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Item 1. Financial Statements

2024-08-07 compared with 2024-05-08 · 193 added, 100 removed, 405 unchanged (42% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

$ 100,905,409

Cost of goods sold

7 unchanged sentences

Income tax expense

( 1,011,517 )

( 1,216,220 )

Basic earnings per share:

13 unchanged sentences

Intangible assets, net

Deferred tax asset

Liabilities and stockholders' equity

17 unchanged sentences

60,000,000 shares authorized;

26,924,631 shares issued and 26,307,318 shares outstanding as of March 31, 2024;

26,924,631 shares issued and 26,155,229 shares outstanding as of June 30, 2024;

26,924,631 shares issued and 26,508,658 shares outstanding as of December 31, 2023

Treasury stock at cost, 617,313 and 415,973 shares, as of March 31, 2024 and December 31, 2023, respectively

Treasury stock at cost, 769,402 and 415,973 shares, as of June 30, 2024 and December 31, 2023, respectively

( 3,775,534 )

7 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended March 31,

Six Months Ended June 30,

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

6 unchanged sentences

( 3,633,741 )

( 2,762,524 )

Prepaid expenses

2 unchanged sentences

Operating leases

( 1,010,247 )

Other liabilities

1 unchanged sentence

Purchase of property and equipment

( 1,300,871 )

Purchase of intangible assets

Investment in notes receivable

Net cash (used in) provided by investing

Net cash (used in) by investing

( 1,265,004 )

Payments on notes payable

Purchase of treasury stock

( 1,620,485 )

Net cash (used in) financing

8 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Three Months Ended March 31, 2023

For the Three Months ended June 30, 2023 and 2024

Treasury Stock

1 unchanged sentence

Stockholders'

Balance as of April 1, 2023

Shares repurchased

Balance as of June 30, 2023

$ ( 194,820 )

Treasury Stock

Preferred Stock

Stockholders'

Balance as of April 1, 2024

$ ( 3,060,195 )

Shares repurchased

Balance as of June 30, 2024

$ ( 3,775,534 )

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 Six Months ended June 30, 2023 and 2024

Treasury Stock

Preferred Stock

Stockholders'

Balance as of January 1, 2023

Balance as of March 31, 2023

For the Three Months Ended March 31, 2024

Shares repurchased

Balance as of June 30, 2023

$ ( 194,820 )

Treasury Stock

4 unchanged sentences

Shares repurchased

Balance as of March 31, 2024

( 1,620,485 )

Balance as of June 30, 2024

$ ( 3,775,534 )

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

7 unchanged sentences

Management suggests these unaudited condensed consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (“Fiscal 2023”) filed with the SEC on March 21, 2024 (“2023 Annual Report”).

Envela files annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements, and other information with the SEC.

Such information and amendments to reports previously filed or furnished are available on the Company’s corporate website, www.envela.com, as soon as reasonably practicable after such materials are filed with or furnished to the SEC.

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

The preparation of interim condensed consolidated financial statements in conformity with U.S.

4 unchanged sentences

Envela serves as a holding company, conducting its operations via subsidiaries engaged in various businesses and activities within the re-commerce and recycling sectors.

The products and services we offer are delivered by these subsidiaries under their distinct brands, rather than directly by Envela Corporation itself.

The products and services we offer are delivered by our subsidiaries under their distinct brands, rather than directly by Envela Corporation itself.

Our operations are organized into two operating and reportable segments:

commercial and consumer, which additionally are the Company’s reporting units.

consumer and commercial, which additionally are the Company’s reporting units.

Consumer Segment

4 unchanged sentences

Commercial Segment

Our commercial segment specializes in the de-manufacturing of end-of-life electronic assets to reclaim commodities and other materials, while also engaging in the IT asset disposition (ITAD) industry.

Our commercial segment specializes in the de-manufacturing of end-of-life electronic assets to reclaim commodities and other materials, while also engaging in the information technology (“IT”) asset disposition (“ITAD”) industry.

