What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-11-08 compared with 2023-08-02 · 205 added, 145 removed, 227 unchanged (61% of the section changed)

2 unchanged sentences

Forward-Looking Statements

This Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 (this “Form 10-Q”), including but not limited to:

This Quarterly Report on Form 10-Q for the quarter ended September 30, 2023 (this “Form 10-Q”), including but not limited to:

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

11 unchanged sentences

The consumer segment, formerly known as the DGSE segment, focuses on the recommercialization of luxury hard assets, and the commercial segment formerly known as the ECHG segment, focuses on the recommercialization of business IT equipment and electronic devices.

Through the consumer segment, the Company recommercializes luxury hard assets and operates the Dallas Gold and Silver Exchange, Charleston Gold & Diamond Exchange, and Bullion Express brands.

Through the consumer segment, the Company recommercializes luxury hard assets and operates the Dallas Gold and Silver Exchange, Charleston Gold & Diamond Exchange, Kretchmer and Bullion Express brands.

Through the commercial segment, the Company recommercializes business IT equipment and electronic devices and operates Echo, ITAD USA, Teladvance, CEX and Avail.

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For additional information regarding the consumer segment, see “Item 1.

Business - Operating Segments - DGSE Segment.” in the Company’s 2022 Annual Report.

Business – How We Organize Our Business – Direct-To-Consumer.” in the Company’s 2022 Annual Report.

Consumer Segment Recommerce Activities

14 unchanged sentences

Such fluctuations, particularly with respect to gold, which accounts for a majority of our merchandise costs, can have a significant impact on its earnings and cash availability.

We continue to monitor the economic impact on our operations from surging inflation and the conflict in Ukraine.

We continue to monitor the economic impact on our operations from surging inflation and the conflicts in Ukraine and the Middle East.

Uncertainties exist that could affect our operations or cash flows in the future, such as continued inflationary environmental changes (including, but not limited to, labor, materials, and advertising costs).

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Our continued strategy will be to expand the number of locations we operate through opening new (“de novo”) locations in both current markets within DFW and South Carolina.

On May 4, 2023, the Company closed on a building, in Phoenix, Arizona, for $1,231,150 and will begin to prepare the building to house our next retail location.

On May 4, 2023, the Company closed on a building, in Phoenix, Arizona, for $1,231,150 and continues to prepare the building to house our next retail location.

We continue to search for other locations to expand.

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The Company expects capital expenditures over the next twelve months including the potential purchase of additional properties.

On September 12, 2023, the Company purchased all of the issued and outstanding stock of Kretchmer.

Based on the terms of the purchase, the Company has concluded the Kretchmer Transaction represents a business combination pursuant to Financial Accounting Standards Board Accounting Standards Codification Topic 805, Business Combinations, or ASC 805.

The Kretchmer Transaction will be incorporated into the consumer segment.

Commercial Segment Business Overview

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For additional information regarding the commercial segment, see “Item 1.

Business—Operating Segments—ECHG Segment.” in the Company’s 2022 Annual Report.

Business—How We Organize Our Business—Commercial Services.” in the Company’s 2022 Annual Report.

Economic Conditions

Surging inflation, supply chain disruptions and the war in Ukraine have affected the recommerce business in unpredictable ways.

Surging inflation, supply chain disruptions and the wars in Ukraine and the Middle East have affected the recommerce business in unpredictable ways.

There have been fewer customers raising money by selling items.

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Under the retail method the valuation of the inventory at cost and the resulting gross margins are calculated by applying a cost to retail ratio to the retail value of the inventory.

For the three and six months ended June 30, 2023, we have not identified critical accounting estimates that involve a significant level of estimation uncertainty and would have a material impact on our results.

Refer to our significant accounting policies are more fully described in Note 3 to these interim condensed consolidated financial statements.

For the three and nine months ended September 30, 2023, we have not identified critical accounting estimates that involve a significant level of estimation uncertainty and would have a material impact on our results.

For additional information, refer to Note 3 to these interim condensed consolidated financial statements, where our significant accounting policies are more fully described.

Recent Accounting Pronouncements

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GAAP measure and should not be considered as an alternative to the presentation of net income or any other measure of financial performance calculated and presented in accordance with U.S.

The following table provide a reconciliation of net income to EBITDA for the three months ending June 30, 2023 and 2022:

For the three months ended June 30,

The following table provides a reconciliation of net income to EBITDA for the three months ending September 30, 2023 and 2022:

For the three months ended September 30,

EBITDA Reconciliation:

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Income tax expense

The following table provide a reconciliation of net income to EBITDA for the six months ending June 30, 2023 and 2022:

For the six months Ended June 30,

The following table provides a reconciliation of net income to EBITDA for the nine months ending September 30, 2023 and 2022:

For the nine months ended June 30,

EBITDA Reconciliation:

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Results of Operations

The following disaggregation of total revenue is listed by sales category and segment for the three months ended June 30, 2023 and 2022:

Three Months Ended June 30,

Comparison of three months ended June 30, 2023 and 2022

The following disaggregation of total revenue is listed by sales category and segment for the three months ended September 30, 2023 and 2022:

Three Months Ended September 30,

Comparison of three months ended September 30, 2023 and 2022

Resale Revenue

Three Months Ended June 30,

Three Months Ended September 30,

Resale Revenue

$ (8,893,575 )

Resale revenue related to the consumer segment increased by $8,480,615, or 30%, during the three months ended June 30, 2023, to $36,645,641, as compared to $28,165,026 during the same period in 2022.

Resale revenue, such as bullion, jewelry, watches, and rare coins, increased due to heavy on-line advertising.

Resale revenue related to the commercial segment decreased by $1,535,765, or 17%, during the three months ended June 30, 2023, to $7,566,236, as compared to $9,102,001 during the same period in 2022.

