What changed in this filing

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Item 1A. Risk Factors

2024-03-21 compared with 2023-03-16 · 29 added, 36 removed, 170 unchanged (28% of the section changed)

22 unchanged sentences

There are a limited number of people with knowledge and experience within our industries.

The Company does not have employment agreements with many of the key employees and do not maintain life insurance policies on any of the key personnel.

The Company does not have employment agreements with many of the key employees and does not maintain life insurance policies on any of the key personnel.

The loss of key personnel, especially without advance notice, or the inability to hire or retain qualified people, could have a material adverse effect on sales and operations.

20 unchanged sentences

A significant increase in costs to finance operations may have a material adverse impact on Envela’s business results and financial condition.

We may not realize our deferred tax assets.

As of December 31, 2022, we had deferred tax assets (primarily consisting of federal net operating loss carryovers) of approximately $1.5 million.

The ultimate realization of our deferred tax assets is dependent upon generating future taxable income to utilize our net operating loss carryovers before they expire.

The value of our deferred tax assets and liabilities are also dependent upon the tax rates expected to be in effect at the time they are realized.

A change in enacted corporate tax rates in our major jurisdictions, especially the U.S.

federal corporate tax rate, would change the value of our deferred taxes, which could be material.

Interest-rate fluctuations could increase our interest expense.

Interest rates rose significantly during 2022 as the Federal Reserve sought to control inflation, and interest rates are likely to rise higher during 2023.

Interest rates could continue to rise, which would increase our borrowing cost, or could make it difficult or impossible to secure financing.

High interest rates and interest-rate fluctuations could increase our interest expense.

Interest rates rose significantly during 2022 and 2023 as the Federal Reserve sought to control inflation.

High interest rates and interest rates that continue to rise, may increase our borrowing cost, or could make it difficult or impossible to secure financing.

The Company is, and will be, subject to new and existing corporate-governance and internal-control demands and reporting requirements.

14 unchanged sentences

The ability to manage and control growth in new areas is vital to sustaining success.

The Company has a solid footprint in DFW, but it is not guaranteed that the Company will be able find staff, train and supervise new employees away from the Company’s base of operations for both DGSE and ECHG.

The Company’s websites may be vulnerable to security breaches and similar threats, which could result in liability for damages and harm to the Company’s reputation.

6 unchanged sentences

If our key clients terminate important business arrangements with us, or renew contracts on terms less favorable to us, we may fail to meet our business objectives and targets, and our cash flows, results of operations and financial condition could be materially adversely affected.

Our mobile business is subject to the risk of declines in the value and availability of mobile devices in our inventory, and to export compliance and other risks.

Our mobile device business is subject to the risk of declines in the value and availability of devices in our inventory, and to export compliance and other risks.

The value of the electronic devices that we collect and refurbish may fall below the prices we have paid, which could adversely affect our profitability.

14 unchanged sentences

If the Company is unable to maintain its relationships with its suppliers or if the suppliers materially change the terms of their existing agreements with the company, the Company’s business could be materially adversely affected.

Certain parts of ECHG’s business comes from a limited number of partners.

A substantial portion of ECHG’s inventory is purchased from suppliers with which the Company has entered into non-exclusive agreements.

Certain parts of our commercial business comes from a limited number of partners.

A substantial portion of their inventory is purchased from suppliers with which the Company has entered into non-exclusive agreements.

These agreements are typically cancelable on short notice.

11 unchanged sentences

Jewelry and watch retailing is highly fragmented and competitive.

DGSE competes for jewelry sales primarily against specialty jewelers and other retailers that sell jewelry and watches including department stores, discount stores, apparel outlets, and internet retailers.

The consumer division competes for jewelry sales primarily against specialty jewelers and other retailers that sell jewelry and watches including department stores, discount stores, apparel outlets, and internet retailers.

Participants in the jewelry and watch category compete for a share of customers’ disposable income with other consumer sectors such as electronics, clothing, furniture, travel and restaurants.

2 unchanged sentences

Consumers are increasingly shopping for jewelry or starting their jewelry-buying experience online, which makes it easier for them to compare prices with other jewelry retailers.

If DGSE’s brands do not offer the same or similar items at the lowest prices, consumers may purchase their jewelry from competitors, which would adversely impact the Company’s sales and results of operations.

If our consumer brands do not offer the same or similar items at the lowest prices, consumers may purchase their jewelry from competitors, which would adversely impact the Company’s sales and results of operations.

A decrease in demand for the Company’s products and services and the failure of the Company to adapt to such decreases could adversely affect the Company’s results of operations.

19 unchanged sentences

In addition, if any of these events should occur, future sales could decline due to increased commodities prices, particularly gold.

DGSE’s wholesale and retail jewelry business is seasonal, with sales traditionally greater during certain holiday seasons.

Events and circumstances that adversely affect holiday consumer spending will have a disproportionately adverse effect on DGSE’s operational results.

DGSE’s wholesale and retail jewelry sales are seasonal by nature.

Consumer wholesale and retail jewelry business is seasonal, with sales traditionally greater during certain holiday seasons.

Events and circumstances that adversely affect holiday consumer spending will have a disproportionately adverse effect on operational results.

The consumer wholesale and retail jewelry sales are seasonal by nature.

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

DGSE’s sales are traditionally greater during significant holidays that occur in early spring, late fall, and winter.

Sales are traditionally greater during significant holidays that occur in early spring, late fall, and winter.

The amount of net sales and operating income generated during these seasons depends upon the general economic conditions and other factors beyond our control.

