What changed in this filing

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Item 1. Financial Statements

2023-05-03 compared with 2022-11-02 · 221 added, 335 removed, 264 unchanged (68% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended September 30,

Nine Months Ended September 30,

$ 135,252,502

Three Months Ended March 31,

Cost of goods sold

3 unchanged sentences

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

6 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

Current assets:

1 unchanged sentence

Trade receivables, net of allowances

Notes receivable, net of allowances

Deferred tax asset

Current right-of-use assets from operating leases

4 unchanged sentences

Intangible assets, net

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

Other long-term assets

Operating lease right-of-use assets

Liabilities and stockholders’ equity

1 unchanged sentence

Accounts payable-trade

Line of credit

Notes payable

15 unchanged sentences

Additional paid-in capital

Accumulated deficit

( 3,002,137 )

( 12,814,929 )

Retained earnings

Total stockholders’ equity

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

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

Deferred Taxes

Changes in operating assets and liabilities:

Trade receivables

( 2,871,070 )

( 4,014,627 )

( 2,647,432 )

Prepaid expenses

( 1,213,187 )

Intangible Assets

Accounts payable and accrued expenses

2 unchanged sentences

Net cash provided by operations

Investment in note receivable

Payments from notes receivable

Purchase of property and equipment

( 3,064,277 )

Acquisition of CExchange assets and liabilities, net of cash acquired

Adjustment to the purchase price of the Avail Transaction

Net cash used in investing

( 3,351,141 )

Payments on notes payable, related party

Net cash provided by (used in) investing

Payments on notes payable

Proceeds from notes to purchase property

Payments on line of credit

( 1,700,000 )

Net cash provided by (used in) financing

Net cash used in financing

( 1,906,274 )

4 unchanged sentences

Cash paid during the period for:

Non cash activites:

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 September 30, 2021 and 2022

Preferred Stock

Stockholders'

Balances at June 30, 2021

$ ( 18,702,420 )

Balances at September 30, 2021

$ ( 15,596,019 )

Preferred Stock

Stockholders'

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.

ENVELA CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Nine Months ended September 30, 2021 and 2022

For the Three Months ended March 31, 2022 and 2023

Preferred Stock

Stockholders'

Balances at December 31, 2020

Balances at January 1, 2022

$ ( 12,814,929 )

Balances at September 30, 2021

Balances at March 31, 2022

$ ( 10,167,704 )

1 unchanged sentence

Stockholders'

Balances at December 31, 2021

$ ( 12,814,929 )

Balances at September 30, 2022

$ ( 3,002,137 )

Balances at January 1, 2023

Balances at March 31, 2023

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

1 unchanged sentence

NOTE 1 — BASIS OF PRESENTATION

The 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 by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”), including under the Securities Act of 1933, as amended (the “Securities Act”) and the Securities and Exchange Act of 1934, as amended (the “Exchange Act”).

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

GAAP”) have been condensed or omitted pursuant to the SEC’s rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading.

The Company suggests that these financial statements be read in conjunction with the financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the SEC on March 16, 2022 (the “2021 Annual Report”).

In the opinion of the management of the Company, the accompanying unaudited interim financial statements contain all adjustments, consisting only of those of a normal recurring nature, necessary to present fairly its results of operations and cash flows for the periods presented.

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

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

These unaudited interim condensed consolidated financial statements of Envela Corproration, 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 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.

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 (this “Form 10-Q”), necessary for a fair presentation of the consolidated financial statements for these interim periods, have been included.

Operating results for the three months ended March 31, 2023 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2023 (“fiscal 2023”).

For further information, refer to the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (“fiscal 2022”) of Envela filed with the SEC on March 16, 2023 (the “2022 Annual Report”).

Contemporaneously with filing this Form 10-Q, we updated our two reportable segments by renaming the ECHG segment the “Commercial” segment and the DGSE segment the “Consumer” segment.

The segment name changes did not result in any change to the composition of the Company’s operations and therefore did not result in any change to the historical results.

Our operations conducted by each of our segments are more specifically described below.

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

5 unchanged sentences

Envela operates primarily via two operating and reportable segments.

Through DGSE, LLC (“DGSE”), the Company operates Dallas Gold & Silver Exchange, Charleston Gold & Diamond Exchange, and Bullion Express brands.