Resale revenue decreased primarily due to a lower than expected volume of inventory purchased for resale during the three months ending June 30, 2023.

$ (4,365,692 )

$ (4,527,883 )

Resale revenue decreased by $8,893,575, or 22%, during the three months ended September 30, 2023 to $30,797,325, as compared to $39,690,900 during the same period in 2022.

The individual segments reported the following:

Resale revenue related to the consumer segment decreased by $4,365,692, or 15%, during the three months ended September 30, 2023, to $23,807,040, as compared to $28,172,732 during the same period in 2022.

Resale revenue decreased for the three months ended September 30, 2023, as compared to the three months ended September 30, 2022, primarily due to a reduction in gold and silver bullion ounces sold, partially offset by higher average selling prices of gold and silver.

Resale revenue related to the commercial segment decreased by $4,527,883, or 39%, during the three months ended September 30, 2023, to $6,990,285, as compared to $11,518,168 during the same period in 2022.

Resale revenue decreased for the three months ended September 30, 2023, as compared to the three months ended September 30, 2022, primarily due to a post pandemic normalization of product from cable operator clients and a decrease in reusable photovoltaic modules.

Recycled Revenue

Three Months Ended June 30,

Three Months Ended September 30,

Recycled Revenue

Recycled revenue related to the consumer segment increased by $821,692, or 38%, during the three months ended June 30, 2023, to $2,995,793, as compared to $2,174,101 during the same period in 2022.

Recycled revenue increased primarily during the period ending June 30, 2023 due to increased purchases of non-retail precious metals to be recycled instead of being sold to retail consumers.

Recycled revenue related to the commercial segment decreased by $102,733, or 3%, during the three months ended June 30, 2023, to $3,095,857, as compared to $3,198,590 during the same period in 2022.

Recycled revenue slightly decreased primarily due to a decrease of electronic material purchased to be recycled from material not suitable to resale to commercial customers during the three months ending June 30, 2023.

Recycled revenue decreased by $37,840, or 0.01%, during the three months ended September 30, 2023 to $5,468,946, as compared to $5,506,786 during the same period in 2022.

The individual segments reported the following:

Recycled revenue related to the consumer segment increased by $819,640, or 36%, during the three months ended September 30, 2023, to $3,074,162, as compared to $2,254,522 during the same period in 2022.

The increase in recycled revenue for the three months ended September 30, 2023, as compared to the three months ended September 30, 2022, primarily due to an increase in over-the-counter purchases made directly from customers.

The surge in transactions is believed to be largely driven by the ongoing inflationary pressures, which has led to a higher demand from individuals seeking funds for emergency situations, bills, or other financial responsibilities.

Recycled revenue related to the commercial segment decreased by $857,480, or 26%, during the three months ended September 30, 2023, to $2,394,784, as compared to $3,252,264 during the same period in 2022.

Recycled revenue decreased for the three months ended September 30, 2023, as compared to the three months ended September 30, 2022, primarily due to a post pandemic normalization of product from cable operator clients and a decrease in photovoltaic module recycling.

Gross Profit - Resale

Three Months Ended June 30,

Three Months Ended September 30,

Gross Profit - Resale

Resale gross profit related to the consumer operations for the three months ended June 30, 2023, decreased by $366,119, or 10%, to $3,353,835, as compared to resale gross profit of $3,719,954 during the same period in 2022.

The decrease in resale gross profit was due primarily to increased competition in the jewelry sector.

Resale gross profit related to the commercial operations for the three months ended June 30, 2023, decreased by $515,170, or 9%, to $5,051,337, as compared to resale gross profit of $5,566,507 during the same period in 2022.

The decrease in resale gross profit was primarily due to the decrease in sales volume in the three months ended June 30, 2023 as compared to the same period in 2022.

$ (2,122,601 )

$ (1,662,838 )

Resale gross profit decreased by $2,122,601, or 22%, during the three months ended September 30, 2023 to $7,593,938, as compared to $9,716,539 during the same period in 2022.

The individual segments reported the following:

Resale gross profit related to the consumer operations for the three months ended September 30, 2023, decreased by $459,763, or 14%, to $2,791,390, as compared to resale gross profit of $3,251,153 during the same period in 2022.

The decrease in resale gross profit was due primarily to a decrease in resale revenue.

Resale gross profit related to the commercial operations for the three months ended September 30, 2023, decreased by $1,662,838, or 26%, to $4,802,548, as compared to resale gross profit of $6,465,386 during the same period in 2022.

The decrease in resale gross profit was primarily due to the decrease in resale revenue during the three months ended September 30, 2023, as compared to the same period in 2022.

Gross Profit - Recycled

Three Months Ended June 30,

Three Months Ended September 30,

Gross Profit - Recycled

Recycled gross profit related to the consumer operations for the three months ended June 30, 2023, increased by $272,177, or 58%, to $740,807, as compared to gross profit of $468,630 during the same period in 2022.

The increase in recycled gross profit was primarily due to the increase of approximately 38% in recycled sales during the three months ended June 30, 2023 as compared to the three months ended June 30, 2022.

Recycled gross profit related to the commercial operations for the three months ended June 30, 2023, decreased by $106,841, or 6%, to $1,616,068, as compared to gross profit of $1,722,909 during the same period in 2022.

The decrease in recycled gross profit was due primarily to a 3% decrease in recycled sales during the three months ended June 30, 2023, as compared to the same period in 2022.

For The Three Months Ended June 30,

Recycled gross profit increased by $1,226, or 0.06%, during the three months ended September 30, 2023 to $2,140,344, as compared to $2,139,118 during the same period in 2022.

The individual segments reported the following:

Recycled gross profit related to the consumer operations for the three months ended September 30, 2023, increased by $299,663, or 60%, to $797,873, as compared to gross profit of $498,210 during the same period in 2022.

