner.

The higher-quality diamonds and gemstones that we purchase are typically submitted for independent assessment and certification by the Gemological Institute of America (“GIA”) and other third-party certifying authorities.

This process helps us resell the diamonds and gemstones individually or as components of our custom bridal and fashion jewelry.

Mid-quality diamonds and gemstones are often also utilized in our custom fashion jewelry or packaged with lower-quality stones and sold to wholesalers across the country.

DGSE utilizes jewelry makers to design and create custom fashion jewelry for sale at its locations, including to customer specifications.

In addition to our own inventory of reconditioned luxury hard assets that we offer for sale, we maintain relationships with numerous commercial consignment vendors across the country who supply us with new and pre-owned jewelry on consignment.

This supplements our over-the-counter jewelry purchases and enhances our overall jewelry offering.

Sales of this consignment jewelry are settled with our consignment vendors on a weekly or monthly basis.

DGSE also buys and sells most numismatic items, including rare coins, currency, medals, tokens and other monetary collectibles.

Most of our rare coins, currency and monetary collectibles are purchased directly from individual customers.

We then resell them through our retail activities or wholesale contacts.

Our bullion-trading operation buys and sells all forms of gold, silver, platinum and palladium products, including United States and other government-issue coins, private-mint medallions, art bars and trade unit bars.

All of our store locations conduct retail bullion transactions.

Wholesale bullion transactions are conducted through our main bullion-trading operation in Dallas, Texas, through which DGSE maintains numerous vendor relationships with major industry wholesalers, mints and institutions.

Envela’s mission is to empower buyers and sellers to extend the useful lives of manufactured goods by reselling previously owned, new or used goods, or recycling goods’ materials, elements or components for sale and reuse.

This process is called “re-commerce”.

A circular economy is a sustainable economic system that aims to increase the lifespan of manufactured goods and thereby reduce waste and pollution for a cleaner environment.

Re-commerce is an integral part of circular economies, and it’s a business model that’s sustainable to its core.

Envela helps expand circular consumption through product reuse, refurbishment, repair, and related strategies to extend the useful lives of manufactured goods and reduce their negative impact on our planet.

Envela focuses its re-commerce business on two areas:

direct-to-consumer and commercial services.

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

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

HOW WE ORGANIZE OUR BUSINESS

Envela is a diverse re-commerce company that manages its business through two operating segments.

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

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

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

COMMERCIAL SERVICES

Re-commerce through Intelligent Reuse & Responsible Recycling

Envela’s commercial services portfolio, led by ECHG and its subsidiaries, provides asset- disposition solutions to government agencies, middle-market firms, major corporations, and other organizations.

Through a deep understanding of our clients’ business goals, we’re able to exceed their evolving needs and maintain a differentiated position in this marketplace.

When clients upgrade their IT equipment, ECHG purchases the replaced assets.

They can then be resold as whole goods, harvested for components to re-use, or recycled if not reusable.

By extending the usable lives of their replaced technology assets through re-commerce, our clients realize maximum value for these products, help protect the environment, and reduce the amount of raw materials required to make new products.

We create custom programs for retailers, original equipment manufacturers (“OEMs”) and other institutions to offer their consumer clients an easy, environmentally friendly way to trade in their electronic devices, including laptops and mobile telephones.

And we also repair and refurbish such electronic devices for resale and reuse before ultimately being recycled to make something new.

Simply put, we offer comprehensive lifecycle solutions for a host of electronic devices through custom ITAD programs that address our clients’ specific needs—down to the transportation and product tracking.

We combine our unique consumer insight and extensive re-commerce capabilities to anticipate and exceed the needs of our commercial clients and the consumers they serve.

Moreover, we help companies navigate the maze of regulations associated with technology disposition, including through our secure logistics and data-sanitization processes.

For end-of life items, we remove reusable components for resale.

We separate and shred the remaining materials to reduce them into their commodity components (e.g., plastic, metal, glass) for resale and remanufacture into new products.

We experience some seasonal fluctuations that can impact demand with our commercial clients.

Our business is subject to fluctuations as device trade-in and upgrade volumes can be based on the release of new devices and promotional programs, as well as customer preferences.

Our business is also subject to volatility in margins based on the actual and anticipated timing of the release of new devices and promotional programs, as well as to changes in customer preferences.

Most purchases are through non-exclusive, cancelable agreements.