Given the timing of the annual seasonality, inclement weather can at times pose a substantial barrier to consumer retail activity and have a material negative impact on DGSE’s store traffic.

Given the timing of the annual seasonality, inclement weather can at times pose a substantial barrier to consumer retail activity and have a material negative impact on store traffic.

If events or circumstances were to occur that negatively impact consumer spending during such holiday seasons, it could have a material adverse effect on sales, profitability and operating results.

11 unchanged sentences

If consumer demand is lower than expected, inventory levels can rise, causing a strain on operating cash flow.

If the inventory cannot be sold through retail outlets or wholesale contacts, additional write-downs or write-offs to earnings could be necessary.

If the inventory cannot be sold through retail outlets or wholesale contacts, write-downs or write-offs to earnings could be necessary.

Conversely, if consumer demand is higher than expected, insufficient inventory levels could result in unfulfilled customer orders, loss of revenue and an unfavorable impact on customer relationships.

14 unchanged sentences

Moreover, any sustained increases in the cost of commodities could result in the need to fund a higher level of inventory or to make changes in the merchandise available to customers.

A significant portion of DGSE’s profit is generated from buying and selling pre-owned jewelry or other precious-metal-based products.

Significant price fluctuations in precious metals, especially downward, can have a severe impact on this part of our business, as people are less likely to sell these products to the Company if they believe their merchandise is being undervalued, or if they believe the value is uncertain.

A significant portion of the consumer segment’s profit is generated from buying and selling pre-owned jewelry or other precious-metal-based products.

Significant price fluctuations in precious metals, especially downward, could have a severe impact on this part of our business, as people are less likely to sell these products to the Company if they believe their merchandise is being undervalued, or if they believe the value is uncertain.

The conflict-mineral diligence process, the results from that process and the related reporting obligations could increase costs, adversely affect the Company’s reputation and adversely affect our ability to obtain merchandise.

9 unchanged sentences

Also, if the responses of parts of the Company’s supply chain to verification requests were adverse, it could harm our ability to obtain merchandise and add to compliance costs.

The coronavirus (COVID-19) pandemic adversely affected us and a reoccurrence of the pandemic or similar outbreaks could in the future adversely affect our business, financial condition, and results of operations.

On March 11, 2020, the World Health Organization announced that infections of the coronavirus COVID-19 had become a pandemic, and on March 13, 2020, the U.S.

President announced a National Emergency relating to the disease.

There was widespread infection in the United States and abroad.

National, state, and local authorities implemented social distancing and imposed quarantine and isolation measures on large portions of the population, including temporary mandatory business closures.

These measures, while intended to protect human life, had serious adverse impact on domestic and foreign economies.

and certain other governments took unprecedented actions in an attempt to address and rectify these extreme market and economic conditions by providing liquidity and stability to the financial markets.

The impact of the actions taken by these governments is still being felt.

Public health emergencies or outbreaks of epidemics, pandemics, or contagious diseases have disrupted, and could in the future disrupt, our operations and materially and adversely affect our business, financial condition, and results of operations.

Widespread public health emergencies or outbreaks of epidemics, pandemics, or contagious diseases, such as the COVID-19 pandemic, have had, and could in the future have, a material adverse effect on our business, financial condition, and results of operations.

The full extent to which a global health crisis may impact our business and operating results would depend on future developments that are highly uncertain and cannot be accurately predicted, including new medical and other information that may emerge as a result and the actions by governmental entities or others to contain it or treat its impact.

The impacts of a severe health crisis could pose the risk that we or our employees, suppliers, customers and others may be restricted or prevented from conducting, or adversely modify, our business activities for indefinite or intermittent periods of time, including as a result of employee health and safety concerns, shutdowns, shelter in place orders, travel restrictions and other actions and restrictions that may be prudent or required by governmental authorities.

A global health crisis could also impact our customers’ purchasing behavior or decisions, including reduced demand for our products that could continue for an extended period of time.

Any or all of the foregoing in jurisdictions where we or our customers, suppliers, or operations are located have had and could in the future have a material adverse effect on our business, results of operations, cash flows, and financial condition.

In addition, fluctuations in demand and other implications associated with public health emergencies have resulted in, and could in the future result in, certain supply chain constraints and challenges.

Sustained geopolitical conflicts, military action and civil unrest could result in disruptions to the global supply chain and uncertain economic conditions, which could materially adversely affect our financial condition.

and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions between Ukraine and Russia, which has devolved into military conflict.

and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions between Ukraine and Russia, Israel and Gaza, and the Middle East.

Those of which have devolved into military conflicts.

In addition, the United States, Canada, the European Union, and other countries have levied economic sanctions and other penalties on Russia.

Although the length and full impact of the ongoing conflict remains uncertain, the events in Ukraine have resulted in market disruptions.

The broader consequences of the conflict, which may include further sanctions, embargoes, regional instability, geopolitical shifts, transportation bans on certain shipping routes and potential retaliatory action by the Russian government against the United States and its allies.

Although the length and full impact of the ongoing conflicts remain uncertain, the events in Ukraine, Israel and the Middle East have resulted in market disruptions.

The broader consequences of the conflicts, which may include further sanctions, embargoes, regional instability, geopolitical shifts, transportation bans on certain shipping routes and potential retaliatory action by the Russian and Iranian governments against the United States and its allies.

This may lead to economic instability, sustained inflation and changes in liquidity and credit availability.

1 unchanged sentence

Item 1B, 2, 3, 4

UNRESOLVED STAFF COMMENTS

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

What changed 10-K

Item 1A. Risk Factors