The increase in recycled gross profit was primarily due to the increase in recycled revenue of 36%, and the increase of gross profit percentage to 26% during the three months ended September 30, 2023 as compared to 22.1% during the three months ended September 30, 2022.

Recycled gross profit related to the commercial operations for the three months ended September 30, 2023, decreased by $298,437, or 18%, to $1,342,471, as compared to gross profit of $1,640,908 during the same period in 2022.

The decrease in recycled gross profit was due primarily to a 26% decrease in recycled revenue during the three months ended September 30, 2023, as compared to the same period in 2022.

For The Three Months Ended September 30,

Cost of goods sold

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Selling, General and Administrative

Three Months Ended June 30,

Three Months Ended September 30,

Selling, General and Administrative

Selling, General and Administrative Expenses, for the consumer segment , for the three months ended June 30, 2023, increased by $220,064, or 10%, to $2,472,973, as compared to $2,252,009 during the same period in 2022.

Selling, General and Administrative Expenses decreased by $415,705, or 5%, during the three months ended September 30, 2023 to $7,446,380, as compared to $7,862,085 during the same period in 2022.

The individual segments reported the following:

Selling, General and Administrative Expenses, for the consumer segment , for the three months ended September 30, 2023, increased by $219,040, or 9%, to $2,588,628, as compared to $2,369,558 during the same period in 2022.

The increase was primarily due to increased expenses related to expanding our footprint into Arizona and other markets.

Additionally, starting January 1, 2023, expenses previously classified as other expenses related to corporate campus overhead have been classified as operating expenses within the selling, general, and administrative expenses category.

Starting January 1, 2023, expenses previously classified as other expenses related to corporate campus overhead have been classified as operating expenses within the selling, general, and administrative expenses category.

The corporate campus overhead for 2022 initially recorded as other expense has been restated here to be included in selling, general, and administrative expenses for comparison purposes.

During the three-month period ending on June 30, 2023, there was a significant increase in selling, general, and administrative expenses amounting to $941,757 compared to the same period in 2022.

This increase can primarily be attributed to factors such as an increase in staff, higher salaries and related costs, as well as the Company's ongoing expansion in the consumer segment, which includes increased spending on marketing and professional services.

Selling, General and Administrative Expenses, for the commercial segment for the three months ended September 30, 2023, decreased by $634,745, or 12%, to $4,857,752, as compared to $5,492,497 during the same period in 2022.

This decrease is primarily due to factors such as a decrease in wages and related costs, as well as the decrease in equipment supplies and rentals.

The corporate campus overhead for 2022 initially recorded as other expense has been restated here to be included in selling, general, and administrative expenses for comparison purposes.

Depreciation and Amortization

Three Months Ended June 30,

Three Months Ended September 30,

Depreciation and Amortization

Depreciation and amortization, for the consumer segment, for the three months ended June 30, 2023, decreased by $22,026, or 22%, to $79,408, as compared to $101,434 during the same period in 2022.

The decrease was primarily due to some of the fixed assets being fully depreciated.

Depreciation and amortization, for the commercial segment, for the three months ended June 30, 2023, increased by $78,684, or 44%, to $256,766, as compared to $178,082 during the same period in 2022.

The increase was primarily due to the amortization of increased intangible assets added from the Avail Transaction during the latter half of fiscal 2022.

Three Months Ended June 30,

Other income, for the consumer segment, for the three months ended June 30, 2023, increased by $14,532, or 155%, to $23,929, as compared to $9,397 during the same period in 2022.

The increase in other income was primarily due to interest earned from bank accounts for the three months ended June 30, 2023.

Depreciation and amortization decreased by $197,249, or 37%, during the three months ended September 30, 2023 to $337,715, as compared to $534,964 during the same period in 2022.

The individual segments reported the following:

Depreciation and amortization, for the consumer segment, for the three months ended September 30, 2023, decreased by $27,179, or 26%, to $75,843, as compared to $103,022 during the same period in 2022.

The decrease was primarily due to some of the fixed assets and intangible assets being fully depreciated and fully amortized.

Depreciation and amortization, for the commercial segment, for the three months ended September 30, 2023, decreased by $170,070, or 39%, to $261,872, as compared to $431,942 during the same period in 2022.

The decrease was primarily due to the amortization of increased intangible assets identified from the Avail Transaction during the three months ended September 30, 2022, as compared to the three months ended September 30, 2023.

The commercial segment needed to catch up with amortizing the intangible assets once they were identified.

Three Months Ended September 30,

Other income increased by $149,317, or 346%, during the three months ended September 30, 2023 to $192,436, as compared to $43,119, during the same period in 2022.

The individual segments reported the following:

Other income, for the consumer segment, for the three months ended September 30, 2023, increased by $16,894, or 284%, to $22,851, as compared to $5,967 during the same period in 2022.

The increase in other income for the three months ended September 30, 2023, as compared to the three months ended September 30, 2022 was primarily due to an increase in interest earned from bank accounts of approximately $21,700.

During December of fiscal 2022, the Company began to move excess working capital funds to savings accounts that paid higher interest rates.

The corporate campus overhead for 2022 initially recorded as other expense has been restated to be included in selling, general, and administrative expenses for comparison purposes.

Other income, for the commercial segment, for the three months ended June 30, 2023, increased by $117,719, or 981%, to $129,723, as compared to $12,004 during the same period in 2022.

The increase in other income was primarily due to interest earned from bank accounts of $94,874.

Other income, for the commercial segment, for the three months ended September 30, 2023, increased by $132,423, or 356%, as compared to $169,585, during the same period in 2022.

The increase in other income for the three months ended September 30, 2023, as compared to the three months ended September 30, 2022, was primarily due to an increase in interest earned from bank accounts of approximately $140,274.