Envela’s commercial-services segment markets its products directly to prospective clients through several wholly owned subsidiary brands including ITAD USA;

Echo Environmental;

and Avail Recovery Solutions.

Sales and operating results for these brands are reported within their respective ECHG operating segments.

ECHG operates from two leased warehouses in the Dallas/Fort Worth Metroplex (“DFW”), and one leased warehouse in Chandler, Arizona.

DIRECT-TO-CONSUMER

Authenticated Re-commerce

Envela’s direct-to-consumer portfolio, spearheaded by DGSE, primarily buys to resell or recycle luxury hard assets like jewelry, diamonds, gemstones, fine watches, rare coins and related collectibles, precious-metal bullion products, gold, silver and other precious metals.

For over 50 years, DGSE has been a destination location for seeking value and liquidity in luxury goods.

Our direct-to-consumer business provides a marketplace that delivers what we believe to be unparalleled value and liquidity for those seeking to buy, sell or trade merchandise in every major jewelry, fine watch, diamond, gemstone, finding, precious metal, and premium brand product category.

Our experienced staff of experts, including GIA-graduate gemologists, horologists, numismatists, and jewelers and brand authenticators, recondition and rebuild items for resale through our retail locations, e-commerce, or wholesale distributors.

When reconditioning is not feasible because crafted precious metals are at the end of their useful lives, we sell them wholesale channels or recycle them by selling them to third-party refiners who recover reusable precious metals for subsequent sale or recrafting into new jewelry or bullion products.

We offer on-site repair services for jewelry and watches, as well as custom jewelry services.

We buy and sell all forms of gold, silver, platinum, and palladium products.

These include United States and other government-issued coins, private-mint medallions, and most numismatic items such as rare coins, currency, medals, tokens, and other monetary collectibles.

We maintain numerous vendor relationships with major industry wholesalers, mints, and institutions.

We purchase bullion products from a variety of vendors and sell them based on current precious metal market pricing.

Bullion inventory is subject to market-value changes created by underlying commodity markets.

While we believe that we effectively manage commodity risk associated with our bullion business, including by periodically entering into futures contracts to hedge our exposure against market-price changes, there are national and international factors beyond our control that may affect margins, customer demand and transactional volume.

Many factors beyond our control may affect margins, customer demand and transactional volume.

These factors include, but are not limited to, U.S.

Federal Reserve policies, inflation rates, global economic uncertainty, and government and private-mint supply.

DGSE Other Products & Services

We maintain a jewelry-repair center at our Dallas flagship location.

Our stores accept repair, polishing and service orders through all of our locations which are routed to our Dallas flagship location for service.

ECHG Electronic Recycling

ECHG, through its wholly owned subsidiary Echo, offers comprehensive end-of-life electronics recycling.

ECHG works with customers to design a flexible, convenient, hassle-free program that accommodates specific customer needs.

It offers comprehensive turnkey solutions that include transportation and product tracking.

ECHG IT Asset Disposition

ECHG, through its wholly owned subsidiary ITAD USA, offers wide-ranging IT equipment disposition services for diverse clients that want to replace and remarket their IT equipment.

ITAD USA helps companies carefully navigate the maze of local compliance and regulations associated with technology disposition.

From secure logistics and transportation to comprehensive reporting tools and data sanitization services, ITAD USA’s solutions cover all enterprise technology types.

Depending on an IT asset’s condition, it can be refurbished and redeployed within the customer’s business, remarketed and sold, or donated to charity.

When assets are being sold, ITAD USA’s in-house, global-commodity experts help determine market value, and its remarketing network helps ensure clients get maximum value.

ECHG Hardware & Cloud Solutions

ECHG, through its wholly owned subsidiaries Teladvance, CEX and Avail DE, operate as a value-added reseller, providing IT equipment offerings and services to companies looking to upgrade their software, hardware or networking capabilities, or dispose of IT equipment during the process of moving to cloud services.

ECHG delivers a diverse portfolio of latest-technology products and services for clients’ specific business and technology needs.

Moreover, helping new cloud customers recover value from their existing datacenter components, ECHG offers true cradle-to-grave technology solutions.

Our long history of experience in resale has given us the unique ability to have deep knowledge of the resale market.

Using the same processes of authentication, pricing, and marketing as our primary channels, we provide services through consignment of premium brand products.

Premium brand products from individuals, wholesalers and retailers are evaluated for authenticity meeting minimum resale cutlines receive product description, priced, pictured, and packaged for omnichannel distribution and fulfillment services.