The separated commodities, including metals, plastics, and glass, are sold to downstream processors where they are further processed and reintroduced into new products.

9 unchanged sentences

Financial Instruments

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

Notes payable approximate fair value due to the market interest rate charged.

2 unchanged sentences

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses.

Examples of estimates and assumptions include:

revenue recognition, determining the nature and timing of satisfaction of the performance obligations, variable consideration, and other obligations such as product returns and refunds;

Examples of estimates and assumptions include revenue recognition, determining the nature and timing of satisfaction of performance obligations, variable consideration, and other obligations such as product returns and refunds;

loss contingencies;

5 unchanged sentences

Revenue Recognition

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

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

The Company applies a five-step approach in determining the amount and timing of revenue to be recognized:

5 unchanged sentences

Consumer Segment

For the consumer segment, revenue for monetary transactions (i.e., cash and receivables) with wholesale customers are recognized when the merchandise is delivered or at point of sale for retail customers, and payment has been made either by immediate payment or through a receivable obligation.

For e-commerce, revenue is recognized upon when the customer has fulfilled their obligation to pay, or promise to pay and goods have been shipped.

Revenue on precious metals requiring an assay are recognized upon transfer of title, based on the determination of the underlying weight and price of the associated metals.

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

For the consumer segment, revenue from monetary transactions (i.e., cash and accounts receivable) with wholesale customers is recognized when the merchandise is delivered or at the point of sale for retail customers, and payment has been made either by immediate payment or through a receivable obligation.

For e-commerce, revenue is recognized when the customer has fulfilled their obligation to pay or promise to pay and goods have been shipped.

Revenue on precious metals requiring an assay is recognized upon transfer of title, based on the determination of the underlying weight and price of the associated metals.

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

Revenue is recognized from the sale upon transfer of title, with the promise of the third-party financing company to pay.

Commercial Segment

The commercial segment recognizes revenue 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 commercial segment recognizes revenue at an amount that reflects the consideration to which the entities expect to be entitled to in exchange for transferring goods or services to the customer.

The commercial segment 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.

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.

The initial invoice is recognized in full when our performance obligation is satisfied.

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

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

Historically, these amounts have been insignificant.

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

Recycling services are primarily recognized based on the number of units processed by a preset price per unit or weight measurements, and revenue is recognized upon completion of the SOW.

Revenue from recycling services is recognized upon completion of the SOW at a predetermined amount based on the number of units processed and a preset price per unit or weight measurement.

The commercial segment provides freight arrangement services related to inbound asset or material movements to our facilities.

Freight arrangement services are recognized at settlement with our inbound customers which occurs when the SOW has been completed.

Revenue from freight arrangement services is recognized at settlement with our inbound customers which occurs when the SOW has been completed.

Under the guidance of ASC 606, the Company is deemed to be a principal and as such records freight arrangement services as a component of revenue, and the associated expense is recorded as a component of cost of goods sold.

4 unchanged sentences

In some cases, the consumer and commercial segment’s customers may return a product purchased within 30 days of receipt.

Our allowance for estimated returns is 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, 2024 and March 31, 2023, the consumer segment’s allowance for returns was $ 28,402 and $ 0 , respectively.

For the three months ended March 31, 2024 and March 31, 2023, the commercial segment’s allowance for returns was $ 6,578 and $ 0 , respectively.

Our allowance for estimated returns is based on our review of historical returns experience and reduces our reported revenues accordingly.

As of June 30, 2024, and December 31, 2023, the consumer segment’s allowance for returns was $ 50,281 and $ 28,402 , respectively.

As of June 30, 2024, and December 31, 2023, the commercial segment’s allowance for returns was $ 10,769 and $ 0 , respectively.

Concentrations and Credit Risk

The Company is potentially subject to concentrations of credit risk in its accounts receivable.