During December of fiscal 2022, the Company began to move excess working capital funds to savings accounts that paid higher interest rates.

The corporate campus overhead for 2022 initially recorded as other expense has been restated to be included in selling, general, and administrative expenses for comparison purposes.

Interest Expense

Three Months Ended June 30,

Three Months Ended September 30,

Interest Expense

Interest expense, for the consumer segment, for the three months ended June 30, 2023, decreased by $3,454, or 6%, to $58,209, as compared to $61,663 during the same period in 2022.

The decrease was primarily due to reduced loan balances during the three months ended June 30, 2023 as compared to the three months ended June 30, 2022.

Interest expense, for the commercial segment, for the three months ended June 30, 2023, decreased by $2,900, or 5%, to $56,479, as compared to $59,379 during the same period in 2022.

The decrease was primarily due to reduced loan balances during the three months ended June 30, 2023 as compared to the three months ended June 30, 2022.

Interest expense decreased by $2,791, or 2%, during the three months ended September 30, 2023 to $117,166, as compared to $119,957, during the same period in 2022.

The individual segments reported the following:

Interest expense, for the consumer segment, for the three months ended September 30, 2023, decreased by $988, or 2%, to $59,631, as compared to $60,619 during the same period in 2022.

The decrease was primarily due to reduced loan balances during the three months ended September 30, 2023 as compared to the three months ended September 30, 2022.

Interest expense, for the commercial segment, for the three months ended September 30, 2023, decreased by $1,803, or 3%, to $57,535, as compared to $59,338 during the same period in 2022.

The decrease was primarily due to reduced loan balances during the three months ended September 30, 2023 as compared to the three months ended September 30, 2022.

Income Tax Expense

Three Months Ended June 30,

Three Months Ended September 30,

Income Tax Expense

Income tax expense, for both segments, for the three months ended June 30, 2023, was $498,574, an increase of $448,322, as compared to income tax expense of $50,252 for the three months ended June 30, 2022.

Income tax expense, for both segments, for the three months ended September 30, 2023, was $317,967, an increase of $253,906, as compared to income tax expense of $64,061 for the three months ended September 30, 2022.

Currently, the Company has a deferred tax asset reflecting net operating losses brought over from prior years.

2 unchanged sentences

Starting January 1, 2023, the Company has a federal tax rate of approximately 21%, in addition to other state and local taxes, on net income.

The effective income tax rate was 23.7% and 1.3% for the three months ended June 30, 2023 and 2022, respectively.

The effective income tax rate was 18.6% and 1.9% for the three months ended September 30, 2023 and 2022, respectively.

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

federal statutory rate are the result of state taxes, non-deductible expenses and changes in the valuation allowance in relation to the deferred tax asset for net operating loss carryforwards, as was the Company’s case for the increase for the three months ended June 30, 2023, compared to the three months ended June 30, 2022.

Three Months Ended June 30,

federal statutory rate are the result of state taxes, non-deductible expenses and changes in the valuation allowance in relation to the deferred tax asset for net operating loss carryforwards, as was the Company’s case for the increase for the three months ended September 30, 2023, compared to the three months ended September 30, 2022.

Three Months Ended September 30,

$ (1,610,216 )

Net income related to the consumer operations for the three months ended June 30, 2023, decreased by $598,272, or 34%, to $1,168,309, as compared to $1,766,584 during the same period in 2022.

The decrease in net income was due primarily to increased income tax expense of $324,281 and an increase in selling, general and administrative expenses of $220,064 due to our increasing footprint in Arizona and other markets during the three months ended June 30, 2023, as compared to the three months ended June 30, 2022.

Net income related to the commercial operations for the three months ended June 30, 2023, decreased by $1,645,874, or 79%, to $435,400, as compared to $2,081,274 during the same period in 2022.

The decrease in net income was due primarily to an increase in income tax expense of $124,041, a decrease in gross profit of $622,011, added to an increase in selling, general and administrative expenses of $941,757.

The increase in selling, general and administrative expenses of $941,757 can primarily be attributed to factors such as an increase in staff, higher salaries and related costs, as well as the Company's ongoing expansion in the consumer segment, which includes increased spending on marketing and professional services.

Earnings Per Share

Three Months Ended June 30,

$ (1,175,744 )

Net income decreased by $1,610,216, or 49%, during the three months ended September 30, 2023 to $1,707,493, as compared to $3,317,709, during the same period in 2022.

The individual segments reported the following:

Net income related to the consumer operations for the three months ended September 30, 2023, decreased by $434,472, or 36%, to $767,376, as compared to $1,201,848 during the same period in 2022.

The decrease in net income was due primarily to increased income tax expense of $100,394, an increase in selling, general and administrative expenses of $219,040, and a decrease in gross profit of approximately $160,000, for the three months ended September 30, 2023, as compared to the three months ended September 30, 2022.

Net income related to the commercial operations for the three months ended September 30, 2023, decreased by $1,175,744, or 56%, to $940,117, as compared to $2,115,861 during the same period in 2022.

The decrease in net income was due primarily to an increase in income tax expense of $153,512 and a decrease in gross profit for the three months ended September 30, 2023, as compared to the three months ended September 30, 2022.

Earnings Per Share

Earnings per share, for the three months ended June 30, 2023, for net income per basic and diluted shares attributable to holders of our Common Stock was $0.06, compared to $0.14 per basic and diluted shares attributable to holders of our Common Stock for the three months ended June 30, 2022.

The following disaggregation of total revenue is listed by sales category and segment for the six months ended June 30, 2023 and 2022:

Six Months Ended June 30,

Comparison of six months ended June 30, 2023 and 2022

Three Months Ended September 30,

Earnings Per Share (Consolidated)

Earnings per share, for the three months ended September 30, 2023, for net income per basic and diluted shares attributable to holders of our Common Stock was $0.06, compared to $0.12 per basic and diluted shares attributable to holders of our Common Stock for the three months ended September 30, 2022.