Historically, we have observed trends in supply-and-demand seasonality.

Our supply tends to increase in the third and fourth quarters, and our demand tends to increase in the fourth quarter.

As a result, we typically incur higher operating expenses in the last four months of the year as we increase advertising spend.

DGSE operates six retail locations throughout DFW, and one in Mt.

Pleasant, South Carolina.

We opened our newest location in Frisco, Texas, during the first quarter of Fiscal 2022.

We own three retail locations in the DFW area and lease the others.

Our direct-to-consumer brands include Dallas Gold & Silver Exchange, Charleston Gold & Diamond, and Bullion Express.

Sales and operating results for these brands are reported within their respective DGSE operating segments.

CORPORATE INFORMATION

We incorporated in the State of Nevada on September 16, 1965, as Canyon State Mining Corporation of Nevada .

During the ensuing 57 years, the Company transformed its business to meet its customers’ needs and changed its name to reflect this transformation, including to the following:

Canyon State Corporation (October 13, 1981), The American Pacific Mint, Inc.

The Company incorporated in the State of Nevada on September 16, 1965, as Canyon State Mining Corporation of Nevada.

During the next 50 years, the Company changed its name to Canyon State Corporation (October 13, 1981), The American Pacific Mint, Inc.

(July 15, 1986), Dallas Gold & Silver Exchange, Inc.

1 unchanged sentence

(June 26, 2001).

By pursuing diversified business opportunities in the recommerce sector that has potential long-term rewards, we continued to evolve, and on December 12, 2019, we changed our name to Envela Corporation to better reflect our current business operations and diversified recommerce portfolio.

These diversified business opportunities include authenticated recommerce retail of luxury hard assets;

end-of-life IT asset recycling;

data destruction and IT-asset disposition;

and provision of products, services and solutions to industrial and commercial companies.

Information contained on, or accessible through, our website is not incorporated by reference into and does not constitute a part of this annual report or any other report or documents we file with or furnish to the Securities and Exchange Commission (the “SEC”).

Our principal executive offices’ address and telephone number are shown on the cover of this document.

Our website address, envela.com , reflects corporate information and is intended primarily for investors.

In 2016, after recently celebrating its 50th anniversary, it was named by S&P Global Market Intelligence as the second most likely company to go bankrupt, behind Sears Holdings.

Aiming to turn the Company around, the board of directors (its “Board”) brought in new management.

On December 12, 2016, John Loftus was named CEO, and transformation of the business began.

For many employees, that day marked the “true founding” of the Company.

Under this new leadership, the Company has posted six straight years of unprecedented profitability.

By pursuing diversified re-commerce opportunities with potential long-term rewards, we continued to evolve as a company.

On December 12, 2019, we changed our name to Envela Corporation to better reflect our current business operations and diversified re-commerce portfolio.

CONTACT & OTHER

Our principal executive offices are located at 1901 Gateway Drive, Irving, Texas 75038, and our telephone number is (972) 587-4049.

You may access our annual reports on Form 10-K, quarterly reports on Form 10- Q, current reports on Form 8-K, and other reports (and amendments and exhibits thereto) filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act with the Securities and Exchange Commission (“SEC”), as well as proxy statements filed by us, free of charge on our website at www.envela.com, as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC.

Additionally, our website contains complete copies of our policies (Business Code of Conduct & Ethics), committee charters (Audit;

Compliance, Governance and Nominating;

and Compensation), and information about how to communicate with our Board.

Many of our subsidiaries and brands maintain their own websites for commercial purposes, including primarily the following:

DGSE.com , CGDEinc.com , echoenvironmental.com , ITADUSA.com , teladvance.com and AvailRecovery.com .

Envela and its subsidiaries hold well-established trademarks and trade names, including the following:

Dallas Gold & Silver Exchange;

Charleston Gold & Diamond Exchange;

Bullion Express;

Echo Environmental;

Teladvance and Avail.

Envela and other trade names, trademarks and service marks of the Company are the property of Envela.

DGSE.com, echoenvironmental.com, ITADUSA.com, teladvance.com and AvailRecovery.com.

Information contained on, or that can be accessed through, our website or any website of our subsidiaries or brands is not incorporated by reference into this or any other report we file with, or furnish to, the SEC, and you should not consider information on any such website to be part of this or any other report we file with, or furnish to, the SEC.

Such periodic reports, proxy statements and other information are also available on the SEC’s website at http://www.sec.gov.

Envela and other trade names, trademarks and service marks of the Company or its subsidiaries are the property of Envela.

Solely for convenience, the trademarks, service marks, logos and trade names referred to in this document are without the “®” and “™” symbols, but such references are not intended to indicate that we waive or will not assert our rights in them.

RELATIONSHIPS

Envela has a corporate policy governing the identification, review, consideration and approval or ratification of transactions with related persons, as that term is defined in the Instructions to Item 404(a) of Regulation S-K, promulgated under the Securities Act (“Related Party”).

Under this policy, all Related Party transactions are identified and approved prior to consummation of the transaction to ensure they are consistent with the Company’s best interests and the best interests of its stockholders.

Among other factors, Envela’s board of directors (its “Board”) considers the size and duration of the transaction, the nature and interest of the Related Party in the transaction, whether the transaction may involve a conflict of interest and if the transaction is on terms that are at least as favorable to the Company as would be available in a comparable transaction with an unaffiliated third party.

Envela’s Board reviews all Related Party transactions at least annually to determine if it is in the Company’s best interests and the best interests of the stockholders to continue, modify, or terminate any of the Related Party transactions.

Envela’s Related Party Transaction Policy is available for review in its entirety under the “Investors” menu of the Company’s corporate relations website at envela.com .

On May 20, 2019, the Company entered into two loan agreements with John R.

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

The first note with a principal balance of $6,925,979, proceeds of which were used to finance an asset acquisition , was a five-year promissory note amortized over 20 years at 6% annual interest rate.

The second note with a principal balance of $3,074,021, proceeds of which were used to pay off an accounts payable – related party balance to a previous Related Party as of May 20, 2019, was a five-year note amortized over 20 years at 6% annual interest rate.

Both notes were being serviced by operational cash flow.

On November 23, 2021, Farmers State Bank of Oakley, Kansas refinanced both of the loans from Mr.

Loftus, therefore, paying-off all note payables, related party loans from Mr.

For the year ended December 31, 2021 and 2020, the Company paid Mr.

Loftus $495,490 and $580,957, respectively, in interest on the Company’s outstanding note payables, related party.

SALES AND MARKETING

In fiscal year 2021, DGSE’s advertising activities continued to rely heavily on digital media, radio and print.

Marketing activities centered on each of the major business categories, emphasizing our broad array of products, expertise, and price advantages compared to our local and regional competition.

In fiscal year 2021, we spent approximately $407,000 on advertising and marketing in our operations, a 61% year-over-year increase.

Our advertising and marketing spending represent costs for traditional and digital media, in-store displays, brochures and informational pamphlets, production fees, and other related items.

In fiscal year 2022, we anticipate our radio, digital and social media presence to remain an integral part of DGSE’s marketing strategy.

The website for the Dallas Gold & Silver Exchange has been redesigned to be viewed on a variety of platforms across a multitude of digital devices.

We believe our enhanced web platform also facilitates a personalized shopping experience, including recommending inventory, and delivers a seamless digital experience for product research and social sharing.

Additionally, we anticipate that social media will continue to play an increasingly larger role in our overall advertising mix.

Digital advertising will continue to allow us to target specific customer groups on a wider scale.

ECHG’s advertising activities focus primarily on regional and national trade shows.

In fiscal year 2021, we spent approximately $53,000 on advertising and marketing, a significant portion of which was spent at regional and national trade shows.

In 2022, ECHG expects trade shows will continue to be the largest portion of their advertising budget since downstream recyclers frequent such trade shows to evaluate who can meet their needs or service their projects.

Also, at trade shows, representatives of ITAD USA make many contacts with decision makers seeking either to purchase refurbished electronics for their employees or to sell their older electronic devices for recycling and reuse.

DGSE’s retail and wholesale jewelry business is generally seasonal.

The time periods around Christmas, Valentine’s Day and Mother’s Day are typically the main seasons for jewelry sales.

DGSE’s business of buying and selling bullion, precious metal, and rare-coins are less seasonal, though we believe they are directly impacted by several factors outside of our control, including U.S.

Federal Reserve policies, inflation rates, global economic uncertainty, governmental and private-mint supply.

These factors may affect margins, customer demand and transactional volume.

Seasonal swings are rarely sustained or noticed in ECHG’s business of recycling end-of-life assets and refurbishing value-sustaining electronic components.

As of December 31, 2021, we employed 256 people, all full-time employees.

None of our employees are represented by a labor union.

We believe that our current employee relations are in good condition.

ENVIRONMENTAL, SOCIAL AND GOVERNANCE

Our stakeholders are essential to our business—shareholders, employees, and the communities in which we do business.

We aspire to operate our business with positive social and environmental impact.

Our Board, including the Corporate Governance and Nominating Committee, the Audit Committee, and the Compensation Committee, provide oversight on business initiatives and programs that relate to social responsibility, emerging opportunities and the Company’s exposure to risk.

The Board and management seek to attract and retain the most qualified inclusive workforce to propel the Company into the next generation.

Our Sustainability Program

We are committed to extending the useful lives of goods by promoting their recirculation and re-use, rather than creating waste.

In this way, sustainability is at the core of our business, and we hope to create a more sustainable future.

Human Capital Resources

Our employees are guided by our mission to extend the lifespans of durable goods.

We are part of a diverse global community, and we aim to reflect that diversity within our team.

We believe diversity and inclusion foster a collaborative culture, which fuels our ability to innovate as we work to create a more sustainable future.

As of December 31, 2022, we had 257 full-time equivalent employees.

Additionally, we rely on independent contractors and temporary personnel to supplement our workforce, primarily in our electronic-disposition centers.

None of our employees is represented by a labor union or covered by a collective bargaining agreement.

We consider our relations with our employees to be positive.

Our management policy is to keep employees informed of material decisions that affect them, encourage employee suggestions, and implement them whenever practicable.

Diversity and Inclusion

We are proud to have a diverse team.

We celebrate diversity and are committed to providing equal-employment opportunities regardless of race, color, ancestry, religion, sex, national origin, sexual orientation, age, citizenship, marital status, disability, or gender identity or expression.

Competitive Environment

The Company encounters competition in connection with all aspects of its operations.

These competitive conditions may adversely affect the Company’s revenue and profitability and its ability to expand and execute its business strategy.

In addition, the Company competes with other companies and retailers to attract and retain employees with competitive compensation programs.

Many of the competitors have significantly greater size, financial resources, and human capital than the Company.

GOVERNMENT REGULATIONS, ENVIRONMENTAL MATTERS AND IMPACT OF CLIMATE CHANGE

2 unchanged sentences

If our sourcing processes should change, or if there is a determination that our current practices should be covered by the conflict-minerals reporting and disclosure guidelines, we would need to implement significant additional measures to comply with these rules.

See “Item 1A.

Risk Factors—The conflict-mineral diligence process, the results from that process and the related reporting obligations could increase costs, adversely affect our reputation and adversely affect our ability to obtain merchandise” for more information.

In addition, Envela partners with refiners for portion of its sales.

In addition, Envela partners with refiners for a portion of its sales.

These refiners are subject to increasingly stringent governmental regulation in their refining operations, and a change or increase in such regulations in the United States or abroad may have an adverse impact on our business.

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Risk Factors—Adverse economic conditions in the U.S.

or in other key markets, and the resulting declines in consumer confidence and spending, could have a material adverse effect on our operating results” for more information.

Envela applied for and received, on April 20, 2020, an approximately $1.67 million federally backed loan with 1% interest, the proceeds of which were intended to pay employees and cover certain rent and utility-related costs during the COVID-19 pandemic (the “Federal Loan”).

The Federal Loan was forgivable to the extent that certain criteria were met.

We applied for the forgiveness of the Federal Loan during Fiscal 2020, and received notification during Fiscal 2021 that the loan had been forgiven.

The forgiveness of the Federal Loan is included in Other income from loan forgiveness on our consolidated income statements.

AVAILABLE INFORMATION

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 US Securities and Exchange Commission (“SEC”).

Such information, and amendments to reports previously filed or furnished, is available free of charge from our corporate website, envela.com , as soon as reasonably practicable after such materials are filed with or furnished to the SEC.

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

Additionally, there are complete copies of our policies (Business Code of Conduct & Ethics;

Related Party Transaction Policy;

and Whistleblower, committee charters (Audit;

Compliance, Governance and Nominating;

and Compensation), and information about how to communicate with our Board.

or in other key markets, and the resulting declines in consumer confidence and spending, could have a material adverse effect on the Company’s operating results” for more information.

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

What changed 10-K

Item 1. Business