A significant amount of revenue stems from one precious metals partner, which accounted for 6 % of our sales for the period ended March 31, 2024, and 6 % of our sales for the period ended March 31, 2023.

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

The Company is potentially subject to concentrations of counterparty credit risk.

The concentrations described herein pertain to domestic precious metals transactions requiring an assay which are of short duration and settled on comparable terms.

Overall customer concentrations as a percentage of sales may vary as a result of the mix of product being sold within each comparative period.

Individual customer concentrations are also impacted by each customer’s production schedule and as such the Company identifies the most appropriate sales outlet to ensure a timely transaction settlement.

For the six months ended June 30, 2024, two customers aggregated 21.0 % of our sales and represented 0.0 % of our accounts receivable balance.

For the six months ended June 30, 2023, three customers aggregated 39.1 % of our sales and represented 0.0 % of our accounts receivable balance.

The Company believes that no single customer is critical to its business as a result of having diverse revenue streams and the optionality of sales outlets primarily associated with base and precious metals.

Shipping and Handling Costs

Within the consumer and commercial segments shipping and handling costs are accounted for as fulfillment costs within costs of goods sold.

For the three months ended March 31, 2024 and March 31, 2023, the consumer segment’s shipping and handling costs were $ 439 and $ 0 , respectively.

For the three months ended March 31, 2024 and March 31, 2023, the commercial segment’s shipping and handling costs were $ 1,394,077 and $ 1,689,941 , respectively.

Within the consumer and commercial segments, outbound shipping and handling costs are accounted for as fulfillment costs within cost of goods sold.

For the three months ended June 30, 2024, and June 30, 2023, the consumer segment’s outbound shipping and handling costs were $ 49,350 and $ 5,237 , respectively.

For the three months ended June 30, 2024, and June 30, 2023, the commercial segment’s outbound shipping and handling costs were $ 1,194,203 and $ 1,522,542 , respectively.

For the six months ended June 30, 2024, and June 30, 2023, the consumer segment’s outbound shipping and handling costs were $ 49,789 and $ 5,237 , respectively.

For the six months ended June 30, 2024, and June 30, 2023, the commercial segment’s outbound shipping and handling costs were $ 2,588,280 and $ 3,212,483 , respectively.

Advertising Costs

The consumer and commercial segment’s advertising costs are expensed as incurred.

For the three months ended March 31, 2024 and March 31, 2023, the consumer segment’s advertising costs were $ 247,903 and $ 206,075 , respectively.

For the three months ended March 31, 2024 and March 31, 2023, the commercial segment’s advertising costs were $ 71,095 and $ 14,553 , respectively.

For the three months ended June 30, 2024, and June 30, 2023, the consumer segment’s advertising costs were $ 325,079 and $ 345,052 , respectively.

For the three months ended June 30, 2024, and June 30, 2023, the commercial segment’s advertising costs were $ 61,882 and $ 6,686 , respectively.

For the six months ended June 30, 2024, and June 30, 2023, the consumer segment’s advertising costs were $ 572,982 and $ 551,127 , respectively.

For the six months ended June 30, 2024, and June 30, 2023, the commercial segment’s advertising costs were $ 132,977 and $ 21,239 , respectively.

We determine if an arrangement is a lease at inception.

14 unchanged sentences

The Company reviews the likelihood that the benefit of the deferred tax assets will be realized and the need for valuation allowances on a quarterly basis, or more frequently if events indicate that a review is required.

We have not taken a tax position that, if challenged, would have a material effect on the consolidated financial statements or the effective tax rate for the three months ended March 31, 2024.

For the period ended March 31, 2024, the Company had a deferred tax liability of $ 21,177 .

For the period ended December 31, 2023, the Company had a deferred tax liability of $ 38,668 .

The Company did not have a valuation allowance for the period ended March 31, 2024 and December 31, 2023.