The following disaggregation of total revenue is listed by sales category and segment for the nine months ended September 30, 2023 and 2022:

Nine Months Ended September 30,

$ 134,958,838

$ 135,252,502

Comparison of nine months ended September 30, 2023 and 2022

Resale Revenue

Six Months Ended June 30,

Nine Months Ended September 30,

Resale Revenue

$ 117,287,251

Resale revenue related to the consumer segment increased by $8,523,442, or 14%, during the six months ended June 30, 2023, to $70,365,601, as compared to $61,842,159 during the same period in 2022.

Resale revenue, such as bullion, jewelry, watches, and rare coins, increased $8,523,442 during the six months ending June 30, 2023 due to heavy on-line advertising, as compared to the same period in 2022.

Resale revenue related to the commercial segment decreased by $2,557,532, or 14%, during the three months ended June 30, 2023, to $16,124,326, as compared to $18,681,858 during the same period in 2022.

Resale revenue decreased primarily due to supply chain issues of purchasing inventory during the six months ending June 30, 2023.

$ 120,214,917

$ (2,927,666 )

$ (7,085,415 )

Resale revenue decreased by $2,927,666, or 2%, during the nine months ended September 30, 2023 to $117,287,251, as compared to $120,214,917 during the same period in 2022.

The individual segments reported the following:

Resale revenue related to the consumer segment increased by $4,157,749, or 5%, during the nine months ended September 30, 2023, to $94,172,640, as compared to $90,014,891 during the same period in 2022.

Resale revenue increased for the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022, primarily due to an increase in gold and silver bullion ounces sold.

Resale revenue related to the commercial segment decreased by $7,085,415, or 23%, during the nine months ended September 30, 2023, to $23,114,611, as compared to $30,200,026 during the same period in 2022.

Resale revenue decreased for the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022, primarily due to a post pandemic normalization of product from cable operator clients and a decrease in reusable photovoltaic modules.

Recycled Revenue

Six Months Ended June 30,

Nine Months Ended September 30,

Recycled Revenue

Recycled revenue related to the consumer segment increased by $1,700,390, or 40%, during the six months ended June 30, 2023, to $5,980,230, as compared to $4,279,840 during the same period in 2022.

Recycled revenue increased $1,700,390 during the six months ending June 30, 2023, compared to the six months ended June 30, 2022 primarily due to increased inventory purchased that was not selected to be exhibited in our retail showcases.

Inventory was scrapped for its precious metal content.

Recycled revenue related to the commercial segment increased by $971,451, or 19%, during the six months ended June 30, 2023, to $6,222,410, as compared to $5,250,959 during the same period in 2022.

Recycled revenue increased primarily due to an increase of electronic material to be recycled from material not suitable to resale to commercial customers during the six months ending June 30, 2023, compared to the six months ending June 30, 2022.

Recycled revenue increased by $2,634,002, or 18%, during the nine months ended September 30, 2023, to $17,671,587, as compared to $15,037,585 during the same period in 2022.

The individual segments reported the following:

Recycled revenue related to the consumer segment increased by $2,520,031, or 39%, during the nine months ended September 30, 2023, to $9,054,393, as compared to $6,534,362 during the same period in 2022.

The increase in recycled revenue for the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022, was primarily due to an increase in over-the-counter purchases made directly from customers.

This surge in transactions is believed to be largely driven by the ongoing inflationary pressures, which has led to a higher demand from individuals seeking funds for emergency situations, bills, or other financial responsibilities.

Recycled revenue related to the commercial segment increased by $113,971, or 1%, during the nine months ended September 30, 2023, to $8,617,194, as compared to $8,503,223 during the same period in 2022.

There was minimal change in recycled revenue during the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022.

Gross Profit - Resale

Six Months Ended June 30,

Nine Months Ended September 30,

Gross Profit - Resale

Resale gross profit related to the consumer operations for the six months ended June 30, 2023, decreased by $804,039, or 11%, to $6,658,767, as compared to resale gross profit of $7,462,806 during the same period in 2022 due to increased competition in the jewelry sector.

Resale gross profit related to the commercial operations for the six months ended June 30, 2023, increased by $709,688, or 7%, to $10,850,463, as compared to resale gross profit of $10,140,775 during the same period in 2022.

The increase in resale gross profit was primarily due to increased sales prices on material sold.

$ (2,216,953 )

$ (1,263,803 )

Resale gross profit decreased by $2,216,953, or 8%, during the nine months ended September 30, 2023 to $25,103,167, as compared to $27,320,120 during the same period in 2022.

The individual segments reported the following:

Resale gross profit related to the consumer operations for the nine months ended September 30, 2023, decreased by $1,263,803, or 12%, to $9,450,156, as compared to resale gross profit of $10,713,959 during the same period in 2022.

The reduction in gross profit can be attributed to a higher volume of gold bullion sales in comparison to silver bullion sales for the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022.

Resale gross profit related to the commercial operations for the nine months ended September 30, 2023, decreased by $953,150, or 6%, to $15,653,011, as compared to resale gross profit of $16,606,161 during the same period in 2022.

The decrease in resale gross profit was primarily due to a decrease in resale revenue of 23% during the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022.

Gross Profit - Recycled

Six Months Ended June 30,

Nine Months Ended September 30,

Gross Profit - Recycled

Recycled gross profit related to the consumer operations for the six months ended June 30, 2023, increased by $471,603, or 50%, to $1,420,843, as compared to gross profit of $949,240 during the same period in 2022.