Through ECHG, LLC (“ECHG”), the Company operates Echo Environmental Holdings, LLC (“Echo”), ITAD USA Holdings, LLC (“ITAD USA”), CEX Holdings, LLC (“CEX”), Avail Recovery Solutions, LLC (“Avail”) and Teladvance, LLC (“Teladvance”).

Our consumer segment, formerly known as the DGSE segment, operates DGSE, LLC (“DGSE”), Dallas Gold & Silver Exchange, Charleston Gold & Diamond Exchange, and Bullion Express brands.

Our commercial segment, formerly known as the ECHG segment, operates ECHG, LLC (“ECHG”), Echo Environmental Holdings, LLC (“Echo”), ITAD USA Holdings, LLC (“ITAD USA”), Teladvance, LLC (“Teladvance”), CEX Holdings, LLC (“CEX”) and Avail Recovery Solutions, LLC (“Avail”).

Envela is a Nevada corporation, headquartered in Irving, Texas.

DGSE 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.

DGSE operates seven jewelry stores at both the retail and wholesale levels in Texas and South Carolina.

Buying and selling items for their precious-metals 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.

The Company also maintains a presence in the retail market through its websites, www.dgse.com and www.cgdeinc.com .

ECHG, through its subsidiaries, primarily buys electronic components from business and other organizations, such as school districts, for end-of-life recycling and resale, or to add life to electronic devices by data destruction and refurbishment for reuse.

ECHG also conducts such recycling and resale at the retail level.

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 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.

ECHG’s customers are companies and organizations that are based domestically and internationally.

For additional information on the businesses of both DGSE and ECHG, see “Item 1.

Our consumer segment 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.

We operate seven jewelry stores at both the retail and wholesale levels throughout the United States via its facilities in Texas and South Carolina.

The Company expects to expand soon to Arizona, see Note 16 – Subsequent Events, to these interim condensed consolidated financial statements.

The consumer segment is currently promoting and building their Bullion Express brand into a leading on-line seller of bullion.

Buying and selling items for their precious-metals content is a major method by which we are marketed.

The consumer segment 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.

We also maintain a presence in the retail market through websites, www.dgse.com , www.cgdeinc.com and www.bullionexpress.com .

Our commercial segment, primarily buys electronic components from business and other organizations, such as school districts, for end-of-life recycling and resale, or to add life to electronic devices by data destruction and refurbishment for reuse.

We also conduct such recycling and resale at the retail level.

We focus 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.

Like the consumer segment, the commercial segment 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.

The commercial segment’s customers are companies and organizations that are based domestically and internationally.

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

Business – Operating Segments” in the Company’s 2022 Annual Report.

4 unchanged sentences

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.

The carrying amounts reported in the condensed consolidated balance sheets for cash equivalents, trade receivables, prepaid expenses, other current assets, accounts payable, accrued expenses, 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.

4 unchanged sentences

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.

The Company’s goodwill is related to ECHG only and not the entire Company.

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”), 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.

The Company’s goodwill is related to the commercial segment only and not the entire Company.

The commercial segment 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 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, management concluded there were no impairments of goodwill that resulted from those triggering events for the three months ended March 31, 2023.

Management will continue to evaluate goodwill for the commercial segment.

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

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”).

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 , 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.

There have been several adjustments made to goodwill concerning the Avail Transaction during fiscal year 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 .

During fiscal year 2022 management also identified $ 2,736,000 of intangibles that were not initially included in the fair value of Avail’s net assets.

The separation of intangibles reduced the Avail Transaction goodwill to $ 972,272 .

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

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

As of March 31, 2023 and December 31, 2022, goodwill as reported in the condensed consolidated balance sheets was $ 3,621,453 .

Recent Accounting Pronouncements

2 unchanged sentences

We will be required to use a forward-looking expected credit loss methodology for accounts receivable, loans and other financial instruments.

The standard will be adopted upon the effective date for us beginning January 1, 2023 by using a modified retrospective transition approach to align our credit loss methodology with the new standard.

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 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.

The ASU is effective for the fiscal years beginning after December 15, 2022.

We adopted this ASU as of January 1, 2023, which includes interim periods within the reporting period.

ASU 2016-13 was adopted by using a modified retrospective transition approach to align our credit loss methodology with the new standard.

There were no effects of this standard on our financial position, results of operations or cash flows.

There were no other new accounting standards that had a material impact on the Company’s consolidated financial statements during the three-month period ended March 31, 2023, and there were no other new accounting standards or pronouncements that were issued but not yet effective as of March 31, 2023 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, 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 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.

ECHG has its own separate financial information to perform goodwill impairment testing.

The Company will evaluate goodwill based on cash flows for the ECHG segment.

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

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

September 30, 2022

September 30, 2021

Income from continuing operations

Basic net income per common share

Diluted net income per common share

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 Nine Months Ended

September 30, 2022

September 30, 2021

$ 135,252,502

$ 102,710,504

Income from continuing operations

Basic net income per common share

Diluted net income per common share

NOTE 5 — GOODWILL

The changes in goodwill is as follows:

September 30,

The change in goodwill is as follows:

Opening balance

Additions/(Reductions) (1)

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.

(1) The reduction in goodwill of $ 2,519,012 for fiscal 2022, is a combination of an additional cash payment made on May 31, 2022 of $ 216,988 , increasing goodwill for the Avail Transaction, offset by the effect of identifying $ 2,736,000 of intangible assets that was not initially included in the fair value of Avail’s net assets, reducing goodwill and increasing intangible assets.

NOTE 6 — 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

8 unchanged sentences

( 1,757,080 )

Software development

accumulated amortization

( 1,593,305 )

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

1 unchanged sentence

(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)

The following table outlines the estimated future amortization expense related to intangible assets held as of March 31, 2023:

2023 (excluding the three months ending March 31, 2023)

NOTE 8— ACCRUED EXPENSES

Accrued expenses consist of the following:

September 30,

Accrued interest

8 unchanged sentences

Other administrative expenses

Federal Income tax

State income tax

NOTE 9 — SEGMENT INFORMATION

As stated in Note 1 – Basis of Presentation, we updated our two reportable segments by renaming the ECHG segment to the “Commercial” segment and the DGSE segment to the “Consumer” segment.

The segment name changes did not result in any change to the composition of the Company’s operations and therefore did not result in any change to the historical results.

Our operations conducted by each of our segments are more specifically described below.

We determine our business segments based upon an internal reporting structure.

Our financial performance is based on the following two segments:

DGSE and ECHG.

The DGSE segment includes Dallas Gold & Silver Exchange, which has six retail stores in the Dallas/Fort Worth Metroplex, and Charleston Gold & Diamond Exchange, which has one retail store in Mt.

Our financial performance is based on the following segments:

consumer and commercial.

The consumer segment includes Dallas Gold & Silver Exchange, which has six retail stores in the Dallas/Fort Worth Metroplex (“DFW”), and Charleston Gold & Diamond Exchange, which has one retail store in Mt.

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 reuse of electronic components.

The consumer segment also operates the on-line Bullion Express brand.

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

These five companies are involved in recycling and the 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 September 30, 2022 and 2021:

For The Three Months Ended September 30,

The following separates the consumer and the commercial financial results of operations for the three months ended March 31, 2023 and 2022:

For The Three Months Ended March 31,

$ 36,704,397 $ 11,684,643 $ 48,389,040 $ 35,782,872 $ 11,632,226 $ 47,415,098

Cost of goods sold

32,719,429 4,259,709 36,979,138 31,559,410 6,144,654 37,704,064

3,984,968 7,424,934 11,409,902 4,223,462 5,487,572 9,711,034

Selling, general and administrative expenses

2,396,025 5,509,278 7,905,303 2,137,949 4,421,806 6,559,755

Depreciation and amortization

Total operating expenses

98,134 256,217 354,351 106,963 184,984 291,947

2,494,159 5,765,495 8,259,654 2,244,912 4,606,790 6,851,702

Operating income

Interest expense

1,490,809 1,659,439 3,150,248 1,978,550 880,782 2,859,332

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

Income tax expense

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,

Other income (expense)

23,534 187,245 210,779 ( 27,992 ) ( 30,584 ) ( 58,576 )

Cost of goods sold

Selling, general and administrative expenses

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

59,618 57,446 117,064 61,241 61,998 123,239

Income before income taxes

1,454,725 1,789,238 3,243,963 1,889,317 788,200 2,677,517

Income tax expense

317,841 399,805 717,646 13,177 17,115 30,292

$ 1,136,884 $ 1,389,433 $ 2,526,317 $ 1,876,140 $ 771,085 $ 2,647,225

NOTE 10 — REVENUE RECOGNITION

ASC 606 provides guidance to identify performance obligations for revenue-generating transactions.

Accounting Standards Codification (“ASC 606”) provides guidance to identify performance obligations for revenue-generating transactions.

The initial step is to identify the contract with a customer created with the sales invoice or a repair ticket.

Secondly, we identify the performance obligations in the contract, as we promise to deliver the purchased item or promised repairs in return for payment or future payment as a receivable.

Secondly, to identify the performance obligations in the contract as we promise to deliver the purchased item or promised repairs in return for payment or future payment as a receivable.

The third step is determining the transaction price of the contract obligation as in the full ticket price, negotiated price or a repair price.

1 unchanged sentence

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 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

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.

We also recognize revenue upon the shipment of goods when retail and wholesale customers have fulfilled their obligation to pay, or promise to pay through e-commerce or phone sales.

We have elected to account for shipping and handling costs as fulfillment costs after the customer obtains control of the goods.

Crafted-precious-metal items at the end of their useful lives are sold to a refiner.

Since the local refiner is located in the Dallas/Fort Worth area, we deliver the metal to the refiner.

The metal is melted and assayed, price is determined from the assay and payment is made usually in a day or two.

Revenue is recognized from the sale once payment is received.

DGSE also offers a structured layaway plan.

When a retail customer utilizes the layaway plan, we collect a minimum payment of 25% of the sales price , establish a payment schedule for the remaining balance and hold the merchandise as collateral as security against the customer’s deposit until all amounts due are paid in full.

Revenue for layaway sales is recognized when the merchandise is paid in full and delivered to the retail customer.

Layaway revenue is also recognized when a customer fails to pay in accordance with the sales contract and the sales item is returned to inventory with the forfeit of deposited funds, typically after 90 days.

In limited circumstances, we exchange merchandise for similar merchandise and/or monetary consideration with both dealers and retail customers, for which we recognize revenue in accordance with ASC 845, Nonmonetary Transactions.

When we exchange merchandise for similar merchandise and there is no monetary component to the exchange, we do not recognize any revenue.

The following disaggregation of total revenue is listed by sales category and segment for the three months ended March 31, 2023 and 2022:

Three Months Ended March 31,

For the consumer segment, revenue for monetary transactions (i.e., cash and receivables) with dealers and the retail public are recognized when the merchandise is delivered, and payment has been made either by immediate payment or through a receivable obligation at one of our over-the-counter retail stores.

Revenue is recognized upon the shipment of goods when retail and wholesale customers have fulfilled their obligation to pay, or promise to pay, through e-commerce or phone sales.

Shipping and handling costs are accounted for as fulfillment costs after the customer obtains control of the goods.

Crafted-precious-metal items at the end of their useful lives are sold for its precious metal contained.

The metal is assayed to determine the precious metal content, a price is agreed upon and payment is made usually within two days.

Revenue is recognized from the sale once the performance obligation is satisfied.

In limited circumstances, merchandise is exchanged for similar merchandise and/or monetary consideration with both dealers and retail customers, for which revenue is recognized in accordance with Accounting Standards Codification (“ASC”) 845, Nonmonetary Transactions.

When merchandise is exchanged for similar merchandise and there is no monetary component to the exchange, there is no revenue recognized.

Instead, the basis of the merchandise relinquished becomes the basis of the merchandise received, less any indicated impairment of value of the merchandise relinquished.

When we exchange merchandise for similar merchandise and there is a monetary component to the exchange, we recognize revenue to the extent of the monetary assets received and determines the cost of sale based on the ratio of monetary assets received to monetary and non-monetary assets received multiplied by the cost of the assets surrendered.

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

The customer applies on-line with the financing company and upon going through the credit check will be approved or denied.

If accepted, the customer is allowed to purchase according to the limits set by the financing company.

Once the customer does purchase merchandise, based on their financing agreement, we record and recognize the sale at that point, based on the promise to pay by the finance company up to the customer’s approved limit.

We have a return policy (money-back guarantee).

The policy covers retail transactions involving jewelry, graded rare coins and currency only.

Customers may return jewelry, graded rare coins and currency purchased within 30 days of the receipt of the items for a full refund as long as the items are returned in exactly the same condition as they were delivered.

In the case of jewelry, graded rare coins and currency sales on account, customers may cancel the sale within 30 days of making a commitment to purchase the items.

The receipt of a deposit and a signed purchase order evidences the commitment.

Any customer may return a jewelry item or graded rare coins and currency if they can demonstrate that the item is not authentic, or there was an error in the description of a graded coin or currency piece.

When merchandise is exchanged for similar merchandise and there is a monetary component to the exchange, revenue is recognized to the extent of the monetary assets received that determines the cost of sale based on the ratio of monetary assets received to monetary and non-monetary assets received multiplied by the cost of the assets surrendered.

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

The customer applies on-line with the third party and upon going through the credit check will be approved or denied.

If accepted, the customer is allowed to purchase according to the limits set by the finance company.

Revenue is recognized from the sale upon the promise of the financing company to pay.

Our return policy covers retail transactions.

In some cases, customers may return a product purchased within 30 days of the receipt of the items for a full refund.

Also, in some cases customers may cancel the sale within 30 days of making a commitment to purchase the items.

Additionally, a customer may return an item for full refund if they can demonstrate that the item is not authentic, or there was an error in the description of the piece.

Returns are accounted for as a reversal of the original transaction, with the effect of reducing revenues, and cost of sales, and returning the merchandise to inventory.

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 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.

DGSE has established an allowance for estimated returns based on our review of historical returns experience and reduces our reported revenues and cost of sales accordingly.

For the three months ended March 31, 2023 and 2022, our allowance for returns remained the same at approximately $ 28,000 for both years.

A significant amount of revenue stems from sales to two precious metal partners.

One partner constitutes 24.5%, and the second partner constitutes 23.7%, of the revenues for the three months ended March 31, 2023.

However, the Company believes that the products it sells is marketable to numerous sources at competitive prices.

The commercial segment 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.

The revenue streams are as follows:

Outright sales are recorded when product is shipped.

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

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 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.

Outright sales are recorded when product is shipped and title transferred.

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

The commercial segment has fulfilled its performance obligation with an agreed upon transaction price, payment terms and shipping the product.

We recognize 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.

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

Under the guidance of ASC 606, an estimate of the variable consideration that are expected to be entitled 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 in the period once the underlying weight and any precious metal spot price movement is resolved, which is usually around six (6) weeks.

Any adjustment from the resolution of the underlying uncertainty is netted with the remaining forty percent (40%) due from the original contract.

Hard drive sales by the Echo Entities are limited to customers who are required to prepay shipments.

Once the commodity price is established and agreed upon by both parties, customers send payment in advance.

The Company releases the shipment on the same day when payment receipt is confirmed, and revenue is recognized on day of shipment.

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.

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.

Payment terms are also dictated in the Scope of Work.

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

The commercial segment also provides recycling services according to a Scope of Work (“SOW”).

Services are recognized based on the number of units processed by a preset price per unit.

Activity reports are produced weekly with the counts and revenue is recognized based on the billing from the weekly reports.

Recycling services can be conducted at our facility, or the recycling services can be performed at the client’s facility.

The SOW will determine the charges and whether the service will be completed at our facility or at the client’s facility.

Payment terms are also dictated in the SOW.

Accounts Receivable :

We record trade receivables when revenue is recognized.

When appropriate, we will record an allowance for doubtful accounts, which is primarily determined by an analysis of our trade receivables aging.

The new accounting standard introduces a new expected credit losses methodology for estimating allowances for credit losses which is based on expected losses rather than incurred losses.

We are required to use a forward-looking expected credit loss methodology for accounts receivable.

This new methodology is effective for the fiscal years beginning January 1, 2023.

We will record an allowance for doubtful accounts, which is primarily determined by an analysis of our trade receivables aging, using the new expected losses methodology.

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

In addition, specific accounts that are doubtful of collection are included in the allowance.

In addition, specific accounts that are considered and expected to be uncollectable are included in the allowance.

These provisions are reviewed to determine the adequacy of the allowance for doubtful accounts.

1 unchanged sentence

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

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

The consumer segment had no allowance for doubtful accounts balance as of March 31, 2023 and December 31, 2022.

Some of commercial segment’s customers are on payment terms, and although low risk, occasionally the need may arise to record an allowance for receivables that are deemed high risk using the new expected loss methodology.

The commercial segment’s allowance for doubtful accounts, as of March 31, 2023 and December 31, 2022 was $ 0 and $ 51,734 .

Income Taxes :

4 unchanged sentences

A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets unless it is more likely than not such assets will be realized.

During fiscal 2022, management determined that it was more likely than not the tax asset would be reduced by future taxable income, therefore, the remaining valuation allowance at December 31, 2022, was released.

As of March 31, 2023, we had a tax deferred asset of $ 1,140,002 with $ 0 offsetting valuation allowance.

As of March 31, 2022, the Company had a deferred tax asset of $ 3,928,134 with an offsetting valuation allowance of $ 3,928,134 , netting the tax asset to $ 0 .

We account for our position in tax uncertainties in accordance with ASC 740, Income Taxes.

4 unchanged sentences

First, we must determine whether any amount of the tax benefit may be recognized.

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 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.

Second, we determine how much of the tax benefit should be recognized (this would only apply to tax positions that qualify for recognition.).

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 months ended March 31, 2023 and 2022.

NOTE 11 — 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 at the time of the lease signing.

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

The lease for ECHG’s Echo location on W.

Belt Line Road, in Carrollton, Texas, expires January 31, 2026.

The lease for ECHG’s Teladvance location, which also houses ITAD USA, on Realty Road in Carrollton, Texas expires January 31, 2027.

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

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)

The Company has nine operating leases as of March 31, 2023—five in DFW, two in Mt.

Pleasant, South Carolina and two in Chandler, Arizona.

The leases for the consumer segment are:

1) the flagship store located at 13022 Preston Road, Dallas, Texas expiring 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;

2) the Grand Prairie, Texas lease which was renewed starting July 1, 2022, expiring June 30, 2027, with an option to extend the lease for an additional five years;

3) the two leases for the Mt.

Pleasant, South Carolina location expiring on April 30, 2025, with no additional renewal options;

and 4) the lease for the Euless, Texas location expiring June 30, 2025, with an option to extend the lease for an additional five years.

The leases for the commercial segment are:

1) the Echo location on W.

Belt Line Road, in Carrollton, Texas, expiring January 31, 2026, with an option to extend the lease an additional five years:

2) the lease for the Teladvance location, which also houses ITAD USA and CEX, on Realty Road in Carrollton, Texas expiring January 31, 2027, with no additional renewal options;

and 3) the two leases for the Avail location in Chandler, Arizona expiring on May 31, 2025, with no additional renewal options.

All of the Company’s nine leases as of March 31, 2023 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 March 31, 2023 and 2022 was $ 659,616 and $ 622,863 respectively, comprised of a combination of minimum lease payments and variable lease costs.

As of March 31, 2023, the weighted average remaining lease term and weighted average discount rate for operating leases was 3.3 years and 4.4 %, respectively.

For the three months ended March 31, 2023 and 2022, the Company’s cash paid for operating lease liabilities was $ 656,520 and $ 616,097 respectively.

Future annual minimum lease payments as of March 31, 2023:

2023 (excluding the three months ending March 31, 2023)

2027 and thereafter

1 unchanged sentence

Less imputed interest

DGSE Sub-Total

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

Consumer Sub-Total

2023 (excluding the three months ending March 31, 2023)

2027 and thereafter

1 unchanged sentence

Less imputed interest

ECHG Sub-Total

Commercial Sub-Total

Current portion

NOTE 12 — BASIC AND DILUTED AVERAGE SHARES

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

A reconciliation of basic and diluted weighted average common shares for the three months ended March 31, 2023 and 2022 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 nine months ended September 30, 2022 and 2021 is as follows:

For the Nine Months Ended

September 30,

Basic weighted average shares

Effect of potential dilutive securities

Diluted weighted average 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.

For the three months ended March 31, 2023 and 2022, there was a total of 15,000 common stock options, warrants, and Restricted Stock Units (RSUs) unexercised, respectively.

For the three months ended March 31, 2023 and 2022, there were no anti-dilutive shares.

On March 14, 2023, a stock repurchase program was unanimously approved by the Company’s Board of Directors, with gives management authorization to purchase up to one million ( 1,000,000 ) shares of the Company’s stock, of a per-share price not to exceed $ 9 , on the open market.

NOTE 13 — LONG-TERM DEBT

1 unchanged sentence

Outstanding Balance

September 30,

Interest Rate

6 unchanged sentences

July 30, 2031

DGSE Sub-Total

Consumer Sub-Total

Note payable, Farmers Bank (1)

2 unchanged sentences

November 15, 2024

Avail Transaction note payable (6)

Avail Transaction note (6)

April 1, 2025

ECHG Sub-Total

Commercial Sub-Total

Note payable, Texas Bank & Trust (7)

November 4, 2025

Novemeber 4, 2025

Current portion

(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 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 .

DGSE executed a five-year, $ 3,074,021 note to pay off the accounts payable – related party balance to a former Related Party as of May 20, 2019.

That promissory note was also amortized over 20 years at a 6 % annual interest rate.

The interest and principal payment due monthly on the note for DGSE was $ 22,203 .

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 “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.

Round Grove Road in Lewisville, Texas for $ 1,195,000 .

The purchase was partly financed through a $ 956,000 , 10 year loan (the “Truist Lewisville Loan”), bearing an annual interest rate of 3.65 %, amortized over 20 years, payable to Truist Bank (f/k/a BB&T Bank).

(1) On November 23, 2021, Farmers State Bank of Oakley, Kansas (“FSB”) refinanced prior related party notes held by the consumer segment and the commercial segment.

The commercial segment note was refinanced with a remaining and outstanding balance of $ 6,309,962 , is a five-year promissory note amortized over 20 years at 3.1 % annual interest rate.

The note has monthly principal and interest payments of $ 35,292 .

The consumer segment note was refinanced with a remaining and outstanding balance of $ 2,781,087 , is a five-year promissory note amortized over 20 years at 3.1 % annual interest rate.

The note has monthly principal and interest payments of $ 15,555 .

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

Round Grove Road in Lewisville, Texas for $ 1.195 million.

The purchase was partly financed through a $ 956,000 , ten-year loan, bearing an annual interest rate of 3.65 %, amortized over 20 years, payable to Truist Bank (f/k/a BB&T Bank).

The note has monthly interest and principal payments of $ 5,645 .

(3) On September 14, 2020, 1106 NWH Holdings, LLC, a wholly owned subsidiary of DGSE, closed on the purchase of a retail building located at 1106 W.

(3) On September 14, 2020, the consumer segment closed on the purchase of a retail building located at 1106 W.

Northwest Highway in Grapevine, Texas for $ 620,000 .

The purchase was partly financed through a $ 496,000 , five-year loan (the “TB&T Grapevine Loan”), bearing an annual interest rate of 3.75 %, amortized over 20 years, payable to Texas Bank and Trust.

The purchase was partly financed through a $ 496,000 , five-year loan, bearing an annual interest rate of 3.75 %, amortized over 20 years, payable to Texas Bank & Trust.

The note has monthly interest and principal payments of $ 2,941 .

(4) On July 30, 2021, 9166 Gaylord Holdings, LLC, a wholly owned subsidiary of DGSE, closed the purchase of a retail building located at 9166 Gaylord Parkway in Frisco, Texas for $ 2,215,500 .

(4) On July 30, 2021, the consumer segment closed the purchase of a new retail building located at 9166 Gaylord Parkway in Frisco, Texas for $ 2,215,500 .

The purchase was partly financed through a $ 1,772,000 , five-year loan (the “TB&T Frisco Loan”), bearing an annual interest rate of 3.75 %, amortized over 20 years, payable to Texas Bank and Trust.

The note has monthly interest and principal payments of $ 10,509 .

(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 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 annual interest rate of 3.25 %, amortized over 20 years, payable to Texas Bank and Trust.

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

As of March 31, 2023 and December 31, 2022, the outstanding balance of the line of credit was $ 0 .

(6) On October 29, 2021, the commercial segment 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%

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

The building was partially financed through a $ 2.96 million, five-year loan, bearing an interest rate of 3.25 %, amortized over 20 years, payable to Texas Bank & 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 September 30, 2022 are as follows:

Note payable, Farmers State Bank - DGSE

Future scheduled principal payments of our notes payable as of March 31, 2023 are as follows:

CONSUMER SEGMENT

Note payable, Farmers State Bank

Year Ending December 31,