We have not taken a tax position that, if challenged, would have a material effect on the consolidated financial statements or the effective tax rate for the three and six months ended June 30, 2024, and June 30, 2023.

As of June 30, 2024, the Company had a deferred tax asset of $ 6,715 .

As of December 31, 2023, the Company had a deferred tax liability of $ 38,668 .

The Company did not have a valuation allowance as of June 30, 2024, or December 31, 2023.

Segment Information

The accounting standards for reporting information about operating segments defines an operating segment as a component of an enterprise that engages in business activities from which it may earn revenues and incur expenses for which discrete financial information is available that is evaluated regularly by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources and in assessing performance.

The accounting standards for reporting information about operating segments define an operating segment as a component of an enterprise that engages in business activities from which it may earn revenues and incur expenses for which discrete financial information is available that is evaluated regularly by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources and in assessing performance.

The Company’s financial performance is based on the following segments:

7 unchanged sentences

Stock-Based Compensation

The Company accounts for stock-based compensation by measuring the cost of employee services received in exchange for an award of equity instruments, including grants of stock options, based on the fair value of the award at the date of grant.

In addition, to the extent that the Company receives an excess tax benefit upon exercise of an award, such benefit is reflected as cash flow from financing activities in the consolidated statement of cash flows.

5 unchanged sentences

The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents.

The carrying amounts reported in the consolidated balance sheets approximate fair value.

The carrying amounts reported in the condensed consolidated balance sheets approximate fair value.

Accounts Receivable, Net of Allowances

Accounts receivable represent amounts primarily due from customers on product and other sales.

Our allowance for credit losses is primarily determined by an analysis of our trade receivables aging, using the expected losses methodology.

Accounts receivable represent amounts primarily due from customers on products and services.

Our allowance for credit losses is primarily determined by an analysis of our accounts receivable aging, using the expected losses methodology.

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

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

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

Trade receivables are charged off when there is certainty as to their being uncollectible.

For the three months ended March 31, 2024 and March 31, 2023, the consumer segment’s allowance for credit losses was $ 0 and $ 0 , respectively.

For the three months ended March 31, 2024 and March 31, 2023, the commercial segment’s allowance for credit losses was $ 306,727 and $ 0 , respectively.

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

Accounts receivables are written off when all efforts to collect have been exhausted and the potential for recovery is considered remote.

As of June 30, 2024, and December 31, 2023, the consumer segment’s allowance for credit losses was $ 0 and $ 0 , respectively.

As of June 30, 2024, and December 31, 2023, the commercial segment’s allowance for credit losses was $ 429,908 and $ 260,858 , respectively.

Consumer Segment

1 unchanged sentence

We acquire inventory based on our own internal estimate of the fair value of the items at the time of purchase.

We consider factors such as the current spot market price of precious metals and current market demand for the items being purchased.

We consider factors such as the current spot market price of precious metals and the current market demand for the items being purchased.

Consigned inventory has a net zero balance.

2 unchanged sentences

Commercial Segment

Our inventory primarily includes processed and unprocessed, base metals, electronic scrap materials containing precious metals as well as technology assets being held for resale.

Our inventory primarily includes processed and unprocessed base metals, electronic scrap materials, as well as technology assets being held for resale.

The processed and unprocessed base metals and electronic scrap materials are valued utilizing the average cost method.

2 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.

There were no triggering events identified during the first three months of fiscal 2024 requiring an interim goodwill impairment test, and the Company did not record a goodwill impairment charge in any of the periods presented.

There were no triggering events identified during the six months ended June 30, 2024, requiring an interim goodwill impairment test, and the Company did not record a goodwill impairment charge in any of the periods presented.

There have been no other adjustments to goodwill in any of the periods presented.

1 unchanged sentence

Property and Equipment, Net

Property and equipment is carried at cost less accumulated depreciation and is depreciated on a straight-line basis over the estimated useful lives of the assets;

Property and equipment are carried at cost less accumulated depreciation and are depreciated on a straight-line basis over the estimated useful lives of the assets;

except for construction in progress which has not yet been placed into service.

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Expenditures for maintenance and repairs are charged against income as incurred;

Expenditures for repairs and maintenance are expensed as incurred;

betterments that increase the value or materially extend the life of the related assets are capitalized.

2 unchanged sentences

Finite-lived intangible assets are carried at cost less accumulated amortization and are amortized on a straight-line basis over the estimated useful lives of the assets;

except for assets under development which have not yet been placed into service.

Finite-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

except for assets under development that have not yet been placed into service.

Finite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

See Note 7 – Intangibles, net for further detail.

Correction of Immaterial Error

The Company’s consumer segment previously reported revenue from freight arrangement services as a component of cost of goods sold.

The Company’s commercial segment previously reported revenue from freight arrangement services as a component of cost of goods sold.

The Company has further evaluated the nature and scope of its service offering and has determined that it meets the definition of a principal in accordance with ASC 606 and as such be reported within revenue.

As a result of the correction, for the three months ended March 31,2023 revenue and cost of goods sold increased by $ 1,420,492 .

The error had no impact on operating income, net income, and net income per share nor any other financial statement amount.

Further these errors had no impact on the consolidated balance sheets, statements of stockholders’ equity, and statement of cash flows.

These corrections do not affect any of the metrics used to calculate and evaluate management’s compensation and had no impact on bonuses, commissions, stock-based compensation, or any other employee renumeration.

The following table summarizes the correction of immaterial error:

For the Three Months Ended

September 30,

$ 171,674,088

Correction of immaterial error

Sales adjusted

Cost of goods sold

Correction of immaterial error

Cost of goods sold adjusted

The error had no impact on gross margin, operating income, net income, and basic and diluted earnings per share nor any other financial statement amount.

Further these errors had no impact on the consolidated balance sheets, statements of stockholders’ equity, and statements of cash flows.

These corrections do not affect any of the metrics used to calculate and evaluate management’s compensation and have no impact on bonuses, commissions, stock-based compensation, or any other employee renumeration.

Historical amounts have been corrected and are presented on a comparable basis.

2 unchanged sentences

The Company has elected to discontinue reporting the disaggregation of inventory and revenue by resale and recycle.

The Company’s business operations continue to evolve and includes fee for service revenue that does not always correlate to these categories and underlying inventory positions;

further our inventory positions within these disaggregated presentations can vary at any point in time as they are a diverse mix of technology assets, precious and base metals and luxury hard assets.

The Company’s business operations continue to evolve and include fee-for-service revenue that does not always correlate to these categories and underlying inventory positions;

further, our inventory positions within these disaggregated presentations can vary at any point in time as they are a diverse mix of technology assets, base and precious metals and luxury hard assets.

The Company believes that its disclosure of the nature of its operations, the inventory held at each segment and associated risk factors provides a sufficient understanding of its impact on our business.

1 unchanged sentence

Reclassifications

For the Company’s 2023 Annual Report, the presentation of the operations section within its Consolidated Cash Flow Statements was updated to present "non-cash lease expense" as a separate line item, previously included within "changes in operating assets and liabilities – operating leases.” The Company has elected to reclassify $ 473,881 from operating leases to non-cash lease expenses in the Consolidated Cash Flow Statement for the period ending March 31, 2023.

For the Company’s 2023 Annual Report, the presentation of the operations section within its Consolidated Cash Flow Statements was updated to present "non-cash lease expense" as a separate line item, previously included within "changes in operating assets and liabilities – operating leases.” The Company has elected to reclassify $ 946,598 from operating leases to non-cash lease expense in the Condensed Consolidated Cash Flow Statement for the six months ended June 30, 2023.

See the Condensed Consolidated Statements of Cash Flows for further detail.

For the Company’s 2023 Annual Report, the amount reported for other current assets within the Consolidated Balance Sheets related entirely to notes receivables.

The Company has elected to present notes receivable as its own line item and has reclassified the historical presentation of the aforementioned for the period ended December 31, 2023.

For the Company’s 2023 Annual Report, the amount reported for other current assets within the Consolidated Balance Sheets is related entirely to notes receivables.

The Company has elected to present notes receivable as its own line item and has reclassified the historical presentation of the aforementioned as of December 31, 2023.

See the Condensed Consolidated Balance Sheets for further detail.

1 unchanged sentence

The Company has determined that providing this information further enhances the understanding of the nature of our capital expenditures.

The Company has elected to reclassify the historical presentation of the aforementioned for the period ended December 31, 2023.

The Company has elected to reclassify the historical presentation of the aforementioned as of December 31, 2023.

See Note 6 – Property and equipment, net for further detail.

1 unchanged sentence

The Company has further evaluated the nature of this asset under ASC 350, Intangibles – Goodwill and Other, and has determined that it is a nonmonetary asset without physical substance and was acquired separately from hardware and as such be reported within intangibles, net.

The Company has elected to reclassify the historical presentation of the aforementioned for the period ended December 31, 2023.

The Company has elected to reclassify the historical presentation of the aforementioned as of December 31, 2023.

See Note 7 – Intangibles, net for further detail.

9 unchanged sentences

Improvement to Income Tax Disclosures, amending income tax disclosure requirements for the effective tax rate reconciliation and income taxes paid.

The amendments in ASU 2023-09 are effective beginning in the Company’s fiscal 2025 and are applied prospectively.

The amendments in ASU 2023-09 will be effective for fiscal years beginning January 1, 2025.

The standard will be adopted beginning January 1, 2025, for the fiscal year on a prospective basis.

Early adoption and retrospective application of the amendments are permitted.

The Company does not expect adoption to have a material impact on its consolidated financial statements.

No other recently issued or effective ASU’s had, or are expected to have, a material impact on the Company’s results of operations, financial condition or liquidity.

No other recently issued or effective ASUs had, or are expected to have, a material impact on the Company’s results of operations, financial condition, or liquidity.

NOTE 4 — INVENTORIES

11 unchanged sentences

The Kretchmer Transaction remains within the measurement period of ASC 805, Business Combinations.

The measurement period is the period after the acquisition date during which the acquirer may adjust the provisional amounts recognized for a business combination.

The measurement period is the one-year period after the acquisition date during which the acquirer may adjust the provisional amounts recognized for a business combination.

NOTE 6 — PROPERTY AND EQUIPMENT, NET

22 unchanged sentences

$ ( 191,075 )

(1) Construction in progress relates to the build-out of production equipment.

(2) Construction in progress relates to the build-out of our Arizona retail stores.

(1) The reclassification primarily related to the build-out of our Arizona retail stores, which were placed into service in the second quarter of Fiscal 2024.

(2) The reclassification related to the build-out of production equipment, which was placed into service in the second quarter of Fiscal 2024.

(3) Reclassified amount to intangibles, net.

See Note 7 – Intangible, Net for further details.

(4) Construction in progress pertains to improvements to our corporate headquarters.

(4) The reclassification related to improvements to our corporate headquarters, which were placed into service in the second quarter of Fiscal 2024.

NOTE 7 — INTANGIBLES, NET

1 unchanged sentence

Reclassification

Point of sale system

Assets under development (2)

accumulated amortization

6 unchanged sentences

( 2,248,405 )

Enterprise resource planning system

Assets under development (1)(2)

accumulated amortization

(1) Assets under development relate to the development of our enterprise resource planning system.

The following table depicts the Company’s estimated future amortization expense related to intangible assets as of March 31, 2024:

(1) The reclassification related to the initial development of our enterprise resource planning system, which was placed into service in the first quarter of Fiscal 2024.

(2) As of June 30, 2024, these intangible assets are under development, have not yet been placed into service and are not yet amortizable.

The following table depicts the Company’s estimated future amortization expense related to intangible assets as of June 30, 2024:

NOTE 8 — ACCRUED EXPENSES

6 unchanged sentences

NOTE 9 — SEGMENT INFORMATION

The following table depicts the Company’s disaggregated statements of income:

Three Months Ended March 31,

The following table depicts the Company’s disaggregated condensed consolidated statements of income for the three months ended June 30, 2024 and 2023:

Three Months Ended June 30,

% of Sales (1)

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(1) The "% of Sales" figures present the proportion of each line item to the total consolidated sales for the respective period, which management believes is relevant to an assessment and understanding of our financial condition and results of operations.

Due to rounding, percentages presented may not add up precisely to the totals provided.

The following table depicts the Company’s disaggregated condensed consolidated statements of income for the six months ended June 30, 2024 and 2023:

Six Months Ended June 30,

% of Sales (1)

Cost of goods sold

Selling, general and administrative

Depreciation and amortization

Total operating expenses

Operating income

Other income (expense):

Interest expense

Income before income taxes

Income tax expense

( 1,011,517 )

( 1,216,220 )

Due to rounding, percentages presented may not add up precisely to the totals provided.

The following chart depicts the Company’s total assets:

June 30, 2024

December 31, 2023

NOTE 10 — REVENUE

The following table depicts the Company’s disaggregation of total sales and gross margin:

For the Three Months Ended March 31,

The following table depicts the Company’s disaggregation of total sales and gross margin for the three months ended June 30, 2024 and 2023:

For the Three Months Ended June 30,

Correction of immaterial error (1)

1 unchanged sentence

(1) Correction of immaterial error relating to freight arrangement services, see Note 3 – Accounting Policies and Estimates for further detail.

The following table depicts the Company’s disaggregation of total sales and gross margin for the six months ended June 30, 2024 and 2023:

For the Six Months Ended June 30,

Correction of immaterial error (1)

Commercial adjusted

$ 100,905,409

(1) Correction of immaterial error relating to freight arrangement services, see Note 3 – Accounting Policies and Estimates for further detail.

The following table lists the opening and closing balances of our contract assets and liabilities:

7 unchanged sentences

Closing Balance - 6/30/2024

The Company has no contract assets, and the only contract liability is customer deposits, which is reported within other liabilities in the Unaudited Condensed Consolidated Balance Sheets.

The Company has no contract assets, and the only contract liability is customer deposits, which are reported within other liabilities in the Condensed Consolidated Balance Sheets.

NOTE 11 — LEASES

The following table depicts the Company’s future annual minimum leases payments as of March 31, 2024:

The following table depicts the Company’s future annual minimum leases payments as of June 30, 2024:

Total minimum lease payments

3 unchanged sentences

Current portion

All of the Company’s facilities leases as of March 31, 2024 are non-cancellable and 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, 2024 and 2023 were $ 784,735 and $ 659,616 , respectively, comprised of a combination of minimum lease payments and variable lease costs.

As of March 31, 2024, the weighted average remaining lease term and weighted average discount rate for operating leases were 2.3 years and 4.3 %.

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

All of the Company’s leased facilities as of June 30, 2024, are non-cancellable.

The leases are a combination of triple net leases, for which the Company pays its proportionate share of common area maintenance, property taxes, and property insurance, and modified gross leases, for which the Company directly pays for common area maintenance and property insurance.

Leasing costs for the three months ended June 30, 2024 and 2023 were $ 767,902 and $ 705,635 , respectively, comprised of a combination of minimum lease payments and variable lease costs.

Leasing costs for the six months ended June 30, 2024 and 2023 were $ 1,552,637 and $ 1,361,885 , respectively, comprised of a combination of minimum lease payments and variable lease costs.

As of June 30, 2024, the weighted average remaining lease term and weighted average discount rate for operating leases were 2.5 years and 3.8 %.

As of June 30, 2023, the weighted average remaining lease term and weighted average discount rate for operating leases were 2.8 years and 4.4 %.

NOTE 12 — BASIC AND DILUTED AVERAGE SHARES

The following table is a reconciliation of the Company’s basic and diluted weighted average common shares:

The following table is a reconciliation of the Company’s basic and diluted weighted average common shares for the three months ended June 30, 2024 and 2023:

For the Three Months Ended

2 unchanged sentences

Diluted weighted average shares

For the three months ended March 31, 2024 and 2023, there was a total of 15,000 common stock options, warrants, and Restricted Stock Units (“RSUs”) unexercised.

For the three months ended March 31, 2024 and 2023, there were no anti-dilutive shares.

On March 14, 2023, a stock repurchase program was unanimously approved by the Company’s Board of Directors (the “Board”), that gave management authorization to purchase up to one million ( 1,000,000 ) shares of the Company’s stock, at a per share price not to exceed $ 9.00 , on the open market.

The following table is a reconciliation of the Company’s basic and diluted weighted average common shares for the six months ended June 30, 2024 and 2023:

For the Six Months Ended

Basic weighted average shares

Effect of potential dilutive securities

Diluted weighted average shares

For the three and six months ended June 30, 2024, and 2023, there was a total of 15 thousand common stock options unexercised.

For the three and six months ended June 30, 2024, and 2023, there were no anti-dilutive shares.

On March 14, 2023, a stock repurchase program was unanimously approved by the Company’s Board of Directors (the “Board”), which gave management authorization to purchase up to one million shares of the Company’s stock, at a per-share price not to exceed $ 9.00 , on the open market.

The plan expires on March 31, 2026.

The following table lists the repurchase of Company shares as of March 31, 2024:

The following table lists the repurchase of Company shares for the three and six months ended June 30, 2024:

Total Number of

Average Price

Shares Available

Fiscal Period

Shares Purchased

Paid per Share

Balance as of January 1, 2024

3 unchanged sentences

Balance as of March 31, 2024

April 1 - 30, 2024

May 1 - 31, 2024

June 1 - 30, 2024

Balance as of June 30, 2024

For the three months ended June 30, 2024, the Company repurchased 152,089 shares for $ 715,339 , for an average price of $ 4.70 .

For the six months ended June 30, 2024, the Company repurchased 353,429 shares for $ 1,620,485 , for an average price of $ 4.58 .

NOTE 13 — DEBT

12 unchanged sentences

( 1,361,443 )

The following table depicts the Company’s future principal payments on long-term debt obligations as of March 31, 2024:

The following table depicts the Company’s future principal payments on long-term debt obligations as of June 30, 2024:

Note payable, FSB (1)

26 unchanged sentences

The note payable bears interest at 3.25 % and matures on November 4, 2025.

The Company was in compliance with all of its debt obligation covenants for the periods ended March 31, 2024 and March 31, 2023.

The following table depicts the Company’s future scheduled aggregate principal payments and maturities as of March 31, 2024:

The Company was in compliance with all of its debt obligation covenants for the three and six months ended June 30, 2024, and June 30, 2023.

The following table depicts the Company’s future scheduled aggregate principal payments and maturities as of June 30, 2024:

Scheduled Principal Payments and Maturities by Year:

NOTE 14 — STOCK-BASED COMPENSATION

There was no stock-based compensation expense for the three months ended March 31, 2024 and March 31, 2023.

There was no stock-based compensation expense for the three and six months ended June 30, 2024, and June 30, 2023.

NOTE 15 — RELATED PARTY TRANSACTIONS

1 unchanged sentence

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

There are no related party transactions subject to reporting as of March 31, 2024 and March 31, 2023.

There are no related party transactions subject to reporting as of June 30, 2024, and June 30, 2023.

NOTE 16 — CONTINGENCIES

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 1. Financial Statements