The increase in recycled gross profit was primarily due to the increase of approximately 40% in recycled sales during the six months ended June 30, 2023 as compared to the six months ended June 30, 2022.

Recycled gross profit related to the commercial operations for the six months ended June 30, 2023, increased by $605,663, or 23%, to $3,241,876, as compared to gross profit of $2,636,213 during the same period in 2022.

The increase in recycled gross profit was due primarily to 19% increase in recycled sales during the six months ended June 30, 2023, as compared to the six months ended June 30, 2022.

For The Six Months Ended June 30,

Recycled gross profit increased by $1,078,493, or 19%, during the nine months ended September 30, 2023, to $6,803,064, as compared to $5,724,571 during the same period in 2022.

The individual segments reported the following:

Recycled gross profit related to the consumer operations for the nine months ended September 30, 2023, increased by $771,267, or 53%, to $2,218,717, as compared to gross profit of $1,447,450 during the same period in 2022.

The increase in recycled gross profit was primarily due to the increase of recycled revenue by 39% during the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022.

Recycled gross profit related to the commercial operations for the nine months ended September 30, 2023, increased by $307,226, or 7%, to $4,584,347, as compared to gross profit of $4,277,121 during the same period in 2022.

The increase in recycled gross profit was due primarily to an increase in recycled revenue during the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022.

For The Nine Months Ended September 30,

$ 103,227,033

$ 134,958,838

$ 135,252,502

Cost of goods sold

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Selling, General and Administrative

Six Months Ended June 30,

Nine Months Ended September 30,

Selling, General and Administrative

Selling, General and Administrative Expenses, for the consumer segment, for the six months ended June 30, 2023, increased by $435,532, or 10%, to $4,868,998, as compared to $4,433,466 during the same period in 2022.

Selling, General and Administrative Expenses increased by $2,006,448, or 9%, during the nine months ended September 30, 2023 to $23,714,237, as compared to $21,707,789 during the same period in 2022.

The individual segments reported the following:

Selling, General and Administrative Expenses, for the consumer segment, for the nine months ended September 30, 2023, increased by $654,574, or 10%, to $7,457,628, as compared to $6,803,054 during the same period in 2022.

The increase was primarily due to increased expenses related to expanding our footprint into Arizona and other markets.

The corporate campus overhead for 2022 initially recorded as other expense has been restated to be included in selling, general, and administrative expenses for comparison purposes.

Selling, General and Administrative Expenses, for the commercial segment, for the six months ended June 30, 2023, increased by $1,986,621, or 21%, to $11,398,859, as compared to $9,412,238 during the same period in 2022.

Selling, General and Administrative Expenses, for the commercial segment, for the nine months ended September 30, 2023, increased by $1,351,874, or 9%, to $16,256,609, as compared to $14,904,735 during the same period in 2022.

The increase was primarily due to increased expenses related to expanding the commercial business by increasing the corporate infrastructure.

The corporate campus overhead for 2022 initially recorded as other expense has been restated to be included in selling, general, and administrative expenses for comparison purposes.

Depreciation and Amortization

Six Months Ended June 30,

Nine Months Ended September 30,

Depreciation and Amortization

Depreciation and amortization, for the consumer segment, for the six months ended June 30, 2023, decreased by $30,855, or 15%, to $177,542, as compared to $208,397 during the same period in 2022.

Depreciation and amortization decreased by $78,189, or 7%, during the nine months ended September 30, 2023 to $253,385, as compared to $311,419 during the same period in 2022.

The individual segments reported the following:

Depreciation and amortization, for the consumer segment, for the nine months ended September 30, 2023, decreased by $58,034, or 19%, to $253,385, as compared to $311,419 during the same period in 2022.

The decrease was primarily due to some of the fixed assets being fully depreciated plus some of the intangible assets being fully amortized.

Depreciation and amortization, for the commercial segment, for the nine months ended September 30, 2023, decreased by $20,155, or 3%, to $774,853, as compared to $795,008 during the same period in 2022.

The decrease was primarily due to some of the fixed assets being fully depreciated.

Depreciation and amortization, for the commercial segment, for the six months ended June 30, 2023, increased by $149,917, or 41%, to $512,983, as compared to $363,066 during the same period in 2022.

The increase was primarily due to the amortization of increased intangible assets added from the Avail Transaction during the latter half of fiscal 2022.

Other Income (Expense)

Six Months Ended June 30,

Other income, for the consumer segment, for the six months ended June 30, 2023, was $47,463, as compared to $24,014 during the same period in 2022, an increase of $23,449, or 98%.

The increase in other income was primarily due to increase interest earned from bank accounts for the six months ended June 30, 2023 as compared to the six months ended June 30, 2022.

Nine Months Ended September 30,

Other income increased by $465,708, or 511%, during the nine months ended September 30, 2023 to $556,868, as compared to $91,160 during the same period in 2022.

The individual segments reported the following:

Other income, for the consumer segment, for the nine months ended September 30, 2023, was $70,315, as compared to $29,970 during the same period in 2022, an increase of $40,345, or 135%.

During December of fiscal 2022, the Company began to move excess working capital funds to savings accounts that paid higher interest rates.

The corporate campus overhead for 2022 initially recorded as other expense has been restated to be included in selling, general, and administrative expenses for comparison purposes.

Other income, for the commercial segment, for the six months ended June 30, 2023, was $316,968, as compared to $24,027 during the same period in 2022, an increase of $292,941, or 1219%.

The increase in other income for the six months ended June 30, 2023 was primarily due to interest earned from bank accounts of $156,252, notes receivable interest received of $94,115 from notes receivable formerly written off during fiscal year 2021, and rental income, of $48,000, from third party tenants of the corporate headquarters allocated to the commercial segment, as compared to $24,000 of rental income from third party tenants for the six months ended June 30, 2022.

Other income, for the commercial segment, for the nine months ended September 30, 2023, was $486,553, as compared to $61,190 during the same period in 2022, an increase of $425,363, or 695%.

The increase in other income for the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022 was primarily due to an increase in interest earned from bank accounts of approximately $297,000, and notes receivable interest received of $94,115 from notes receivable formerly written off during fiscal year 2021.

During December of fiscal 2022, the Company began to move excess working capital funds to savings accounts that paid higher interest rates.

The corporate campus overhead for 2022 initially recorded as other expense has been restated to be included in selling, general, and administrative expenses for comparison purposes.

Interest Expense

Six Months Ended June 30,

Nine Months Ended September 30,

Interest Expense

Interest expense, for the consumer segment, for the six months ended June 30, 2023, decreased by $5,077, or 4%, to $117,827, as compared to $122,904 during the same period in 2022.

The decrease was primarily due to reduced loan balances during the six months ended June 30, 2023 as compared to the six months ended June 30, 2022.

Interest expense, for the commercial segment, for the six months ended June 30, 2023, decreased by $7,452, or 6%, to $113,925, as compared to $121,377 during the same period in 2022.

The decrease was primarily due to reduced loan balances during the six months ended June 30, 2023 as compared to the six months ended June 30, 2022.

Interest expense decreased by $15,320, or 4%, during the nine months ended September 30, 2023 to $348,918, as compared to $364,238 during the same period in 2022.

The individual segments reported the following:

Interest expense, for the consumer segment, for the nine months ended September 30, 2023, decreased by $6,065, or 3%, to $177,458, as compared to $183,523 during the same period in 2022.

The decrease was primarily due to reduced loan balances during the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022.

Interest expense, for the commercial segment, for the nine months ended September 30, 2023, decreased by $9,255, or 5%, to $171,460, as compared to $180,715 during the same period in 2022.

The decrease was primarily due to reduced loan balances during the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022.

Income Tax Expense

Six Months Ended June 30,

Nine Months Ended September 30,

Income Tax Expense

Income tax expense, for both segments, for the six months ended June 30, 2023, was $1,216,220, an increase of $1,135,676, as compared to income tax expense of $80,544 for the six months ended June 30, 2022.

Income tax expense, for both segments, for the nine months ended September 30, 2023, was $1,534,187, an increase of $1,389,582, as compared to income tax expense of $144,605 for the nine months ended September 30, 2022.

Currently, the Company has a deferred tax asset reflecting net operating losses brought over from prior years.

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Starting January 1, 2023, the Company has a federal tax rate of approximately 21%, in addition to other state and local taxes, on net income before taxes.

The effective income tax rate was 22.7% and 1.2% for the six months ended June 30, 2023 and 2022, respectively.

The effective income tax rate was 20.8% and 1.5% for the nine months ended September 30, 2023 and 2022, respectively.

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

federal statutory rate are the result of state taxes, non-deductible expenses and changes in the valuation allowance in relation to the deferred tax asset for net operating loss carryforwards, as was the Company’s case for the increase for the six months ended June 30, 2023, compared to the six months ended June 30, 2022.

Six Months Ended June 30,

federal statutory rate are the result of state taxes, non-deductible expenses and changes in the valuation allowance in relation to the deferred tax asset for net operating loss carryforwards, as was the Company’s case for the increase for the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022.

Nine Months Ended September 30,

$ (3,975,273 )

$ (1,772,003 )

Net income related to the consumer operations for the six months ended June 30, 2023, decreased by $1,337,532, or 37%, to $2,305,193, as compared to $3,642,725 during the same period in 2022.

The decrease in net income was due primarily to the increased tax expense of $628,945, the decrease in gross profit of $332,436 and the increase in selling, general and administrative expenses of $435,532 for the six months ended June 30, 2023, compared to the six months ended June 30, 2022.

Net income related to the commercial operations for the six months ended June 30, 2023, decreased by $1,027,525, or 36%, to $1,824,833, as compared to $2,852,358 during the same period in 2022.

The decrease in net income for the six months ended June 30, 2023 was due primarily to an increase in gross profit of $1,315,351 and an increase in other income of $292,941, offset by an increase in income tax expense of $506,731 and an increase in selling, general and administrative expenses of $1,986,621, compared to the six months ended June 30, 2022.

Earnings Per Share

Six Months Ended June 30,

$ (2,203,270 )

Net income decreased by $3,975,273, or 41%, during the nine months ended September 30, 2023 to $5,837,519, as compared to $9,812,792 during the same period in 2022.

The individual segments reported the following:

Net income related to the consumer operations for the nine months ended September 30, 2023, decreased by $1,772,003, or 37%, to $3,072,569, as compared to $4,844,572 during the same period in 2022.

The decrease in net income was due primarily to the increased tax expense of $729,339, the decrease in gross profit of $492,536 and the increase in selling, general and administrative expenses of $654,574 for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022.

Net income related to the commercial operations for the nine months ended September 30, 2023, decreased by $2,203,270, or 44%, to $2,764,950, as compared to $4,968,220 during the same period in 2022.

The decrease in net income for the nine months ended September 30, 2023 was due primarily to an increase in income tax expense of $660,243, an increase in selling, general and administrative expenses of $1,351,874, a decrease in gross profit of $645,924 and offset by an increase in other income of $425,373, as compared to the nine months ended September 30, 2022.

Earnings Per Share

Earnings per share, for the six months ended June 30, 2023, for net income per basic and diluted shares attributable to holders of our Common Stock was $0.15, compared to $0.24 per basic and diluted shares attributable to holders of our Common Stock for the six months ended June 30, 2022.

Nine Months Ended September 30,

Earnings Per Share (consolidated)

Earnings per share, for the nine months ended September 30, 2023, for net income per basic and diluted shares attributable to holders of our Common Stock was $0.22, compared to $0.36 per basic and diluted shares attributable to holders of our Common Stock for the nine months ended September 30, 2022.

Liquidity and Capital Resources

The following table summarizes our cash flows for the periods indicated.

Six Months Ended June 30,

Nine Months Ended September 30,

Net cash provided by (used in):

3 unchanged sentences

Net increase in cash and cash equivalents

During the six months ended June 30, 2023, cash flows provided by operations totaled $2,748,490, and during the six months ended June 30, 2021, cash flows provided by operations totaled $6,362,641, a decrease of $3,614,151.

Cash provided by operations for the six months ended June 30, 2023 was driven primarily by net income added to non-cash items of depreciation and amortization, bad debt and deferred taxes of $5,869,173, a reduction of prepaid expenses of $75,838 and an increase in customer deposits and other liabilities of $65,948, offset by an increase in inventories of $2,762,524, a decrease in accounts payable and accrued expenses of $218,632, an increase in other assets of $202,788 and an increase in trade receivables of $78,053.

Cash provided by operations for the six months ended June 30, 2022 was driven largely by net income added to non-cash items of depreciation, amortization and bad debt of $7,091,546, a decrease in trade receivables of $1,452,651, an increase in customer deposits and other liabilities of $1,019,363, a decrease in other assets of $754,759 and an increase in accounts payable and accrued expenses of $767,122, offset by an increase in inventories of $3,755,662 and the increase in prepaid expenses of $981,616.

During the six months ended June 30, 2023 and 2022, cash flows used in investing activities totaled $722,621 and $420,917, respectively, a period-over-period increase of $301,704.

Cash used in investing activities during the six months ended June 30, 2023 was primarily due to the purchase of property and equipment of $1,300,871, offset by the reduction in note receivable of $578,250.

Cash used in investing activities during the six months ended June 30, 2022 was primarily due to the purchase of additional property and equipment of $203,929 and the addition to the acquisition of Avail assets and liabilities of $216,988.

During the six months ended June 30, 2023 and 2022, cash flows used in financing totaled $815,062 and $2,144,396, respectively, a period-over-period decrease of $1,329,334.

Cash used in financing during the six months ended June 30, 2023 was primarily due from payments made against notes payable of $620,242 and the repurchase of Company stock on the open market.

Cash used in financing during the six months ended June 30, 2022 was primarily due from payments made against notes payable of $444,396 and payments made against the line of credit of $1,700,000.

During the nine months ended September 30, 2023, cash flows provided by operations totaled $3,469,991, and during the nine months ended September 30, 2022, cash flows provided by operations totaled $7,725,140, a decrease of $4,255,149.

Cash provided by operations for the nine months ended September 30, 2023 was driven primarily by net income added to non-cash items of depreciation and amortization, bad debt and deferred taxes of $8,651,902, a reduction of prepaid expenses of $165,863, an increase in customer deposits and other liabilities of $284,085 and an increase in accounts payable and accrued expenses of $106,071, offset by an increase in inventories of $4,295,072, an increase in other assets of $55,601 and an increase in trade receivables of $1,385,580.

Cash provided by operations for the nine months ended September 30, 2022 was driven largely by net income added to non-cash items of depreciation, amortization and bad debt of $10,992,637, a decrease in other assets of $311,420 and an increase in accounts payable and accrued expenses of $1,924,658, offset by an increase in inventories of $4,014,627, an increase in prepaid expenses of $1,213,187, an increase in trade receivables of $97,994 and the decrease in customer deposits and other liabilities of $186,590.

During the nine months ended September 30, 2023 and 2022, cash flows used in investing activities totaled $1,285,362 and $444,185, respectively, a period-over-period increase of $841,177.

Cash used in investing activities during the nine months ended September 30, 2023 was primarily due to the purchase of property and equipment of $1,563,612 and from the Kretchmer Transaction of $300,000, offset by the reduction in note receivable of $578,250.

Cash used in investing activities during the nine months ended September 30, 2022 was primarily due to the purchase of additional property and equipment of $227,197 and the addition to the acquisition of Avail assets and liabilities of $216,988.

During the nine months ended September 30, 2023 and 2022, cash flows used in financing totaled $2,049,209 and $2,450,347, respectively, a period-over-period decrease of $401,138.

Cash used in financing during the nine months ended September 30, 2023 was due from payments made against notes payable of $930,858, repurchase of Company stock on the open market of $1,318,351, offset by the loan proceeds from the kretchmer Transaction of $200,000.

Cash used in financing during the nine months ended September 30, 2022 was due from payments made against notes payable of $750,347 and payments made against the line of credit of $1,700,000.

We expect our capital expenditures to total approximately $4,000,000 during the next 12 months.

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We maintain the FSB Facility to help fund cash shortfalls that we may have from time to time.

We do not currently anticipate the need of those funds for operations and do not currently have any amounts drawn against the FSB Facility as of June 30, 2023.

We do not currently anticipate the need of those funds for operations and do not currently have any amounts drawn against the FSB Facility as of September 30, 2023.

From time to time, we have adjusted and may further adjust our inventory levels to meet seasonal demand or in order to meet working capital requirements.

6 unchanged sentences

The Company leases certain of its facilities under operating leases.

The minimum rental commitments, under non-cancellable operating leases, excluding imputed interest, as of June 30, 2023 are as follows:

The minimum rental commitments, under non-cancellable operating leases, excluding imputed interest, as of September 30, 2023 are as follows:

Operating Leases

Consumer (excluding the six months ending June 30, 2023)

Commercial (excluding the six months ending June 30, 2023)

Consumer (excluding the nine months ending September 30, 2023)

Commercial (excluding the nine months ending September 30, 2023)

Off-Balance Sheet Arrangements

3 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis