10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________________

FORM 10-Q

 ________________________

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended June 30, 2022

OR

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the Transition Period From ___________ to ____________

Commission File Number 001-11048

________________________ 

ENVELA CORPORATION

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

________________________

Nevada	88-0097334
(STATE OF INCORPORATION)	(I.R.S. EMPLOYER IDENTIFICATION NO.)

1901 GATEWAY DRIVE, STE 100, IRVING, TX 75038

(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

(972) 587-4049

(REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE)

www.envela.com

Securities registered pursuant to Section 12(b) of the Act:         

Title of each class	Trading Symbol	Name of exchange on which registered
COMMON STOCK, par value $0.01 per share	ELA	NYSE American

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 3, 2022, the registrant had 26,924,631 shares of common stock outstanding.

TABLE OF CONTENTS

PART I.	FINANCIAL INFORMATION	Page No.
Item 1.	Financial Statements	3
	Condensed Consolidated Statements of Income for the three months and six months ended June 30, 2022 and 2021 (unaudited)	3
	Condensed Consolidated Balance Sheets as of June 30, 2022 (unaudited) and December 31, 2021	4
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021 (unaudited)	5
	Condensed Consolidated Statements of Stockholders’ Equity for the three months ended June 30, 2021 and 2022 (unaudited)	6
	Condensed Consolidated Statements of Stockholders’ Equity for the six months ended June 30, 2021 and 2022 (unaudited)	7
	Notes to Condensed Consolidated Financial Statements (unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36
Item 4	Controls and Procedures	36
PART II.	OTHER INFORMATION
Item 1	Legal Proceedings	37
Item 1A.	Risk Factors	37
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 3.	Defaults Upon Senior Securities	37
Item 4.	Mine Safety Disclosures	37
Item 5.	Other Information	37
Item 6.	Exhibits	38
SIGNATURES		39

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ENVELA CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

	Three Months Ended June 30,					Six Months Ended June 30,
(Unaudited)	2022			2021		2022			2021
Revenue:
Sales	$	42,639,718		$	33,724,006	$	90,054,816		$	59,214,447
Cost of goods sold		31,161,718			26,596,116		68,865,782			45,782,293
Gross margin		11,478,000			7,127,890		21,189,034			13,432,154
Expenses:
Selling, General & Administrative Expenses		7,083,903			4,831,225		13,643,658			8,984,454
Depreciation and Amortization		279,516			216,219		571,463			421,131
Total operating expenses		7,363,419			5,047,444		14,215,121			9,405,585
Operating income		4,114,581			2,080,446		6,973,913			4,026,569
Other income (expense), net		(95,429	)		283,055		(154,005	)		554,996
Interest expense		121,042			177,704		244,281			356,726
Income before income taxes		3,898,110			2,185,797		6,575,627			4,224,839
Income tax expense		50,252			32,685		80,544			63,455
Net income	$	3,847,858		$	2,153,112	$	6,495,083		$	4,161,384
Basic earnings per share:
Net income	$	0.14		$	0.08	$	0.24		$	0.15
Diluted earnings per share:
Net income	$	0.14		$	0.08	$	0.24		$	0.15
Weighted average shares outstanding:
Basic		26,924,631			26,924,381		26,924,631			26,924,381
Diluted		26,939,631			26,939,631		26,939,631			26,939,631

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

3

ENVELA CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30,			December 31,
	2022			2021
Assets	(unaudited)
Current assets:
Cash and cash equivalents	$	13,935,476		$	10,138,148
Trade receivables, net of allowances		5,688,882			7,166,533
Inventories		17,804,096			14,048,436
Current right-of-use assets from operating leases		1,649,034			1,604,736
Prepaid expenses		1,420,656			439,038
Other current assets		265,866			969,624
Total current assets		40,764,010			34,366,515
Property and equipment, net		9,662,401			9,806,188
Goodwill		6,357,453			6,140,465
Intangible assets, net		2,800,495			3,024,245
Operating lease right-of-use assets		5,039,806			5,692,141
Other assets		186,761			237,761
Total assets	$	64,810,926		$	59,267,315
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable-trade	$	3,303,090		$	2,488,396
Line of credit		-			1,700,000
Notes payable		1,241,480			1,065,794
Current operating lease liabilities		1,631,270			1,573,824
Accrued expenses		1,741,794			1,789,366
Customer deposits and other liabilities		2,198,587			1,179,224
Total current liabilities		10,116,221			9,796,604
Notes payable, less current portion		15,350,254			15,970,337
Long-term operating lease liabilities, less current portion		5,222,051			5,873,057
Total liabilities		30,688,526			31,639,998
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.01 par value; 5,000,000 shares authorized;
no shares issued and outstanding		-			-
Common stock, $0.01 par value; 60,000,000 shares authorized;
26,924,631 shares issued and outstanding		269,246			269,246
Additional paid-in capital		40,173,000			40,173,000
Accumulated deficit		(6,319,846	)		(12,814,929	)
Total stockholders’ equity		34,122,400			27,627,317
Total liabilities and stockholders’ equity	$	64,810,926		$	59,267,315

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

4

ENVELA CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended June 30,	2022			2021
	(Unaudited)			(Unaudited)
Operations
Net income	$	6,495,083		$	4,161,384
Adjustments to reconcile net income to net cash provided by operations:
Depreciation, amortization, and other		571,463			421,131
Bad debt expense		25,000			6,249
Changes in operating assets and liabilities:
Trade receivables		1,452,651			(3,365,999	)
Inventories		(3,755,662	)		(2,579,991	)
Prepaid expenses		(981,616	)		(169,373	)
Other assets		754,759			(146,042	)
Accounts payable and accrued expenses		767,122			1,574,520
Operating leases		14,478			20,493
Customer deposits and other liabilities		1,019,363			341,260
Net cash provided by operations		6,362,641			263,632
Investing
Investment in note receivable		-			(654,958	)
Purchase of property and equipment		(203,929	)		(484,594	)
Acquisition of CExchange assets and liabilities, net of cash acquired		-			13,136
Adjustment to the purchase price of the Avail Transaction		(216,988	)		-
Net cash used in investing		(420,917	)		(1,126,416	)
Financing
Payments on notes payable, related party		-			(144,787	)
Payments on notes payable		(444,396	)		(79,353	)
Payments on line of credit		(1,700,000	)		-
Net cash used in financing		(2,144,396	)		(224,140	)
Net change in cash and cash equivalents		3,797,328			(1,086,924	)
Cash and cash equivalents, beginning of period		10,138,148			9,218,036
Cash and cash equivalents, end of period	$	13,935,476		$	8,131,112
Supplemental Disclosures
Cash paid during the period for:
Interest	$	252,431		$	359,253
Income taxes	$	98,000		$	56,900
Non cash activites:
Acquisition of CExchange assets and liabilities	$	-		$	1,555,892

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

5

ENVELA CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Three Months ended June 30, 2021 and 2022

(Unaudited)

									Additional					Total
	Common Stock				Preferred Stock					Paid-in		Accumulated			Stockholders'
	Shares		Amount		Shares		Amount			Capital		Deficit			Equity
Balances at March 31, 2021		26,924,381	$	269,246		-	$	-	$	40,173,000	$	(20,855,532	)	$	19,586,714
Net Income		-		-		-		-		-		2,153,112			2,153,112
Balances at June 30, 2021		26,924,381	$	269,246		-	$	-	$	40,173,000	$	(18,702,420	)	$	21,739,826
										Additional					Total
	Common Stock					Preferred Stock				Paid-in		Accumulated			Stockholders'
		Shares	Amount			Shares		Amount		Capital		Deficit			Equity
Balances at March 31, 2022		26,924,631	$	269,246		-	$	-	$	40,173,000	$	(10,167,704	)	$	30,274,542
Net Income		-		-		-		-		-		3,847,858			3,847,858
Balances at June 30, 2022		26,924,631	$	269,246		-	$	-	$	40,173,000	$	(6,319,846	)	$	34,122,400

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

6

ENVELA CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Six Months ended June 30, 2021 and 2022

(Unaudited)

										Additional				Total
	Common Stock				Preferred Stock					Paid-in		Accumulated			Stockholders'
	Shares		Amount		Shares		Amount			Capital		Deficit			Equity
Balances at December 31, 2020		26,924,631	$	269,246		-	$	-	$	40,173,000	$	(22,863,804	)	$	17,578,442
Net Income		-		-		-		-		-		4,161,384			4,161,384
Balances at June 30, 2021		26,924,631	$	269,246		-	$	-	$	40,173,000	$	(18,702,420	)	$	21,739,826
										Additional					Total
	Common Stock				Preferred Stock					Paid-in		Accumulated			Stockholders'
	Shares		Amount		Shares		Amount			Capital		Deficit			Equity
Balances at December 31, 2021		26,924,631	$	269,246		-	$	-	$	40,173,000	$	(12,814,929	)	$	27,627,317
Net Income		-		-		-		-		-		6,495,083			6,495,083
Balances at June 30, 2022		26,924,631	$	269,246		-	$	-	$	40,173,000	$	(6,319,846	)	$	34,122,400

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

7

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 — BASIS OF PRESENTATION

The interim condensed consolidated financial statements of Envela Corporation, a Nevada corporation, and its subsidiaries (together with its subsidiaries, the “Company” or “Envela”), included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”), including under the Securities Act of 1933, as amended (the “Securities Act”) and the Securities and Exchange Act of 1934, as amended (the “Exchange Act”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to the SEC’s rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. The Company suggests that these financial statements be read in conjunction with the financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the SEC on March 16, 2022 (the “2021 Annual Report”). In the opinion of the management of the Company, the accompanying unaudited interim financial statements contain all adjustments, consisting only of those of a normal recurring nature, necessary to present fairly its results of operations and cash flows for the periods presented. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year. Certain reclassifications were made to the prior year's consolidated financial statements to conform to the current year presentation. The information provided as of June 30, 2022 in these notes to the interim condensed consolidated financial statements is unaudited.

NOTE 2 — PRINCIPLES OF CONSOLIDATION AND NATURE OF OPERATIONS

Envela and its subsidiaries engage in diverse business activities within the recommerce sector. These activities include being one of the nation's premier authenticated recommerce retailers of luxury hard assets; providing end-of-life asset recycling and resale to businesses, organization and retail consumers; offering data destruction and IT asset management; and providing products, services and solutions to industrial and commercial companies. Envela operates primarily via two operating and reportable segments. Through DGSE, LLC (“DGSE”), the Company operates Dallas Gold & Silver Exchange, Charleston Gold & Diamond Exchange, and Bullion Express brands. Through ECHG, LLC (“ECHG”), the Company operates Echo Environmental Holdings, LLC (“Echo”), ITAD USA Holdings, LLC (“ITAD USA”), CEX Holdings, LLC (“CEX”), Avail Recovery Solutions, LLC (“Avail”) and Teladvance, LLC (“Teladvance”). Envela is a Nevada corporation, headquartered in Irving, Texas.

DGSE primarily buys and resells or recycles luxury hard assets like jewelry, diamonds, gemstones, fine watches, rare coins and related collectibles, precious-metal bullion products, gold, silver and other precious-metals. DGSE operates seven jewelry stores at both the retail and wholesale levels in Texas and South Carolina. Buying and selling items for their precious-metals content is a major method by which DGSE markets itself. DGSE also offers jewelry repair services, custom-made jewelry and consignment items, and maintains relationships with refiners for precious-metal items that are not appropriate for resale. The Company also maintains a presence in the retail market through its websites, www.dgse.com and www.cgdeinc.com.

ECHG, through its subsidiaries, primarily buys electronic components from business and other organizations, such as school districts, for end-of-life recycling and resale, or to add life to electronic devices by data destruction and refurbishment for reuse. ECHG also conducts such recycling and resale at the retail level. Echo focuses on end-of-life electronics recycling and sustainability and ITAD USA provides IT equipment disposition, including compliance and data sanitization services. Teladvance, CEX and Avail operate as value-added resellers by providing offerings and services to companies looking either to upgrade capabilities or dispose of equipment. Like DGSE, ECHG also maintains relationships with refiners or recyclers to which it sells valuable materials it extracts from electronics and IT equipment that are not appropriate for resale or reuse. ECHG’s customers are companies and organizations that are based domestically and internationally.

8

For additional information on the businesses of both DGSE and ECHG, see “Item 1. Business – Operating Segments” in the Company’s 2021 Annual Report.

The interim condensed consolidated financial statements have been prepared in accordance with U.S. GAAP and include the accounts of the Company and its subsidiaries. All material intercompany transactions and balances have been eliminated.

 NOTE 3 — ACCOUNTING POLICIES AND ESTIMATES

 Financial Instruments

The carrying amounts reported in the condensed consolidated balance sheets for cash equivalents, trade receivables, prepaid expenses, other current assets, accounts payable, accrued expenses and customer deposits and other liabilities approximate fair value because of the immediate or short-term nature of these financial instruments. Notes payable and line of credit approximate fair value due to the market interest rate charged.

Earnings Per Share

Basic earnings per share of our common stock, par value $0.01 per share (our “Common Stock”), is computed by dividing net earnings available to holders of the Company’s Common Stock by the weighted average number of shares of Common Stock outstanding for the reporting period. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts requiring the Company to issue Common Stock were exercised or converted into Common Stock. For the calculation of diluted earnings per share, the basic weighted average number of shares is increased by the dilutive effect of stock options and warrants outstanding determined using the treasury stock method.

Goodwill

Goodwill is not amortized but evaluated for impairment on an annual basis during the fourth quarter of our fiscal year, or earlier if events or circumstances indicate the carrying value may be impaired. The Company’s goodwill is related to ECHG only and not the entire Company. ECHG has its own, separate financial information to perform goodwill impairment testing at least annually or if events indicate that those assets may be impaired. As a result of the current market and economic conditions related to the coronavirus pandemic (“COVID-19”) and the war between Ukraine and Russia, in accordance with step 1 of the guidelines set forth in ASC 350-20-35-3A, the Company concluded there were no impairments of goodwill that resulted from those triggering events as of June 30, 2022. The Company will continue to evaluate goodwill for the ECHG segment. For tax purposes, goodwill is amortized and deductible over fifteen years.

ECHG goodwill was allocated in connection with three acquisitions of the assets now held by Echo on May 20, 2019 (the “Echo Transaction”), of the assets now held by Teladvance on June 9, 2021 (the “CExchange Transaction”) and of the assets now held by Avail on October 29, 2021 (the “Avail Transaction”). The preliminary goodwill associated with the Avail Transaction was $3,491,285. There was an adjustment made to goodwill concerning the Avail Transaction from an additional cash payment made during the three months ending June 30, 2022 of $216,988, bringing the total goodwill for the Avail Transaction to $3,708,273 as of June 30, 2022. There have been no other adjustments or impairment charges to goodwill. As of June 30, 2022 and December 31 2021, goodwill was $6,357,453 and $6,140,465, respectively.

Recent Accounting Pronouncements

In June 2016, the FASB issued a new credit loss accounting standard ASU 2016-13. The new accounting standard introduces the current expected credit losses methodology for estimating allowances for credit losses which will be based on expected losses rather than incurred losses. We will be required to use a forward-looking expected credit loss methodology for accounts receivable, loans and other financial instruments. The standard will be adopted upon the effective date for us beginning January 1, 2023 by using a modified retrospective transition approach to align our credit loss methodology with the new standard. The Company is evaluating the financial statement implications of ASU 2016-13.

9

There were no other new accounting standards that had a material impact on the Company’s consolidated financial statements during the six-month period ended June 30, 2022, and there were no other new accounting standards or pronouncements that were issued but not yet effective as of June 30, 2022 that the Company expects to have a material impact on its consolidated financial statements.

NOTE 4 — INVENTORIES

A summary of inventories is as follows:

	June 30,		December 31,
	2022		2021
DGSE
Resale	$	15,964,881	$	10,422,072
Recycle		15,791		11,995
Subtotal		15,980,672		10,434,067
ECHG
Resale		1,236,523		3,350,159
Recycle		586,901		264,210
Subtotal		1,823,424		3,614,369
	$	17,804,096	$	14,048,436

 NOTE 5 — ACQUISITION

On October 29, 2021, ECHG entered into the Avail Transaction to purchase all of the assets, liabilities and rights and interests of Avail for $4,500,000. The purchase was facilitated by an initial payment of $2,500,000 at closing, and the remaining $2,000,000 to be paid out by 12 quarterly payments starting April 1, 2022, of $166,667 each. See Note 14 to our consolidated financial statements for more information on this loan. The installment note payable for the Avail Transaction imputed at 3.1% interest.

As part of the Avail Transaction, goodwill was preliminarily recorded as $3,491,284, which is the purchase price less the approximate fair value of the net assets and liabilities purchased. On May 31, 2022, an additional cash payment of $216,988 was made in connection with the Avail Transacton adjusting the goodwill and purchase price amount as shown in the preliminary purchase price allocation in the following table. The additional payment is not part of the installment note payable of $2,000,000 from the initial Avail Transaction. The Company’s goodwill is related to the ECHG segment. ECHG has its own separate financial information to perform goodwill impairment testing. The Company will evaluate goodwill based on cash flows for the ECHG segment. For tax purposes, goodwill is amortized and deductible over 15 years.

10

The following table compares the results of Avail as part of the Company's financial results for the three months ended June 30, 2022, and the Company's results of operations as if they were combined for the three months ended June 30, 2021:

	Consolidated Statement  of Income For the Three Months Ended		Proforma Combined For the Three Months Ended
	June 30, 2022		June 30, 2021
	(unaudited)		(unaudited)
Revenue	$	42,639,718	$	35,525,133
Income from continuing operations	$	3,847,858	$	2,482,863
Net income	$	3,847,858	$	2,482,863
Basic net income per common share	$	0.14	$	0.09
Diluted net income per common share	$	0.14	$	0.09

The following table compares the results of Avail as part of the Company's financial results for the six months ended June 30, 2022, and the Company's results of operations as if they were combined for the six months ended June 30, 2021:

	Consolidated Statement of Income For the Six Months Ended		Proforma Combined For the Six Months Ended
	June 30, 2022		June 30, 2021
	(unaudited)		(unaudited)
Revenue	$	90,054,816	$	62,635,207
Income from continuing operations	$	6,495,083	$	4,837,758
Net income	$	6,495,083	$	4,837,758
Basic net income per common share	$	0.24	$	0.18
Diluted net income per common share	$	0.24	$	0.18

11

The purchase price allocation of the Avail transaction is listed below and is considered to be a preliminary allocation and is subject to change.

The preliminary purchase price is allocated as follows:

Description	Amount
Assets
Cash	$	988,870
Account receivables		395,144
Inventories		486,736
Prepaid expenses		93,727
Fixed assets - net		247,038
Right-of-use assets		609,511
Other assets		13,268
Liabilities
Account payables		(562,778	)
Accrued liabilities		(653,289	)
Operating lease liabilities		(609,511	)
Net assets		1,008,716
Goodwill		3,708,272
Total Purchase Price	$	4,716,988

NOTE 6 — GOODWILL

The changes in goodwill is as follows:

	June 30,		December 31,
	2022		2021
Opening balance	$	6,140,465	$	1,367,109
Additions (1)		216,988		4,773,356
Goodwill	$	6,357,453	$	6,140,465

(1) Additions ending December 31, 2021 totaling $4,773,356 are a combination of the CExchange Transaction on June 9, 2021, of $1,282,072, and the Avail Transaction on October 29, 2021, of $3,491,284. The addition ending June 30, 2022 is the additional cash payment concerning the Avail Transaction made on May 31, 2022.

12

NOTE 7 — PROPERTY AND EQUIPMENT

 Property and equipment consist of the following:

	June 30,			December 31,
	2022			2021
DGSE
Land	$	1,640,220		$	1,640,220
Building and improvements		2,781,903			2,764,529
Leasehold improvements		1,450,695			1,450,695
Machinery and equipment		1,056,315			1,056,315
Furniture and fixtures		603,945			526,250
Vehicles		22,859			22,859
		7,555,937			7,460,868
Less: accumulated depreciation		(2,501,296	)		(2,343,923	)
Sub-Total		5,054,641			5,116,945
ECHG
Building and improvements		135,491			135,491
Machinery and equipment		1,167,321			1,109,306
Furniture and fixtures		145,950			145,950
		1,448,762			1,390,747
Less: accumulated depreciation		(366,438	)		(212,147	)
Sub-Total		1,082,324			1,178,600
Envela
Land		1,106,664			1,106,664
Building and improvements		2,502,216			2,456,324
Machinery and equipment		28,626			23,676
		3,637,506			3,586,664
Less: accumulated depreciation		(112,070	)		(76,021	)
Sub-Total		3,525,436			3,510,643
	$	9,662,401		$	9,806,188

13

NOTE 8 — INTANGIBLE ASSETS

 Intangible assets consist of the following:

	June 30,			December 31,
	2022			2021
DGSE
Domain names	$	41,352		$	41,352
Point of sale system		330,000			330,000
		371,352			371,352
Less: accumulated amortization		(302,502	)		(269,502	)
Subtotal		68,850			101,850
ECHG
Trademarks (1)		1,483,000			1,483,000
Customer Contracts (1)		1,873,000			1,873,000
Trademarks/Tradenames (2)		114,000			114,000
Customer Relationships (2)		345,000			345,000
		3,815,000			3,815,000
Less: accumulated amortization		(1,083,355	)		(892,605	)
Subtotal		2,731,645			2,922,395
	$	2,800,495		$	3,024,245

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

(2) Intangibles relate to the CExchange Transaction on June 9, 2021.

The following table outlines the estimated future amortization expense related to intangible assets held as of June 30, 2022:

	DGSE		ECHG		Total
2022 (excluding the six months ending June 30, 2022)		33,000		190,750		223,750
2023		30,350		381,500		411,850
2024		5,500		381,500		387,000
2025		-		381,500		381,500
2026		-		381,500		381,500
Thereafter		-		1,014,895		1,014,895
	$	68,850	$	2,731,645	$	2,800,495

14

 NOTE 9— ACCRUED EXPENSES

Accrued expenses consist of the following:

	June 30,		December 31,
	2022		2021
DGSE
Accrued interest	$	12,079	$	12,627
Payroll		118,857		131,325
Property taxes		120,449		88,046
Sales tax		57,894		150,070
Other administrative expenss		30,000		-
Subtotal		339,279		382,068
ECHG
Accrued interest		7,862		14,547
Payroll		337,180		334,431
Unvouchered payables - inventory		252,020		461,481
Material & shipping costs (COGS)		500,326		78,647
Other accrued expenses		-		51,506
Subtotal		1,097,388		940,612
Envela
Accrued interest		7,448		8,355
Payroll		25,642		25,175
Professional fees		125,617		220,101
Property Tax		43,400		84,920
Other administrative expenses		10,794		18,453
State income tax		92,226		109,682
Subtotal		305,127		466,686
	$	1,741,794	$	1,789,366

NOTE 10 — SEGMENT INFORMATION

We determine our business segments based upon an internal reporting structure. Our financial performance is based on the following two segments: DGSE and ECHG.

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

The ECHG segment includes Echo, ITAD USA, Teladvance, CEX and Avail. These five companies are involved in recycling and the reuse of electronic components.

15

We allocate a portion of certain corporate costs and expenses, including information technology as well as rental income and expenses relating to our corporate headquarters, to our business segments. These income and expenses are included in selling, general and administrative (“SG&A”) expenses, depreciation and amortization, other income, interest expense and income tax expense. Our management team evaluates each segment and makes decisions about the allocation of resources according to each segment’s profit. Allocation amounts are generally agreed upon by management and may differ from arms-length allocations.

The following separates DGSE’s and ECHG’s financial results of operations for the three months ended June 30, 2022 and 2021:

	For The Three Months Ended June 30,
	2022									2021
	DGSE			ECHG			Consolidated			DGSE		ECHG		Consolidated
Revenue:
Sales	$	30,339,127		$	12,300,591		$	42,639,718		$	23,012,324	$	10,711,682	$	33,724,006
Cost of goods sold		26,150,543			5,011,175			31,161,718			19,915,328		6,680,788		26,596,116
Gross profit		4,188,584			7,289,416			11,478,000			3,096,996		4,030,894		7,127,890
Expenses:
Selling, general and administrative expenses		2,194,494			4,889,409			7,083,903			1,889,895		2,941,330		4,831,225
Depreciation and amortization		101,434			178,082			279,516			97,435		118,784		216,219
		2,295,928			5,067,491			7,363,419			1,987,330		3,060,114		5,047,444
Operating income		1,892,656			2,221,925			4,114,581			1,109,666		970,780		2,080,446
Other income/expense:
Other income (expense), net		(49,018	)		(46,411	)		(95,429	)		119,460		163,595		283,055
Interest expense		61,663			59,379			121,042			68,692		109,012		177,704
Income before income taxes		1,781,975			2,116,135			3,898,110			1,160,434		1,025,363		2,185,797
Income tax expense		15,391			34,861			50,252			14,185		18,500		32,685
Net income	$	1,766,584		$	2,081,274		$	3,847,858		$	1,146,249	$	1,006,863	$	2,153,112

The following separates DGSE’s and ECHG’s financial results of operations for the six months ended June 30, 2022 and 2021:

	For The Six Months Ended June 30,
	2022									2021
	DGSE			ECHG			Consolidated			DGSE		ECHG		Consolidated
Revenue:
Sales	$	66,121,999		$	23,932,817		$	90,054,816		$	41,926,825	$	17,287,622	$	59,214,447
Cost of goods sold		57,709,953			11,155,829			68,865,782			36,022,194		9,760,099		45,782,293
Gross profit		8,412,046			12,776,988			21,189,034			5,904,631		7,527,523		13,432,154
Expenses:
Selling, general and administrative expenses		4,332,443			9,311,215			13,643,658			3,672,332		5,312,122		8,984,454
Depreciation and amortization		208,397			363,066			571,463			194,257		226,874		421,131
		4,540,840			9,674,281			14,215,121			3,866,589		5,538,996		9,405,585
Operating income		3,871,206			3,102,707			6,973,913			2,038,042		1,988,527		4,026,569
Other income/expense:
Other income (expense), net		(77,009	)		(76,996	)		(154,005	)		231,191		323,805		554,996
Interest expense		122,904			121,377			244,281			137,177		219,549		356,726
Income before income taxes		3,671,293			2,904,334			6,575,627			2,132,056		2,092,783		4,224,839
Income tax expense		28,568			51,976			80,544			27,890		35,565		63,455
Net income	$	3,642,725		$	2,852,358		$	6,495,083		$	2,104,166	$	2,057,218	$	4,161,384

16

NOTE 11 — REVENUE RECOGNITION

ASC 606 provides guidance to identify performance obligations for revenue-generating transactions. The initial step is to identify the contract with a customer created with the sales invoice or a repair ticket. Secondly, we identify the performance obligations in the contract, as we promise to deliver the purchased item or promised repairs in return for payment or future payment as a receivable. The third step is determining the transaction price of the contract obligation, as in the full ticket price, negotiated price or a repair price. The next step is to allocate the transaction price to the performance obligations, as we designate a separate price for each item. The final step in the guidance is to recognize revenue as each performance obligation is satisfied.

The following disaggregation of total revenue is listed by sales category and segment for the three months ended June 30, 2022 and 2021:

CONSOLIDATED	Three Months Ended June 30,
	2022							2021
	Revenues		Gross Profit		Margin			Revenues		Gross Profit		Margin
DGSE
Resale	$	28,165,026	$	3,719,954		13.2	%	$	20,893,838	$	2,678,640		12.8	%
Recycled		2,174,101		468,630		21.6	%		2,118,486		418,356		19.7	%
Subtotal		30,339,127		4,188,584		13.8	%		23,012,324		3,096,996		13.5	%
ECHG
Resale		9,102,001		5,566,507		61.2	%		8,595,910		3,019,685		35.1	%
Recycled		3,198,590		1,722,909		53.9	%		2,115,772		1,011,209		47.8	%
Subtotal		12,300,591		7,289,416		59.3	%		10,711,682		4,030,894		37.6	%
	$	42,639,718	$	11,478,000		26.9	%	$	33,724,006	$	7,127,890		21.1	%

The following disaggregation of total revenue is listed by sales category and segment for the six months ended June 30, 2022 and 2021:

CONSOLIDATED	Six Months Ended June 30,
	2022							2021
	Revenues		Gross Profit		Margin			Revenues		Gross Profit		Margin
DGSE
Resale	$	61,842,159	$	7,462,806		12.1	%	$	38,214,479	$	5,135,784		13.4	%
Recycled		4,279,840		949,240		22.2	%		3,712,346		768,847		20.7	%
Subtotal		66,121,999		8,412,046		12.7	%		41,926,825		5,904,631		14.1	%
ECHG
Resale		18,681,858		10,140,775		54.3	%		13,336,902		5,631,869		42.2	%
Recycled		5,250,959		2,636,213		50.2	%		3,950,720		1,895,654		48.0	%
Subtotal		23,932,817		12,776,988		53.4	%		17,287,622		7,527,523		43.5	%
	$	90,054,816	$	21,189,034		23.5	%	$	59,214,447	$	13,432,154		22.7	%

17

DGSE’s over-the-counter sales with the retail public and wholesale dealers are recognized when merchandise is delivered, and payment has been made either by immediate payment or through a receivable obligation at one of our retail locations. We also recognize revenue upon the shipment of goods when retail and wholesale customers have fulfilled their obligation to pay, or promise to pay through e-commerce or phone sales. We have elected to account for shipping and handling costs as fulfillment costs after the customer obtains control of the goods. Crafted-precious-metal items at the end of their useful lives are sold to a refiner. Since the local refiner is located in the Dallas/Fort Worth area, we deliver the metal to the refiner. The metal is melted and assayed, price is determined from the assay and payment is made usually in a day or two. Revenue is recognized from the sale once payment is received.

DGSE also offers a structured layaway plan. When a retail customer utilizes the layaway plan, we collect a minimum payment of 25% of the sales price, establish a payment schedule for the remaining balance and hold the merchandise as collateral as security against the customer’s deposit until all amounts due are paid in full. Revenue for layaway sales is recognized when the merchandise is paid in full and delivered to the retail customer. Layaway revenue is also recognized when a customer fails to pay in accordance with the sales contract and the sales item is returned to inventory with the forfeit of deposited funds, typically after 90 days.

In limited circumstances, we exchange merchandise for similar merchandise and/or monetary consideration with both dealers and retail customers, for which we recognize revenue in accordance with ASC 845, Nonmonetary Transactions. When we exchange merchandise for similar merchandise and there is no monetary component to the exchange, we do not recognize any revenue. Instead, the basis of the merchandise relinquished becomes the basis of the merchandise received, less any indicated impairment of value of the merchandise relinquished. When we exchange merchandise for similar merchandise and there is a monetary component to the exchange, we recognize revenue to the extent of the monetary assets received and determines the cost of sale based on the ratio of monetary assets received to monetary and non-monetary assets received multiplied by the cost of the assets surrendered.

The Company offers the option of third-party financing to customers wishing to borrow money for the purchase. The customer applies on-line with the financing company and upon going through the credit check will be approved or denied. If accepted, the customer is allowed to purchase according to the limits set by the financing company. Once the customer does purchase merchandise, based on their financing agreement, we record and recognize the sale at that point, based on the promise to pay by the finance company up to the customer’s approved limit.

We have a return policy (money-back guarantee). The policy covers retail transactions involving jewelry, graded rare coins and currency only. Customers may return jewelry, graded rare coins and currency purchased within 30 days of the receipt of the items for a full refund as long as the items are returned in exactly the same condition as they were delivered. In the case of jewelry, graded rare coins and currency sales on account, customers may cancel the sale within 30 days of making a commitment to purchase the items. The receipt of a deposit and a signed purchase order evidences the commitment. Any customer may return a jewelry item or graded rare coins and currency if they can demonstrate that the item is not authentic, or there was an error in the description of a graded coin or currency piece. Returns are accounted for as a reversal of the original transaction, with the effect of reducing revenues and cost of sales, and returning the merchandise to inventory. We have established an allowance for estimated returns related to sales based on historical returns and reduced our reported revenues and cost of sales accordingly. Our return allowance as of June 30, 2022 and December 31, 2021 remained the same for both periods, at approximately $28,000.

ECHG has several revenue streams and recognize revenue according to ASC 606 at an amount that reflects the consideration to which the entities expect to be entitled in exchange for transferring goods or services to the customer. The revenue streams are as follows.

· Outright sales are recorded when product is shipped. Once the price is established and the terms are agreed to and the product is shipped, the revenue is recognized. The Echo Entities have fulfilled their performance obligation with an agreed upon transaction price, payment terms and shipping the product.

18

· Echo recognizes refining revenue when our inventory arrives at the destination port and the performance obligation is satisfied by transferring the control of the promised goods that are identified in the customer contract. Ninety percent (90%) of our refining revenue is generated from one refining partner that has an international refining facility. This refining partner pays us sixty percent (60%) of an Invoice within five working days upon the receipt of the Ocean Bill of Lading issued by the Ocean Carrier. Our 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 we expect to be entitled is included in the transaction price stated at the current precious metal spot price and weight of the precious metal. 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 weeks. Any adjustment from the resolution of the underlying uncertainty is netted with the remaining forty percent (40%) due from the original contract.

· Hard drive sales by the Echo Entities are limited to customers who are required to prepay shipments. Once the commodity price is established and agreed upon by both parties, customers send payment in advance. The Company releases the shipment on the same day when payment receipt is confirmed, and revenue is recognized on day of shipment. If payment is received on the last day of the month and shipment goes out the following day the payment received is deferred revenue and recognized the following month when the shipment is made.

· Echo also provides recycling services according to a Scope of Work and services are recognized when promised services are rendered. We have recycling services conducted at the Echo facility and another type of service is conducted at the client’s facility. The Scope of Work will determine the charges and whether it is completed on campus or off campus. Payment terms are also dictated in the Scope of Work.

Accounts Receivable: We record trade receivables when revenue is recognized. When appropriate, we will record an allowance for doubtful accounts, which is primarily determined by an analysis of our trade receivables aging. The allowance is determined based on historical experience of collecting past due amounts, based on the degree of their aging. In addition, specific accounts that are doubtful of collection are included in the allowance. These provisions are reviewed to determine the adequacy of the allowance for doubtful accounts. Trade receivables are charged off when there is certainty as to their being uncollectible. Trade receivables are considered delinquent when payment has not been made within contract terms. DGSE had no allowance for doubtful accounts balance as of June 30, 2022 and December 31, 2021. Some of ECHG’s customers are on payment terms, and although low risk, occasionally the need arises to record an allowance for receivables that are deemed high risk to collect. We established an allowance for estimated uncollectable receivables related to sales based on historical collections. Our allowance as of June 30, 2022 and December 31, 2021 was $26,582 and $1,582, respectively.

Income Taxes: Income taxes are accounted for under the asset and liability method prescribed by ASC 740, Income Taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets unless it is more likely than not such assets will be realized.

We account for our position in tax uncertainties in accordance with ASC 740, Income Taxes. The guidance establishes standards for accounting for uncertainty in income taxes. The guidance provides several clarifications related to uncertain tax positions. Most notably, a “more likely-than-not” standard for initial recognition of tax positions, a presumption of audit detection and a measurement of recognized tax benefits based on the largest amount that has a greater than 50 percent likelihood of realization. The guidance applies a two-step process to determine the amount of tax benefit to be recognized in the financial statements. First, we must determine whether any amount of the tax benefit may be recognized. Second, we determine how much of the tax benefit should be recognized (this would only apply to tax positions that qualify for recognition.) No additional liabilities have been recognized as a result of the implementation. We have not taken a tax position that, if challenged, would have a material effect on the financial statements or the effective tax rate for the three and six months ended June 30, 2022 and 2021.

19

NOTE 12 — LEASES

In determining our right-of-use assets and lease liabilities, we apply a discount rate to the minimum lease payments within each lease agreement. ASC 842 requires us to use the interest rate that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. If we cannot readily determine the discount rate implicit in lease agreements, we utilize our incremental borrowing rate.

The Company has seven operating leases as of June 30, 2022—five in the Dallas/Fort Worth Metroplex, one in Charleston, South Carolina and one in Chandler, Arizona. The lease for DGSE’s flagship store located at 13022 Preston Road, Dallas, Texas expires on January 31, 2027, with an option to extend the lease for an additional five years, at market rate as determined by the prevailing market rate for comparable space in comparable buildings in the vicinity. The lease for DGSE’s Grand Prairie, Texas location was renewed starting July 1, 2022, expiring June 30, 2027, with an option to extend the lease for an additional five years. The lease for DGSE’s Mt Pleasant, South Carolina location expires April 30, 2025, with no additional renewal options. The lease for DGSE’s Euless, Texas location expires June 30, 2025, with an option to extend the lease for an additional five years. The lease for ECHG’s Echo location on W. Belt Line Road, in Carrollton, Texas, expires January 31, 2026. The lease for ECHG’s Teladvance location, which also houses ITAD USA, on Realty Road in Carrollton, Texas expires January 31, 2027. The lease for ECHG’s Avail location in Chandler, Arizona expires May 31, 2025. All of the Company’s seven leases as of June 30, 2022 are triple net, for which it pays its proportionate share of common area maintenance, property taxes and property insurance. Leasing costs for the three months ended June 30, 2022 and 2021 was $659,860 and $588,896 respectively. Leasing costs for the six months ended June 30, 2022 and 2021 was $1,282,723 and $895,433, respectively, comprised of a combination of minimum lease payments and variable lease costs.

As of June 30, 2022, the weighted average remaining lease term and weighted average discount rate for operating leases was 3.75 years and 4.4%, respectively. For the three months ended June 30, 2022 and 2021, the Company’s cash paid for operating lease liabilities was $650,606 and $588,026, respectively. For the six months ended June 30, 2022 and 2021, the Company’s cash paid for operating lease liabilities was $1,266,703 and $923,253, respectively.

20

Future annual minimum lease payments as of June 30, 2022:

	Operating
	Leases
DGSE
2022 (excluding the six months ending June 30, 2022)	$	267,938
2023		541,984
2024		552,414
2025		412,269
2026 and thereafter		405,114
Total minimum lease payments		2,179,719
Less imputed interest		(188,707	)
DGSE Sub-Total		1,991,012
ECHG
2022 (excluding the six months ending June 30, 2022)		661,506
2023		1,357,381
2024		1,396,129
2025		1,321,297
2026 and thereafter		507,780
Total minimum lease payments		5,244,093
Less imputed interest		(381,784	)
ECHG Sub-Total		4,862,309
Total		6,853,321
Current portion		1,631,270
	$	5,222,051

NOTE 13 — BASIC AND DILUTED AVERAGE SHARES

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

	For the Three Months Ended
	June 30,
	2022		2021
Basic weighted average shares		26,924,631		26,924,631
Effect of potential dilutive securities		15,000		15,000
Diluted weighted average shares		26,939,631		26,939,631

21

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

	For the six Months Ended
	June 30,
	2022		2021
Basic weighted average shares		26,924,631		26,924,631
Effect of potential dilutive securities		15,000		15,000
Diluted weighted average shares		26,939,631		26,939,631

For the three and six months ended June 30, 2022 and 2021, there were 15,000 common stock options, warrants, and Restricted Stock Units (RSUs) unexercised, respectively. For the three and six months ended June 30, 2022 and 2021, there were no anti-dilutive shares.

NOTE 14 — LONG-TERM DEBT

Long-term debt consists of the following:

	Outstanding Balance
	June 30,		December 31,		Current
	2022		2021		Interest Rate			Maturity
DGSE
Note payable, Farmers Bank (1)	$	2,719,906	$	2,770,729		3.10	%	November 15, 2026
Note payable, Truist Bank (2)		891,874		909,073		3.65	%	July 9, 2030
Note payable, Texas Bank & Trust (3)		465,157		474,009		3.75	%	September 14, 2025
Note payable, Texas Bank & Trust (4)		1,721,937		1,752,446		3.25	%	July 30, 2031
DGSE Sub-Total		5,798,874		5,906,257
ECHG
Note payable, Farmers Bank (1)		6,171,150		6,286,459		3.10	%	November 15, 2026
Line of Credit (5)		-		1,700,000		3.10	%	November 15, 2024
Avail Transaction note (6)		1,833,333		2,000,000		0.00	%	April 1, 2025
ECHG Sub-Total		8,004,483		9,986,459
Envela
Note payable, Texas Bank & Trust (7)		2,788,377		2,843,415		3.25	%	November 4, 2025
Sub-Total		16,591,734		18,736,131
Current portion		1,241,480		2,765,794
	$	15,350,254	$	15,970,337

(1) On May 20, 2019, in connection with the Echo Transaction, the Company entered into two loan agreements with John R. Loftus, the Company’s CEO, President and Chairman of the Board. ECHG, LLC executed a five-year, $6,925,979 note for the Echo Transaction, amortized over 20 years at a 6% annual interest rate. The interest and principal payment due monthly was $49,646. DGSE executed a five-year, $3,074,021 note to pay off the accounts payable – related party balance to a former Related Party as of May 20, 2019. That promissory note was also amortized over 20 years at a 6% annual interest rate. The interest and principal payment due monthly on the note for DGSE was $22,203. On November 23, 2021, the ECHG and DGSE notes, with remaining principal balances of $6,309,962 and $2,781,087, respectively, were refinanced by Farmers State Bank of Oakley, Kansas with annual interest rates of 3.1%. The ECHG and DGSE notes have monthly interest and principal payments of $35,292 and $15,555, respectively.     

22

(2) On July 9, 2020, DGSE closed the purchase of a retail building located at 610 E. Round Grove Road in Lewisville, Texas for $1,195,000. The purchase was partly financed through a $956,000, 10 year loan (the “Truist Lewisville Loan”), bearing an annual interest rate of 3.65%, amortized over 20 years, payable to Truist Bank (f/k/a BB&T Bank). The note has monthly interest and principal payments of $5,645.

(3) On September 14, 2020, 1106 NWH Holdings, LLC, a wholly owned subsidiary of DGSE, closed on the purchase of a retail building located at 1106 W. Northwest Highway in Grapevine, Texas for $620,000. The purchase was partly financed through a $496,000, five-year loan (the “TB&T Grapevine Loan”), bearing an annual interest rate of 3.75%, amortized over 20 years, payable to Texas Bank and Trust. The note has monthly interest and principal payments of $2,941.

(4) On July 30, 2021, 9166 Gaylord Holdings, LLC, a wholly owned subsidiary of DGSE, closed the purchase of a retail building located at 9166 Gaylord Parkway in Frisco, Texas for $2,215,500. The purchase was partly financed through a $1,772,000, five-year loan (the “TB&T Frisco Loan”), bearing an annual interest rate of 3.75%, amortized over 20 years, payable to Texas Bank and Trust. The note has monthly interest and principal payments of $10,509.

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

(6) On October 29, 2021, ECHG entered into the Avail Transaction to purchase all of the assets, liabilities and rights and interests of Avail AZ, for $4.5 million. The purchase was facilitated by an initial payment of $2.5 million at closing, and the remaining $2.0 million to be paid out by 12 quarterly payments starting April 1, 2022, of $166,667 each. The Installment note payable for the Avail Transaction imputed at 3.1%

(7) On November 4, 2020, 1901 Gateway Holdings, LLC, a wholly owned subsidiary of the Company, closed on the purchase of an office building located at 1901 Gateway Drive, Irving, Texas for $3.521 million. The building was partially financed through a $2,960,000, 5-year loan (the “TB&T Irving Loan”), bearing an interest rate of 3.25%, amortized over 20 years, payable to Texas Bank and Trust. The note has monthly interest and principal payments of $16,792.

Future scheduled principal payments of our notes payable and notes payable, related party, as of June 30, 2022 are as follows:

Note payable, Farmers State Bank - DGSE
Year Ending December 31,	Amount
2022 (excluding the six months ended June 30, 2022)	$	51,387
2023		105,428
2024		108,743
2025		112,163
2026		2,342,185
Subtotal	$	2,719,906

23

Note payable, Truist Bank - DGSE
Year Ending December 31,	Amount
2022 (excluding the six months ended June 30, 2022)	$	17,456
2023		35,988
2024		37,342
2025		38,748
2026		40,206
Thereafter		722,134
Subtotal	$	891,874
Note payable, Texas Bank & Trust - DGSE
Year Ending December 31,	Amount
2022 (excluding the six months ended June 30, 2022)	$	8,971
2023		18,503
2024		19,209
2025		418,474
Subtotal	$	465,157
Note payable, Texas Bank & Trust - DGSE
Year Ending December 31,	Amount
2022 (excluding the six months ended June 30, 2022)	$	35,079
2023		72,363
2024		74,750
2025		77,216
2026		79,512
Thereafter		1,383,017
Subtotal	$	1,721,937
Note payable, Farmers Bank - ECHG
Year Ending December 31,	Amount
2022 (excluding the six months ended June 30, 2022)	$	116,590
2023		239,204
2024		246,725
2025		254,484
2026		5,314,147
Subtotal	$	6,171,150

24

Note payable - Avail Transaction
Year Ending December 31,	Amount
2022 (excluding the six months ended June 30, 2022)	$	333,334
2023		666,668
2024		666,668
2025		166,663
Subtotal	$	1,833,333
Note payable, Texas Bank & Trust - Envela
Year Ending December 31,	Amount
2022 (excluding the six months ended June 30, 2022)	$	54,948
2023		112,661
2024		116,450
2025		2,504,318
Subtotal	$	2,788,377
	$	16,591,734

Future scheduled aggregate amount of principal payments and maturities of our notes payable as of June 30, 2022 are as follows:

	Scheduled
	Principal		Loan
Scheduled Principal Payments and Maturities by Year:	Payments		Maturities		Total
2022 (excluding the six months ended June 30, 2022)	$	617,765	$	-	$	617,765
2023		1,250,815		-		1,250,815
2024		1,269,887		-		1,269,887
2025		595,584		2,976,482		3,572,066
2026		434,160		7,341,891		7,776,051
2027 and Thereafter		558,168		1,546,982		2,105,150
Total	$	4,726,379	$	11,865,355	$	16,591,734

NOTE 15 — STOCK-BASED COMPENSATION

The Company accounts for share-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.

There was no stock-based compensation expense for the three and six months ended June 30, 2022 and 2021.

25

NOTE 16 — RELATED PARTY TRANSACTIONS

The Company has a corporate policy governing the identification, review, consideration and approval or ratification of transactions with related persons, as that term is defined in the Instructions to Item 404(a) of Regulation S-K, promulgated under the Securities Act (each such person a Related Party”). Under this policy, all Related Party transactions are identified and approved prior to consummation of the transaction to ensure they are consistent with the Company’s best interests and the best interests of its stockholders. Among other factors, the Company’s Board considers the size and duration of the transaction, the nature and interest of the of the Related Party in the transaction, whether the transaction may involve a conflict of interest, and if the transaction is on terms that are at least as favorable to the Company as would be available in a comparable transaction with an unaffiliated third party. The Company’s Board reviews all Related Party transactions at least annually to determine if it is in the best interest of the Company and the Company’s stockholders to continue, modify, or terminate any of the Related Party transactions. Envela’s Related Person Transaction Policy is available for review in its entirety under the “Investors” menu of the Company’s corporate relations website at www.envela.com.

On May 20, 2019, in connection with the Echo Transaction, the Company entered into two loan agreements with John R. Loftus, the Company’s CEO, President and Chairman of the Board. ECHG, LLC executed a five-year, $6,925,979 note for the Echo Transaction, amortized over 20 years at a 6% annual interest rate. The interest and principal payment due monthly was $49,646. DGSE executed a five-year, $3,074,021 note to pay off the accounts payable – related party balance to a former Related Party as of May 20, 2019. That promissory note was also amortized over 20 years at a 6% annual interest rate. The interest and principal payment due monthly on the note for DGSE was $22,203. Both notes were being serviced by operational cash flow. On November 23, 2021, both notes were refinanced by Farmers State Bank of Oakley, Kansas. For the three months ended June 30, 2022 and 2021, the Company paid Mr. Loftus $0 and $142,144, respectively, in interest on the Company’s notes payable, related party. For the six months ended June 30, 2022 and 2021, the Company paid Mr. Loftus $0 and $285,353, respectively, in interest on the Company’s notes payable, related party.

 NOTE 17 — CONTINGENCIES

The coronavirus disease 2019 (COVID-19) pandemic has adversely affected global economic business conditions. Future sales on products like ours could decline or fluctuate due to increased or fluctuating commodities prices, particularly gold. Although we are continuing to monitor and assess the effects of the COVID-19 pandemic, the ultimate impact is highly uncertain and subject to change. The duration of any such impact cannot be predicted, nor can the timing of the development, distribution and acceptance of effective vaccines, booster shots or other treatments for potential COVID-19 divergent strains, including the Delta variant, omicron variant or other variants that may surface. In addition, the effects of the COVID-19 pandemic are subject to, among other things, the effect of government responses to the COVID-19 pandemic on our operations, including vaccine mandates, impacts of the COVID-19 pandemic on global and domestic economic conditions, including with respect to commercial activity, our customers and business partners, as well as consumer preferences and demand.

Escalating global tensions caused by the conflict between Russia and Ukraine has upset the stability within the region of the former Soviet era block. This could lead to further volatility in global energy and other industries that could negatively impact our operations. The U.S. government has imposed sanctions and export controls against Russia and Russian interests and threatened additional sanctions and controls. The impact of these measures, as well as other measures taken, as it concerns our operations is currently unknown.

26

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Unless the context indicates otherwise for one of our specific operating segments, references to “we,” “us,” “our,” the ”Company” and “Envela” refer to the consolidated business operations of Envela Corporation, and all of its direct and indirect subsidiaries.

Forward-Looking Statements

This Quarterly Report on Form 10-Q for the quarter ended June 30, 2022 (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; and (iii) our strategies, plans and objectives, together with other statements that are not historical facts, includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements generally can be identified by the use of forward-looking terminology, such as “may,” “will,” “would,” “expect,” “intend,” “could,” “estimate,” “should,” “anticipate” or “believe.” We intend that all forward-looking statements be subject to the safe harbors created by these laws. All statements other than statements of historical information provided herein are forward-looking based on current expectations regarding important risk factors. Many of these risks and uncertainties are beyond our ability to control, and, in many cases, we cannot predict all of the risks and uncertainties that could cause our actual results to differ materially from those expressed in the forward-looking statements. Actual results could differ materially from those expressed in the forward-looking statements, and readers should not regard those statements as a representation by us or any other person that the results expressed in the statements will be achieved. Important risk factors that could cause results or events to differ from current expectations are described under the section entitled “Risk Factors” in the Company’s 2021 Annual Report and any material updates are described under the section of this Form 10-Q entitled “Risk Factors” and elsewhere in this Form 10-Q. These factors are not intended to be an all-encompassing list of risks and uncertainties that may affect the operations, performance, development and results of our business. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation to release publicly the results of any revisions to these forward-looking statements, which may be made to reflect events or circumstances after the date thereon, including without limitation, changes in our business strategy or planned capital expenditures, or store growth plans, or to reflect the occurrence of unanticipated events.

Envela Overview

The Company operates through two recommerce business segments represented by its two direct subsidiaries. DGSE focuses on the recommercialization of luxury hard assets, and ECHG focuses on the recommercialization of business IT equipment and consumer electronic devices.

Through DGSE, the Company recommercializes luxury hard assets and operates the Dallas Gold and Silver Exchange, Charleston Gold & Diamond Exchange, and Bullion Express brands. Through ECHG, the Company recommercializes business IT equipment and consumer electronic devices and operates Echo, ITAD USA, Teladvance, CEX and Avail. Echo focuses on end-of-life electronics recycling and sustainability, ITAD USA provides IT equipment disposition, including compliance and data sanitization services, Teladvance, CEX and Avail operate as value-added resellers by providing offerings and services to companies looking either to upgrade capabilities or dispose of equipment. In addition to its operations through DGSE and ECHG, Envela also leases unused space at its Company headquarters in Irving, Texas to commercial tenants.

27

DGSE Business Overview

DGSE is headquartered in Dallas, Texas. DGSE focuses on sustainable, authenticated recommerce of luxury hard assets, including diamonds. Its retail strategy is anchored in being an information resource for clients, bringing transparency to purchase and sale transactions, and offering value and liquidity to those seeking to buy, sell or trade jewelry, fine watches, diamonds, rare coins and currency as well as other valuables. DGSE wholesales and retails these items through its Charleston Gold & Diamond Exchange and Dallas Gold & Silver Exchange operations. DGSE has specialized in buying and selling jewelry for over 40 years, making our expert staff among the best in the business. DGSE also maintains a number of related operations, including precious-metal bullion exchange and refiner partnerships, on-site jewelry and watch repair and restoration at its Dallas flagship location, consignment offerings and partnerships, and design of custom bridal and fashion jewelry.

For additional information regarding DGSE, see “Item 1. Business - Operating Segments - DGSE Segment.” in the Company’s 2021 Annual Report.

DGSE Recommerce Activities

Our ability to offer quality pre-owned goods at prices significantly lower than original retail prices attracts value-conscious customers. The gross profit on sales of inventory depends primarily on our assessment of the purchase value at the time the property is purchased and our ability to sell that merchandise in a timely manner. As a significant portion of our inventory and sales involve gold and jewelry, our results can be influenced by the market price of gold and diamonds.

DGSE Precious Metals Pricing and Business Impact

DGSE’s business, similar to the jewelry industry overall, is effected by fluctuations in precious-metals pricing. Such fluctuations, particularly with respect to gold which accounts for a majority of DGSE’s merchandise costs, can have significant impact on its earnings and cash availability.

Because DGSE buys and resells precious metals, it is impacted by changes in precious metal pricing which rises and falls based upon global supply and demand dynamics, with the greatest impact on us relating to gold as it represents a significant portion of the precious metal in which we trade. Gold prices surged during the beginnings of the COVID-19 pandemic. Gold prices started January 1, 2021 at $1,891 an ounce, as determined by the London AM Fix and dipped to a low of $1,683 an ounce on March 30, 2021. Gold then began to rebound throughout the remainder of 2021 closing at $1,820 an ounce on December 31, 2021, as determined by the London AM Fix. During fiscal year 2021, gold prices receded 4% from December 31, 2020. Gold rose 7% during the first three months of 2022, ending at $1,942 an ounce, only to give back the 7% gain from the first fiscal quarter of 2022 to recede to $1,814 an ounce at June 30, 2022.

The COVID-19 pandemic continues to affect the recommerce business in unpredictable ways. Although there are variants of COVID-19 affecting the health of the United States, employment figures improved throughout 2021. The unemployment rate improved from over six percent (6%) in January of 2021 to four percent (4%), as of May 2022.

When prices rise for gold or other precious metals, DGSE has observed that individual sellers tend to be more likely to sell their unwanted crafted-precious-metal items and at the same time retail customers tend to buy bullion and other gold products so as not to miss out on potential market gains. When prices decline for gold or other precious metals, DGSE has observed that individual buyers tend to buy due to the decrease in gold prices. While the precious-metals industry has slowed, our focus will be to grow our jewelry, diamond and fine watch business, as well as maintain our business of purchasing crafted-precious-metal items, a diversified strategy which we believe will continue to grow and be a profit engine in the future.

In addition, DGSE depends on purchasing products and materials from secondary markets. We are reliant on our ability to obtain an adequate supply of products and material at prices or other terms acceptable to it.

28

DGSE Growth and Expansion

Our strategy is to expand the number of locations we operate through opening new (“de novo”) locations in both current markets of Dallas/Fort Worth, Texas and Charleston, South Carolina and potential new markets. Our ability to add new stores is dependent on several variables, such as projected achievement of internal investment hurdles, the availability of acceptable sites, the regulatory environment, local zoning ordinances, access to capital and the availability of qualified personnel. We see opportunity for further expansion through de novo openings in the United States. The Company expects capital expenditures over the next twelve months including potential purchase of additional properties by DGSE.

ECHG Business Overview

ECHG owns and operates Echo, ITAD USA, Teladvance, CEX and Avail, through which it primarily buys and resells or recycles consumer electronic components and IT equipment. Echo focuses on end-of-life electronics recycling and also offers disposal transportation and product tracking, ITAD USA provides IT equipment disposition including compliance and data sanitization services and Teladvance, CEX and Avail operates as value-added resellers by providing offerings and services to companies looking to either upgrade capabilities or dispose of equipment. In addition, as a result of the CExchange Transaction, Teladvance now offers retail customers a trade-in program to offer their customers the ability to upgrade their old phones through a trade-in program. Like DGSE, ECHG also maintains relationships with refiners or recyclers to which it sells extracted valuable materials from electronics and IT equipment that are not appropriate for resale or reuse.

ECHG Recommerce Activities

A portion of ECHG’s business depends on obtaining products and material from secondary markets and is reliant on its ability to obtain an adequate supply of products and material at prices and other items acceptable to it. Although we believe that the long-term prospects for the industry remain bright, but because we do not have unlimited backlogs, our business can be promptly affected by short-term market fluctuations.

ECHG Metals Pricing and Business Impact

ECHG’s recycling business is affected by precious and other non-ferrous metal prices, which fluctuate based upon global supply-and-demand dynamics, among other things, with the greatest impact relating to gold. Recent fluctuations in gold prices are discussed above.

ECHG Growth and Expansion

ECHG’s strategy is to expand both organically and through acquisitions. As an organization, ECHG strives to deliver value through organic growth, high customer loyalty and retention as well as strategic acquisitions. ECHG is committed to continuous innovation. Many of ECHG’s clients have made commitments to going carbon neutral over the next few years and ECHG sees the potential to further expand key relationships as it partners with them in more ways to help them achieve their goal. With an emphasis on increasing recurring revenues and expanding our margins, ECHG believes its organic strategy will ultimately drive strong financial performance, including cash flow to support our acquisition strategy. ECHG’s business strategy has always included pursuing synergistic acquisitions, and ECHG’s plans to continue to expand its business by making strategic acquisitions and regularly seeking suitable acquisition targets to enhance its growth.

For additional information regarding ECHG, see “Item 1. Business—Operating Segments—ECHG Segment.” in the Company’s 2021 Annual Report.

COVID-19

The COVID-19 pandemic continues to affect the U.S. and global economies, and as disclosed in our 2021 Annual Report, the COVID-19 pandemic also affected our business in a variety of ways beginning in the second quarter of fiscal 2020, continuing through fiscal 2021 and into fiscal 2022.

29

The COVID-19 pandemic, recent economic trends, civil unrest and the war in Ukraine have affected the recommerce business in unpredictable ways. There have been fewer customers raising money by selling items. Government stimulus checks, eviction moratoriums and forbearances on mortgages and student loans may have contributed and may still be contributing to this effect. For more information, see Note 17 to our interim condensed consolidated financial statements.

The full extent and duration of the COVID-19 pandemic’s impact on the global economy generally, and on our business specifically, is currently unknown. A prolonged pandemic and recovery may have an adverse effect on our results of operations, financial position and liquidity in future periods.

Critical Accounting Policies and Estimates

For a discussion of critical accounting policies, see Note 3 to the interim condensed consolidated financial statements included herein.

Results of Operations

General

The following disaggregation of total revenue is listed by sales category and segment for the three months ended June 30, 2022 and 2021:

CONSOLIDATED	Three Months Ended June 30,
	2022							2021
	Revenues		Gross Profit		Margin			Revenues		Gross Profit		Margin
DGSE
Resale	$	28,165,026	$	3,719,954		13.2	%	$	20,893,838	$	2,678,640		12.8	%
Recycled		2,174,101		468,630		21.6	%		2,118,486		418,356		19.7	%
Subtotal		30,339,127		4,188,584		13.8	%		23,012,324		3,096,996		13.5	%
ECHG
Resale		9,102,001		5,566,507		61.2	%		8,595,910		3,019,685		35.1	%
Recycled		3,198,590		1,722,909		53.9	%		2,115,772		1,011,209		47.8	%
Subtotal		12,300,591		7,289,416		59.3	%		10,711,682		4,030,894		37.6	%
	$	42,639,718	$	11,478,000		26.9	%	$	33,724,006	$	7,127,890		21.1	%

30

The following disaggregation of total revenue is listed by sales category and segment for the six months ended June 30, 2022 and 2021:

CONSOLIDATED	Six Months Ended June 30,
	2022							2021
	Revenues		Gross Profit		Margin			Revenues		Gross Profit		Margin
DGSE
Resale	$	61,842,159	$	7,462,806		12.1	%	$	38,214,479	$	5,135,784		13.4	%
Recycled		4,279,840		949,240		22.2	%		3,712,346		768,847		20.7	%
Subtotal		66,121,999		8,412,046		12.7	%		41,926,825		5,904,631		14.1	%
ECHG
Resale		18,681,858		10,140,775		54.3	%		13,336,902		5,631,869		42.2	%
Recycled		5,250,959		2,636,213		50.2	%		3,950,720		1,895,654		48.0	%
Subtotal		23,932,817		12,776,988		53.4	%		17,287,622		7,527,523		43.5	%
	$	90,054,816	$	21,189,034		23.5	%	$	59,214,447	$	13,432,154		22.7	%

Three Months Ended June 30, 2022 as compared to the Three Months Ended June 30, 2021

Revenue. Revenue related to DGSE’s continuing operations increased by $7,326,803, or 32%, during the three months ended June 30, 2022, to $30,339,127, as compared to revenue of $23,012,324 during the same period in 2021. Resale revenue, such as bullion, jewelry, watches and rare coins, increased by $7,271,188, or 35%, during the three months ended June 30, 2022, to $28,165,026 as compared to resale revenue of $20,893,838 during the same period in 2021. Recycled-material sales increased 3% to $2,174,101 for the three months ended June 30, 2022, as compared to recycled-material sales of $2,118,486, for the three months ended June 30, 2021. The increased resale revenue for the three months ended June 30, 2022, as compared to the three months ended June 30, 2021, was primarily due to the addition of the new Frisco, Texas retail location in January of 2022 and the maturation of the Lewisville and Grapevine locations which were added during the latter half of fiscal 2020. Revenue increased slightly for recycled items for the three months ended June 30, 2022, as compared to the three months ended June 30, 2021, which was primarily due to the addition of the new Frisco, Texas retail location in January of 2022.

Revenue related to ECHG’s continuing operations for the three months ended June 30, 2022 increased by $1,588,909, or 15%, to $12,300,591, as compared to revenue of $10,711,682 during the same period in 2021. Resale revenue increased by $506,091, or 6%, to $9,102,001, for the three months ended June 30, 2022, as compared to revenue of $8,595,910 during the three months ended June 30, 2021. Recycled sales increased by $1,082,818 or 51%, to $3,198,590 for the three months ended June 30, 2022, as compared to recycled sales of $2,115,772 for the three months ended June 30, 2021. Revenue increased for resale and recycled items for the three months ended June 30, 2022, as compared to the three months ended June 30, 2021, mainly due to the COVID-19 pandemic slowing wholesale operations during the three months ended June 30, 2021.

The Company has had no layoffs to-date or terminations due to the COVID-19 pandemic, and we continue to exercise caution concerning any variants of COVID-19 that may arise. The Company continues to operate at full strength and will take measures to keep our employees safe where possible.

Gross Profit. Gross profit related to DGSE’s operations for the three months ended June 30, 2022, increased by $1,091,588 or 35%, to $4,188,584 as compared to gross profit of $3,096,996 during the same period in 2021. Resale gross profit increased by $1,041,314, or 39%, to $3,719,954 for the three month ended June 30, 2022, as compared to resale gross profit of $2,678,640 during the three months ended June 30, 2021. Recycled gross profit increased by $50,274, or 12%, to $468,630 for the three months ended June 30, 2022, as compared to recycled gross profit of $418,356 during the three months ended June 30, 2021. The increase in resale and recycled gross profit for the three months ended June 30, 2022, as compared to the three months ended June 30, 2021 was primarily due to increased sales.

31

Gross profit related to ECHG for the three months ended June 30, 2022 increased by $3,258,522, or 81%, to $7,289,416 as compared to gross profit of $4,030,894 during the same period in 2021. Gross profit for resale revenue for the three months ended June 30, 2022 increased by $2,546,822, or 84%, to $5,566,507, as compared to gross profit for resale revenue $3,019,685 during the same period in 2021. Gross profit for recycled sales for the three months ended June 30, 2022 increased $711,700, or 70%, to $1,722,909, as compared to gross profit for recycled sales of $1,011,209, during the same period in 2021. The gross profit increase for the resale and recycled items for the three months ended June 30, 2022, as compared to the three months ended June 30, 2021 was primarily due to increased sales.

Selling, General and Administrative Expenses. For the three months ended June 30, 2022, SG&A expenses for DGSE increased by $304,599, or 16%, to $2,194,495, as compared to SG&A expenses of $1,889,894 during the same period in 2021. The increase in SG&A expenses was primarily due to increased expenses from the new retail location in Frisco, Texas placed into service during January 2022, and an increase in advertising during the three months ended June 30, 2022 as compared to the three months ended June 30, 2021.

For the three months ended June 30, 2022, SG&A expenses for ECHG increased by $1,948,079 or 66%, to $4,889,409, as compared to SG&A expenses of $2,941,330 during the same period in 2021. The increase in SG&A expenses was primarily due to the added cost of the Avail and CExchange companies during the three months ended June 30, 2022 as compared to the three months ended June 30, 2021.

Depreciation and Amortization. For the three months ended June 30, 2022, depreciation and amortization expense for DGSE was $101,434, as compared to an expense of $97,435 for the same period in 2021, an increase of $3,999, or 4%. The increase of $3,999 from the three months ended June 30, 2022 as compared to the three months ended June 30, 2021 is primarily due to the depreciation of the new retail building located in Frisco, Texas.

For the three months ended June 30, 2022, depreciation and amortization expense for ECHG was $178,082 as compared to an expense of $118,784 for the same period in 2021, an increase of $59,298, or 50%. The increase of $59,298 from the three months ended June 30, 2022 as compared to the three months ended June 30, 2021, is primarily due to additional amortization expense of intangible assets and depreciation of equipment from the CExchange transaction.

Interest Expense. For the three months ended June 30, 2022, interest expense for DGSE was $61,663, a decrease of $7,029 or 10%, as compared to interest expense of $68,692 during the same period in 2021. The decrease was primarily the combination of an increase from the new loan for the retail building located in Frisco, Texas, offset by a decrease from refinancing the related party loan by Farmers State Bank of Oakley, Kansas on November 23, 2021.

For the three months ended June 30, 2022, interest expense for ECHG was $59,379, a decrease of $49,633 or 46%, as compared to interest expense of $109,012 during the same period in 2021. The decrease was primarily the result of refinancing the related party loan by Farmers State Bank of Oakley, Kansas on November 23, 2021.

Other Income/Expense. For the three months ended June 30, 2022, other expense for DGSE was $49,018, an increase of $168,478, as compared to other income of $119,460 during the same period in 2021. The increase in expense was primarily due to DGSE’s portion of the Company’s corporate building’s operating expenses for the three months ended June 30, 2022. Other income for the three months ended June 30, 2021 only included the rental income from corporate tenants in the Company’s corporate building and therefore are not comparable. In subsequent quarters, the Company’s corporate building’s operating expenses and rental income are netted into other income/expense.

For the three months ended June 30, 2022, other expense for ECHG was $46,411, an increase of $210,006, as compared to other income of $163,595 during the same period in 2021. The increase in expense was primarily due to ECHG’s portion of the Company’s corporate building’s operating expenses for the three months ended June 30, 2022. Other income for the three months ended June 30, 2021 only included the rental income from corporate tenants in the Company’s corporate building and therefore are not comparable. In subsequent quarters, the Company’s corporate building’s operating expenses and rental income are netted into other income/expense.

32

Income Tax Expense. For the three months ended June 30, 2022, income tax expense was $50,252, an increase of $17,567, compared to income tax expense of $32,685 for the three months ended June 30, 2021. The effective income tax rate was 1.3% and 1.5% for the three months ended June 30, 2022 and June 30, 2021, respectively. Differences between our effective income tax rate and the U.S. federal statutory rate are mainly 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.

Net Income. We recorded a net income of $3,847,858 for the three months ended June 30, 2022, compared to a net income of $2,153,112 for the three months ended June 30, 2021, an increase in net income of $1,694,746, which is due primarily to an increase in gross profit of $4,350,110 offset by an increase in SG&A of $2,252,678.

Earnings Per Share. For the three months ended June 30, 2022, our net income per basic and diluted shares attributable to holders of our Common Stock was $0.14, as compared to $0.08 per basic and diluted shares attributable to holders of our Common Stock for the three months ended June 30, 2021.

Six Months Ended June 30, 2022 as compared to the Six Months Ended June 30, 2021

Revenues. Revenues related to DGSE’s operations increased by $24,195,174, or 58%, during the six months ended June 30, 2022, to $66,121,999, as compared to revenue of $41,926,825 during the same period in 2021. Resale revenue, such as bullion, jewelry, watches and rare coins, increased by $23,627,680, to $61,842,159 for the six months ended June 30, 2022, or 62%, compared to resale revenue of $38,214,479 during the six months ended June 30, 2021. Recycled revenue increased by $567,494 to $4,279,840 for the six months ended June 30, 2022, or 15%, compared to recycled revenue of $3,712,346 during the six months ended June 30, 2021. The increased resale and recycle revenue for the six months ended June 30, 2022, as compared to the six months ended June 30, 2021, was primarily due to the addition of the new retail location in Frisco, Texas in January of 2022 and the maturation of the Lewisville and Grapevine retail locations which were added during the latter half of fiscal 2020.

Revenue related to ECHG’s continuing operations for the six months ended June 30, 2022 increased by $6,645,195, or 38%, to $23,932,817, as compared to revenue of $17,287,622 during the same period in 2021. Resale revenue increased by $5,344,956, or 40%, to $18,681,858, for the six months ended June 30, 2022, as compared to resale revenue of $13,336,902 during the six months ended June 30, 2021. Recycled revenue increased by $1,300,239, or 33%, to $5,250,959 for the six months ended June 30, 2022, as compared to recycled revenue of $3,950,720 for the six months ended June 30, 2021. Revenue increased for resale and recycled items for the six months ended June 30, 2022, as compared to the six months ended June 30, 2021, primarily due to the COVID-19 pandemic slowing wholesale operations during the six months ended June 30, 2021.

Gross Profit. Gross profit related to DGSE’s operations for the six months ended June 30, 2022, increased by $2,507,415 or 42%, to $8,412,046 as compared to gross profit of $5,904,631 during the same period in 2021. Resale gross profit increased by $2,327,022, or 45%, to $7,462,806 for the six month ended June 30, 2022, as compared to resale gross profit of $5,135,784 during the six months ended June 30, 2021. Recycled gross profit increased by $180,393, or 23%, to $949,240 for the six months ended June 30, 2022, as compared to recycled gross profit of $768,847 during the six months ended June 30, 2021. The increase in resale and recycled gross profit was due primarily to increased sales.

Gross profit related to ECHG for the six months ended June 30, 2022, increased by $5,249,465, or 70%, to $12,776,988 as compared to gross profit of $7,527,523 during the same period in 2021. Gross profit for resale revenue for the six months ended June 30, 2022 increased by $4,508,906, or 80% to $10,140,775, as compared to gross profit for resale revenue of $5,631,869 during the same period in 2021. Gross profit for recycled sales for the six months ended June 30, 2022, increased $740,559, or 39% to $2,636,213, as compared to gross profit for recycle sales of $1,895,654, during the same period in 2021. The gross profit increase for resale and recycle revenue for the six months ended June 30, 2022, as compared to the six months ended June 30, 2021 is primarily due to increased sales and an increase in gross margin percentages.

33

Selling, General and Administrative Expenses. For the six months ended June 30, 2022, DGSE’s SG&A expenses increased by $660,111, or 18%, to $4,332,443, as compared to SG&A expenses of $3,672,332 during the same period in 2021. The increase in SG&A expenses was primarily due to increased expenses from the new retail location in Frisco, Texas placed into service during January 2022, and an increase in advertising during the six months ended June 30, 2022 as compared to the six months ended June 30, 2021.

For the six months ended June 30, 2022, SG&A expenses for ECHG increased by $3,999,093 or 75%, to $9,311,215, as compared to SG&A expenses of $5,312,122 during the same period in 2021. The increase in SG&A expenses was primarily due to the added cost of the Avail and CExchange companies during the six months ended June 30, 2022 as compared to the six months ended June 30, 2021.

Depreciation and Amortization. For the six months ended June 30, 2022, DGSE’s depreciation and amortization expense was $208,397, compared to an expense of $194,257 for the same period in 2021. The increase is primarily due to the depreciation of the new retail building in Frisco, Texas in January of 2022.

For the six months ended June 30, 2022, depreciation and amortization expense for ECHG was $363,066, as compared to an expense of $226,874 for the same period in 2021, an increase of $136,192, or 60%. The increase of $136,192 from the six months ended June 30, 2022 as compared to the six months ended June 30, 2021, is primarily due to additional amortization expense of intangible assets and depreciation of equipment from the CExchange transaction.

Interest Expense. For the six months ended June 30, 2022, the interest expense for DGSE was $122,904, a decrease of $14,273, or 10%, compared to interest expense of $137,177 during the same period in 2021. The decrease was primarily the combination of an increase from the new loan for the retail building located in Frisco, Texas, offset by a decrease from refinancing the related party loan by Farmers State Bank of Oakley, Kansas on November 23, 2021.

For the six months ended June 30, 2022, interest expense for ECHG was $121,377, a decrease of $98,172 or 45%, compared to interest expense of $219,549 during the same period in 2021. The decrease was primarily the result of refinancing the related party loan by Farmers State Bank of Oakley, Kansas on November 23, 2021.

Other Income/Expense. For the six months ended June 30, 2022, other expense for DGSE was $77,009, an increase of $308,200, compared to other income of $231,191 during the same period in 2021. The increase in expense was primarily due to DGSE’s portion of the Company’s corporate building’s operating expenses for the six months ended June 30, 2022. Other income for the three months ended June 30, 2021 only included the rental income from corporate tenants in the Company’s corporate building and therefore are not comparable. In subsequent quarters, the Company’s corporate building’s operating expenses and rental income are netted into other income/expense.

For the six months ended June 30, 2022, other expense for ECHG was $76,996, an increase of $400,801, compared to other income of $323,805 during the same period in 2021. The increase in expense was primarily due to ECHG’s portion of the Company’s corporate building’s operating expenses for the three months ended June 30, 2022. Other income for the three months ended June 30, 2021 only included the rental income from corporate tenants in the Company’s corporate building and therefore are not comparable. In subsequent quarters, the Company’s corporate building’s operating expenses and rental income are netted into other income/expense.

Income Tax Expense. For the six months ended June 30, 2022, income tax expense was $80,544, an increase of $17,089, or 27%, as compared to income tax expense of $63,455 for the six months ended June 30, 2021. The effective income tax rate was 1.2% and 1.5% for the six months ended June 30, 2022 and 2021, respectively. Differences between our effective income tax rate and the U.S federal statutory rate are mainly the result of state taxes, non-deductible expenses, changes in reserves for uncertain tax positions and unused net operating loss carryforwards.

Net Income. We recorded a net income of $6,495,083 for the six months ended June 30, 2022, as compared to a net income of $4,161,384 for the six months ended June 30, 2021, an increase in net income of $2,333,699, which is due primarily to an increase in gross profit of $7,756,880 offset by an increase in SG&A of $4,659,204.

34

Earnings Per Share. For the six months ended June 30, 2022, the net income per basic and diluted shares attributable to common stockholders is $0.24, as compared to $0.15 per basic and diluted shares for the six months ended June 30, 2021.

Liquidity and Capital Resources

During the six months ended June 30, 2022, cash flows provided by operations totaled $6,362,641, and during the six months ended June 30, 2021, cash flows provided by operations totaled $263,632, an increase of $6,099,009. 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. Cash provided by operations for the six months ended June 30, 2021 was driven largely by net income added to non-cash items of depreciation, amortization and bad debt of $4,588,764, an increase in accounts payable and accrued expenses of $1,574,520 and an increase in customer deposits and other liabilities of $341,260, offset by the increase in trade receivables of $3,365,999, an increase in inventories of $2,579,991, an increase in prepaid expenses of $169,373 and the increase in other assets of $146,042.

During the six months ended June 30, 2022 and 2021, cash flows used in investing activities totaled $420,917 and $1,126,416, respectively, a period-over-period decrease of $705,499. The use of cash 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. The use of cash in investing activities during the six months ended June 30, 2021 was primarily due to the increase in notes receivable of $654,958 and the purchase of additional property and equipment of $484,494, offset by acquisition of CExchange’s assets and liabilities, net of cash acquired of $13,136.

During the six months ended June 30, 2022 and 2021, cash flows used in financing totaled $2,144,396 and $224,140, respectively, a period-over-period increase of $1,920,256. 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. Cash used in financing during the six months ended June 30, 2021 was primarily due from payments made against notes payable of $79,353 and payments made against notes payable, related party of $144,787.

We expect our capital expenditures to total approximately $1,000,000 during the next 12 months. These expenditures will be driven by the purchase of additional equipment and the purchase of potential properties by DGSE for retail locations and for build-out of those purchased properties. The Company has no capital expenditure commitments as of June 30, 2022.

Our primary source of liquidity and capital resources currently consist of cash generated from our operating results and current borrowings, including the Truist Lewisville Loan, the TB&T Grapevine Loan, the TB&T Irving Loan, the TB&T Frisco Loan and the two Farmers State Bank of Oakley, Kansas loans. For more information, see Note 14 to our interim condensed financial statements, which is incorporated into this item by reference. In addition, on November 23, 2021, the Company secured a thirty six month line of credit from Farmers State Bank of Oakley Kansas for up to $3,500,000. The FSB Facility has an annual interest rate of 3.1%. 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, 2022.

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. Management believes we have sufficient capital resources to meet working capital requirements. In the event of significant growth in retail and wholesale jewelry sales and recycling demand, whether purchases or services, our demand for additional working capital will increase due to a related need to stock additional jewelry inventory, increases in wholesale accounts receivable and the purchasing of recycled material. Historically we have funded these activities through operations. If additional working capital is required, we will seek additional loans from other commercial banks.

35

We have historically renewed, extended or replaced short-term debt as it matures, and management believes that we will be able to continue to do so in the near future.

The COVID-19 pandemic and the war between Ukraine and Russia has adversely affected global economic business conditions. Future sales of products like ours have and may continue to decline or fluctuate due to increased or fluctuating commodities prices, particularly gold prices. Although we are continuing to monitor and assess the effects of the COVID-19 pandemic and the war between Ukraine and Russia, the ultimate impact, including the impact on our liquidity and capital resources, is highly uncertain and subject to change. The duration of any such impact cannot be predicted, and the Company believes additional liquidity may be necessary to support ongoing operations during this period of uncertainty. For more information, see Note 17 to our interim condensed consolidated financial statements.

The Company leases certain of its facilities under operating leases. For more information on the minimum rental commitments under non-cancellable operating leases as of June 30, 2022, see Note 12 to our interim condensed consolidated financial statements.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to our stockholders.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Because we are a “smaller reporting company,” we are not required to disclose the information required by this item.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and our principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2022. We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow for timely decisions regarding required disclosure. Based on the evaluation of our disclosure controls and procedures as of June 30, 2022, our principal executive officer and principal financial officer concluded that, as of such date, our disclosure controls and procedures were effective to provide reasonable assurance of the foregoing.

We believe, however, that a controls system, no matter how well designed and operated, cannot provide absolute assurance of achieving their objectives, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud or error, if any, within a company have been detected.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the period covered by this Quarterly Report on Form 10-Q that materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.

36

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

There are various claims, lawsuits and pending actions against the Company arising in the normal course of the Company's business. It is the opinion of management that the ultimate resolution of these matters will not have a material adverse effect on the Company’s financial condition, results of operations or cash flow. Management is also not aware of any legal proceedings contemplated by government agencies of which the outcome is reasonable likely to have a material adverse effect on the Company's financial condition, results of operations or cash flow.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors previously disclosed under Part I, Item 1A, “Risk Factors” in the Company’s 2021 Annual Report and the Company’s quarterly report on Form 10-Q for the period ended March 31, 2022, filed with the SEC on May 11, 2022.

For additional information on the COVID-19 pandemic, see Note 17 to our interim condensed consolidated financial statements.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF

PROCEEDS

Not applicable

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable

ITEM 5. OTHER INFORMATION

None

37

ITEM 6. EXHIBITS

Exhibit Number	Description	Filed Herein	Incorporated by Reference	Form	Date Filed with SEC	Exhibit Number
31.1	Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 implementing Section 302 of the Sarbanes-Oxley Act of 2002 by John R. Loftus	X
31.2	Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 implementing Section 302 of the Sarbanes-Oxley Act of 2002 by Bret A. Pedersen	X
32.1	Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by John R. Loftus	X
32.2	Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Bret A. Pedersen	X
101.INS	XBRL Instance Document	X
101.SCH	XBRL Taxonomy Extension Schema Document	X
101.CAL	XBRL Taxonomy Calculation Linkbase Document	X
101.DEF	XBRL Taxonomy Definition Linkbase Document	X
101.LAB	XBRL Taxonomy Label Linkbase Document	X
101.PRE	XBRL Taxonomy Presentation Linkbase Document	X
104*	Cover Page Interactive Data File (formatted as Inline XBRL and contained in exhibit 101)	X

38

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	ENVELA CORPORATION (Registrant)
Date: August 3, 2022	By:	/s/ JOHN R. LOFTUS
		John R. Loftus
		Chief Executive Officer (Principal Executive Officer)
Date: August 3, 2022		/s/ BRET A. PEDERSEN
		Bret A. Pedersen
		Chief Financial Officer (Principal Accounting Officer)

39

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO

RULE 13a-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934,

IMPLEMENTING SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, John R. Loftus, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Envela Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 3, 2022	By:	/s/ JOHN R. LOFTUS
		John R. Loftus
		Chief Executive Officer
		(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO

RULE 13a-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934,

IMPLEMENTING SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Bret A. Pedersen, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Envela Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 3, 2022	By:	/s/ BRET A. PEDERSEN
		Bret A. Pedersen
		Chief Financial Officer
		(Principal Accounting Officer)

EX-32.1

EXHIBIT 32.1

Certification Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1150)

The undersigned, as the Chief Executive Officer of Envela Corporation, certifies, to the best of his knowledge, that the Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, which accompanies this certification fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in the periodic report fairly presents, in all material respects, the financial condition and results of operations of Envela Corporation at the dates and for the periods indicated. The foregoing certification is made pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1150) and shall not be relied upon for any other purpose.

Date: August 3, 2022	By:	/s/JOHN R. LOFTUS
		John R. Loftus
		Chief Executive Officer
		(Principal Executive Officer)

EX-32.2

EXHIBIT 32.2

Certification Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1150)

The undersigned, as the Chief Financial Officer of Envela Corporation, certifies, to the best of his knowledge, that the Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, which accompanies this certification fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in the periodic report fairly presents, in all material respects, the financial condition and results of operations of Envela Corporation at the dates and for the periods indicated. The foregoing certification is made pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1150) and shall not be relied upon for any other purpose.

Date: August 3, 2022	By:	/s/ BRET A. PEDERSEN
		Bret A. Pedersen
		Chief Financial Officer (Principal Accounting Officer)

XML

Cover - shares	6 Months Ended
	Jun. 30, 2022	Aug. 03, 2022
Cover [Abstract]
Entity Registrant Name	ENVELA CORPORATION
Entity Central Index Key	0000701719
Document Type	10-Q
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Small Business	true
Entity Shell Company	false
Entity Emerging Growth Company	false
Entity Current Reporting Status	Yes
Document Period End Date	Jun. 30, 2022
Entity Filer Category	Non-accelerated Filer
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2022
Entity Common Stock Shares Outstanding		26,924,631
Document Quarterly Report	true
Document Transition Report	false
Entity File Number	001-11048
Entity Incorporation State Country Code	NV
Entity Tax Identification Number	88-0097334
Entity Interactive Data Current	Yes
Entity Address Address Line 1	1901 GATEWAY DRIVE
Entity Address Address Line 2	STE 100
Entity Address City Or Town	IRVING
Entity Address State Or Province	TX
Entity Address Postal Zip Code	75038
City Area Code	972
Local Phone Number	587-4049
Security 12b Title	COMMON STOCK, par value $0.01 per share
Trading Symbol	ELA
Security Exchange Name	NYSEAMER

XML

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Revenue:
Sales	$ 42,639,718	$ 33,724,006	$ 90,054,816	$ 59,214,447
Cost of goods sold	31,161,718	26,596,116	68,865,782	45,782,293
Gross margin	11,478,000	7,127,890	21,189,034	13,432,154
Expenses:
Selling, General & Administrative Expenses	7,083,903	4,831,225	13,643,658	8,984,454
Depreciation and Amortization	279,516	216,219	571,463	421,131
Total operating expenses	7,363,419	5,047,444	14,215,121	9,405,585
Operating income	4,114,581	2,080,446	6,973,913	4,026,569
Other income (expense), net	(95,429)	283,055	(154,005)	554,996
Interest expense	121,042	177,704	244,281	356,726
Income before income taxes	3,898,110	2,185,797	6,575,627	4,224,839
Income tax expense	50,252	32,685	80,544	63,455
Net income	$ 3,847,858	$ 2,153,112	$ 6,495,083	$ 4,161,384
Basic earnings per share:
Net income	$ 0.14	$ 0.08	$ 0.24	$ 0.15
Diluted earnings per share:
Net income	$ 0.14	$ 0.08	$ 0.24	$ 0.15
Weighted average shares outstanding:
Basic	26,924,631	26,924,381	26,924,631	26,924,381
Diluted	26,939,631	26,939,631	26,939,631	26,939,631

XML

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)	Jun. 30, 2022	Dec. 31, 2021
Current assets:
Cash and cash equivalents	$ 13,935,476	$ 10,138,148
Trade receivables, net of allowances	5,688,882	7,166,533
Inventories	17,804,096	14,048,436
Current right-of-use assets from operating leases	1,649,034	1,604,736
Prepaid expenses	1,420,656	439,038
Other current assets	265,866	969,624
Total current assets	40,764,010	34,366,515
Property and equipment, net	9,662,401	9,806,188
Goodwill	6,357,453	6,140,465
Intangible assets, net	2,800,495	3,024,245
Operating lease right-of-use assets	5,039,806	5,692,141
Other assets	186,761	237,761
Total assets	64,810,926	59,267,315
Current liabilities:
Accounts payable-trade	3,303,090	2,488,396
Line of credit	0	1,700,000
Notes payable	1,241,480	1,065,794
Current operating lease liabilities	1,631,270	1,573,824
Accrued expenses	1,741,794	1,789,366
Customer deposits and other liabilities	2,198,587	1,179,224
Total current liabilities	10,116,221	9,796,604
Notes payable, less current portion	15,350,254	15,970,337
Long-term operating lease liabilities, less current portion	5,222,051	5,873,057
Total liabilities	30,688,526	31,639,998
Stockholders' equity:
Preferred stock, $0.01 par value; 5,000,000 shares authorized; no shares issued and outstanding	0	0
Common stock, $0.01 par value; 60,000,000 shares authorized; 26,924,631 shares issued and outstanding	269,246	269,246
Additional paid-in capital	40,173,000	40,173,000
Accumulated deficit	(6,319,846)	(12,814,929)
Total stockholders' equity	34,122,400	27,627,317
Total liabilities and stockholders' equity	$ 64,810,926	$ 59,267,315

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Jun. 30, 2022	Dec. 31, 2021
CONDENSED CONSOLIDATED BALANCE SHEETS
Preferred Stock, Par Value	$ 0.01	$ 0.01
Preferred Stock, Shares Authorized	5,000,000	5,000,000
Preferred Stock, Shares Issued	0	0
Preferred Stock, Shares Outstanding	0	0
Common Stock, Par Value	$ 0.01	$ 0.01
Common Stock, Shares Authorized	60,000,000	60,000,000
Common Stock, Shares Issued	26,924,631	26,924,631
Common Stock, Shares Outstanding	26,924,631	26,924,631

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021
Operations
Net income	$ 6,495,083	$ 4,161,384
Adjustments to reconcile net income to net cash provided by operations:
Depreciation, amortization, and other	571,463	421,131
Bad debt expense	25,000	6,249
Changes in operating assets and liabilities:
Trade receivables	1,452,651	(3,365,999)
Inventories	(3,755,662)	(2,579,991)
Prepaid expenses	(981,616)	(169,373)
Other assets	754,759	(146,042)
Accounts payable and accrued expenses	767,122	1,574,520
Operating leases	14,478	20,493
Customer deposits and other liabilities	1,019,363	341,260
Net cash provided by operations	6,362,641	263,632
Investing
Investment in note receivable	0	(654,958)
Purchase of property and equipment	(203,929)	(484,594)
Acquisition of Exchange assets and liabilities, net of cash acquired	0	13,136
Adjustment to the purchase price of the Avail Transaction	(216,988)	0
Net cash used in investing	(420,917)	(1,126,416)
Financing
Payments on notes payable, related party	0	(144,787)
Payments on notes payable	(444,396)	(79,353)
Payments on line of credit	(1,700,000)	0
Net cash used in financing	(2,144,396)	(224,140)
Net change in cash and cash equivalents	3,797,328	(1,086,924)
Cash and cash equivalents, beginning of period	10,138,148	9,218,036
Cash and cash equivalents, end of period	13,935,476	8,131,112
Cash paid during the period for:
Interest	252,431	359,253
Income taxes	98,000	56,900
Non cash activites:
Acquisition of CExchange assets and liabilities	$ 0	$ 1,555,892

XML

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (Unaudited) - USD ($)	Total	Common Stock	Preferred Stock	Additional Paid-In Capital	Retained Earnings (Accumulated Deficit)
Balance, shares at Dec. 31, 2020		26,924,631
Balance, amount at Dec. 31, 2020	$ 17,578,442	$ 269,246	$ 0	$ 40,173,000	$ (22,863,804)
Net Income	4,161,384	$ 0	0	0	4,161,384
Balance, shares at Jun. 30, 2021		26,924,381
Balance, amount at Jun. 30, 2021	21,739,826	$ 269,246	0	40,173,000	(18,702,420)
Balance, shares at Mar. 31, 2021		26,924,381
Balance, amount at Mar. 31, 2021	19,586,714	$ 269,246	0	40,173,000	(20,855,532)
Net Income	2,153,112	$ 0	0	0	2,153,112
Balance, shares at Jun. 30, 2021		26,924,381
Balance, amount at Jun. 30, 2021	21,739,826	$ 269,246	0	40,173,000	(18,702,420)
Balance, shares at Dec. 31, 2021		26,924,631
Balance, amount at Dec. 31, 2021	27,627,317	$ 269,246	0	40,173,000	(12,814,929)
Net Income	6,495,083	$ 0	0	0	6,495,083
Balance, shares at Jun. 30, 2022		26,924,631
Balance, amount at Jun. 30, 2022	34,122,400	$ 269,246	0	40,173,000	(6,319,846)
Balance, shares at Mar. 31, 2022		26,924,631
Balance, amount at Mar. 31, 2022	30,274,542	$ 269,246	0	40,173,000	(10,167,704)
Net Income	3,847,858	$ 0	0	0	3,847,858
Balance, shares at Jun. 30, 2022		26,924,631
Balance, amount at Jun. 30, 2022	$ 34,122,400	$ 269,246	$ 0	$ 40,173,000	$ (6,319,846)

XML

BASIS OF PRESENTATION

6 Months Ended

Jun. 30, 2022

BASIS OF PRESENTATION

NOTE 1 - BASIS OF PRESENTATION

NOTE 1 — BASIS OF PRESENTATION

The interim condensed consolidated financial statements of Envela Corporation, a Nevada corporation, and its subsidiaries (together with its subsidiaries, the “Company” or “Envela”), included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”), including under the Securities Act of 1933, as amended (the “Securities Act”) and the Securities and Exchange Act of 1934, as amended (the “Exchange Act”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to the SEC’s rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. The Company suggests that these financial statements be read in conjunction with the financial statements and notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the SEC on March 16, 2022 (the “2021 Annual Report”). In the opinion of the management of the Company, the accompanying unaudited interim financial statements contain all adjustments, consisting only of those of a normal recurring nature, necessary to present fairly its results of operations and cash flows for the periods presented. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year. Certain reclassifications were made to the prior year's consolidated financial statements to conform to the current year presentation. The information provided as of June 30, 2022 in these notes to the interim condensed consolidated financial statements is unaudited.

XML

PRINCIPLES OF CONSOLIDATION AND NATURE OF OPERATIONS

6 Months Ended

Jun. 30, 2022

PRINCIPLES OF CONSOLIDATION AND NATURE OF OPERATIONS

NOTE 2 - PRINCIPLES OF CONSOLIDATION AND NATURE OF OPERATIONS

NOTE 2 — PRINCIPLES OF CONSOLIDATION AND NATURE OF OPERATIONS

Envela and its subsidiaries engage in diverse business activities within the recommerce sector. These activities include being one of the nation's premier authenticated recommerce retailers of luxury hard assets; providing end-of-life asset recycling and resale to businesses, organization and retail consumers; offering data destruction and IT asset management; and providing products, services and solutions to industrial and commercial companies. Envela operates primarily via two operating and reportable segments. Through DGSE, LLC (“DGSE”), the Company operates Dallas Gold & Silver Exchange, Charleston Gold & Diamond Exchange, and Bullion Express brands. Through ECHG, LLC (“ECHG”), the Company operates Echo Environmental Holdings, LLC (“Echo”), ITAD USA Holdings, LLC (“ITAD USA”), CEX Holdings, LLC (“CEX”), Avail Recovery Solutions, LLC (“Avail”) and Teladvance, LLC (“Teladvance”). Envela is a Nevada corporation, headquartered in Irving, Texas.

DGSE primarily buys and resells or recycles luxury hard assets like jewelry, diamonds, gemstones, fine watches, rare coins and related collectibles, precious-metal bullion products, gold, silver and other precious-metals. DGSE operates seven jewelry stores at both the retail and wholesale levels in Texas and South Carolina. Buying and selling items for their precious-metals content is a major method by which DGSE markets itself. DGSE also offers jewelry repair services, custom-made jewelry and consignment items, and maintains relationships with refiners for precious-metal items that are not appropriate for resale. The Company also maintains a presence in the retail market through its websites, www.dgse.com and www.cgdeinc.com.

ECHG, through its subsidiaries, primarily buys electronic components from business and other organizations, such as school districts, for end-of-life recycling and resale, or to add life to electronic devices by data destruction and refurbishment for reuse. ECHG also conducts such recycling and resale at the retail level. Echo focuses on end-of-life electronics recycling and sustainability and ITAD USA provides IT equipment disposition, including compliance and data sanitization services. Teladvance, CEX and Avail operate as value-added resellers by providing offerings and services to companies looking either to upgrade capabilities or dispose of equipment. Like DGSE, ECHG also maintains relationships with refiners or recyclers to which it sells valuable materials it extracts from electronics and IT equipment that are not appropriate for resale or reuse. ECHG’s customers are companies and organizations that are based domestically and internationally.

For additional information on the businesses of both DGSE and ECHG, see “Item 1. Business – Operating Segments” in the Company’s 2021 Annual Report.

The interim condensed consolidated financial statements have been prepared in accordance with U.S. GAAP and include the accounts of the Company and its subsidiaries. All material intercompany transactions and balances have been eliminated.

XML

ACCOUNTING POLICIES AND ESTIMATES

6 Months Ended

Jun. 30, 2022

ACCOUNTING POLICIES AND ESTIMATES

NOTE 3 - ACCOUNTING POLICIES AND ESTIMATES

 NOTE 3 — ACCOUNTING POLICIES AND ESTIMATES

 Financial Instruments

The carrying amounts reported in the condensed consolidated balance sheets for cash equivalents, trade receivables, prepaid expenses, other current assets, accounts payable, accrued expenses and customer deposits and other liabilities approximate fair value because of the immediate or short-term nature of these financial instruments. Notes payable and line of credit approximate fair value due to the market interest rate charged.

Earnings Per Share

Basic earnings per share of our common stock, par value $0.01 per share (our “Common Stock”), is computed by dividing net earnings available to holders of the Company’s Common Stock by the weighted average number of shares of Common Stock outstanding for the reporting period. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts requiring the Company to issue Common Stock were exercised or converted into Common Stock. For the calculation of diluted earnings per share, the basic weighted average number of shares is increased by the dilutive effect of stock options and warrants outstanding determined using the treasury stock method.

Goodwill

Goodwill is not amortized but evaluated for impairment on an annual basis during the fourth quarter of our fiscal year, or earlier if events or circumstances indicate the carrying value may be impaired. The Company’s goodwill is related to ECHG only and not the entire Company. ECHG has its own, separate financial information to perform goodwill impairment testing at least annually or if events indicate that those assets may be impaired. As a result of the current market and economic conditions related to the coronavirus pandemic (“COVID-19”) and the war between Ukraine and Russia, in accordance with step 1 of the guidelines set forth in ASC 350-20-35-3A, the Company concluded there were no impairments of goodwill that resulted from those triggering events as of June 30, 2022. The Company will continue to evaluate goodwill for the ECHG segment. For tax purposes, goodwill is amortized and deductible over fifteen years.

ECHG goodwill was allocated in connection with three acquisitions of the assets now held by Echo on May 20, 2019 (the “Echo Transaction”), of the assets now held by Teladvance on June 9, 2021 (the “CExchange Transaction”) and of the assets now held by Avail on October 29, 2021 (the “Avail Transaction”). The preliminary goodwill associated with the Avail Transaction was $3,491,285. There was an adjustment made to goodwill concerning the Avail Transaction from an additional cash payment made during the three months ending June 30, 2022 of $216,988, bringing the total goodwill for the Avail Transaction to $3,708,273 as of June 30, 2022. There have been no other adjustments or impairment charges to goodwill. As of June 30, 2022 and December 31 2021, goodwill was $6,357,453 and $6,140,465, respectively.

Recent Accounting Pronouncements

In June 2016, the FASB issued a new credit loss accounting standard ASU 2016-13. The new accounting standard introduces the current expected credit losses methodology for estimating allowances for credit losses which will be based on expected losses rather than incurred losses. We will be required to use a forward-looking expected credit loss methodology for accounts receivable, loans and other financial instruments. The standard will be adopted upon the effective date for us beginning January 1, 2023 by using a modified retrospective transition approach to align our credit loss methodology with the new standard. The Company is evaluating the financial statement implications of ASU 2016-13.

There were no other new accounting standards that had a material impact on the Company’s consolidated financial statements during the six-month period ended June 30, 2022, and there were no other new accounting standards or pronouncements that were issued but not yet effective as of June 30, 2022 that the Company expects to have a material impact on its consolidated financial statements.

XML

INVENTORIES

6 Months Ended

Jun. 30, 2022

INVENTORIES

NOTE 4 - INVENTORIES

NOTE 4 — INVENTORIES

A summary of inventories is as follows:

	June 30,		December 31,
	2022		2021
DGSE
Resale	$	15,964,881	$	10,422,072
Recycle		15,791		11,995
Subtotal		15,980,672		10,434,067
ECHG
Resale		1,236,523		3,350,159
Recycle		586,901		264,210
Subtotal		1,823,424		3,614,369
	$	17,804,096	$	14,048,436

XML

ACQUISITIONS

6 Months Ended

Jun. 30, 2022

ACQUISITIONS

NOTE 5 - ACQUISITION

 NOTE 5 — ACQUISITION

On October 29, 2021, ECHG entered into the Avail Transaction to purchase all of the assets, liabilities and rights and interests of Avail for $4,500,000. The purchase was facilitated by an initial payment of $2,500,000 at closing, and the remaining $2,000,000 to be paid out by 12 quarterly payments starting April 1, 2022, of $166,667 each. See Note 14 to our consolidated financial statements for more information on this loan. The installment note payable for the Avail Transaction imputed at 3.1% interest.

As part of the Avail Transaction, goodwill was preliminarily recorded as $3,491,284, which is the purchase price less the approximate fair value of the net assets and liabilities purchased. On May 31, 2022, an additional cash payment of $216,988 was made in connection with the Avail Transacton adjusting the goodwill and purchase price amount as shown in the preliminary purchase price allocation in the following table. The additional payment is not part of the installment note payable of $2,000,000 from the initial Avail Transaction. The Company’s goodwill is related to the ECHG segment. ECHG has its own separate financial information to perform goodwill impairment testing. The Company will evaluate goodwill based on cash flows for the ECHG segment. For tax purposes, goodwill is amortized and deductible over 15 years.

The following table compares the results of Avail as part of the Company's financial results for the three months ended June 30, 2022, and the Company's results of operations as if they were combined for the three months ended June 30, 2021:

	Consolidated Statement  of Income For the Three Months Ended		Proforma Combined For the Three Months Ended
	June 30, 2022		June 30, 2021
	(unaudited)		(unaudited)
Revenue	$	42,639,718	$	35,525,133
Income from continuing operations	$	3,847,858	$	2,482,863
Net income	$	3,847,858	$	2,482,863
Basic net income per common share	$	0.14	$	0.09
Diluted net income per common share	$	0.14	$	0.09

The following table compares the results of Avail as part of the Company's financial results for the six months ended June 30, 2022, and the Company's results of operations as if they were combined for the six months ended June 30, 2021:

	Consolidated Statement of Income For the Six Months Ended		Proforma Combined For the Six Months Ended
	June 30, 2022		June 30, 2021
	(unaudited)		(unaudited)
Revenue	$	90,054,816	$	62,635,207
Income from continuing operations	$	6,495,083	$	4,837,758
Net income	$	6,495,083	$	4,837,758
Basic net income per common share	$	0.24	$	0.18
Diluted net income per common share	$	0.24	$	0.18

The purchase price allocation of the Avail transaction is listed below and is considered to be a preliminary allocation and is subject to change.

The preliminary purchase price is allocated as follows:

Description	Amount
Assets
Cash	$	988,870
Account receivables		395,144
Inventories		486,736
Prepaid expenses		93,727
Fixed assets - net		247,038
Right-of-use assets		609,511
Other assets		13,268
Liabilities
Account payables		(562,778	)
Accrued liabilities		(653,289	)
Operating lease liabilities		(609,511	)
Net assets		1,008,716
Goodwill		3,708,272
Total Purchase Price	$	4,716,988

XML

GOODWILL

6 Months Ended

Jun. 30, 2022

GOODWILL

NOTE 6 - GOODWILL

NOTE 6 — GOODWILL

The changes in goodwill is as follows:

	June 30,		December 31,
	2022		2021
Opening balance	$	6,140,465	$	1,367,109
Additions (1)		216,988		4,773,356
Goodwill	$	6,357,453	$	6,140,465

(1) Additions ending December 31, 2021 totaling $4,773,356 are a combination of the CExchange Transaction on June 9, 2021, of $1,282,072, and the Avail Transaction on October 29, 2021, of $3,491,284. The addition ending June 30, 2022 is the additional cash payment concerning the Avail Transaction made on May 31, 2022.

XML

PROPERTY AND EQUIPMENT

6 Months Ended

Jun. 30, 2022

PROPERTY AND EQUIPMENT

NOTE 7 - PROPERTY AND EQUIPMENT

NOTE 7 — PROPERTY AND EQUIPMENT

 Property and equipment consist of the following:

	June 30,			December 31,
	2022			2021
DGSE
Land	$	1,640,220		$	1,640,220
Building and improvements		2,781,903			2,764,529
Leasehold improvements		1,450,695			1,450,695
Machinery and equipment		1,056,315			1,056,315
Furniture and fixtures		603,945			526,250
Vehicles		22,859			22,859
		7,555,937			7,460,868
Less: accumulated depreciation		(2,501,296	)		(2,343,923	)
Sub-Total		5,054,641			5,116,945
ECHG
Building and improvements		135,491			135,491
Machinery and equipment		1,167,321			1,109,306
Furniture and fixtures		145,950			145,950
		1,448,762			1,390,747
Less: accumulated depreciation		(366,438	)		(212,147	)
Sub-Total		1,082,324			1,178,600
Envela
Land		1,106,664			1,106,664
Building and improvements		2,502,216			2,456,324
Machinery and equipment		28,626			23,676
		3,637,506			3,586,664
Less: accumulated depreciation		(112,070	)		(76,021	)
Sub-Total		3,525,436			3,510,643
	$	9,662,401		$	9,806,188

XML

INTANGIBLE ASSETS

6 Months Ended

Jun. 30, 2022

GOODWILL

NOTE 8 - INTANGIBLE ASSETS

NOTE 8 — INTANGIBLE ASSETS

 Intangible assets consist of the following:

	June 30,			December 31,
	2022			2021
DGSE
Domain names	$	41,352		$	41,352
Point of sale system		330,000			330,000
		371,352			371,352
Less: accumulated amortization		(302,502	)		(269,502	)
Subtotal		68,850			101,850
ECHG
Trademarks (1)		1,483,000			1,483,000
Customer Contracts (1)		1,873,000			1,873,000
Trademarks/Tradenames (2)		114,000			114,000
Customer Relationships (2)		345,000			345,000
		3,815,000			3,815,000
Less: accumulated amortization		(1,083,355	)		(892,605	)
Subtotal		2,731,645			2,922,395
	$	2,800,495		$	3,024,245

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

(2) Intangibles relate to the CExchange Transaction on June 9, 2021.

The following table outlines the estimated future amortization expense related to intangible assets held as of June 30, 2022:

	DGSE		ECHG		Total
2022 (excluding the six months ending June 30, 2022)		33,000		190,750		223,750
2023		30,350		381,500		411,850
2024		5,500		381,500		387,000
2025		-		381,500		381,500
2026		-		381,500		381,500
Thereafter		-		1,014,895		1,014,895
	$	68,850	$	2,731,645	$	2,800,495

XML

ACCRUED EXPENSES

6 Months Ended

Jun. 30, 2022

ACCRUED EXPENSES

NOTE 9- ACCRUED EXPENSES

 NOTE 9— ACCRUED EXPENSES

Accrued expenses consist of the following:

	June 30,		December 31,
	2022		2021
DGSE
Accrued interest	$	12,079	$	12,627
Payroll		118,857		131,325
Property taxes		120,449		88,046
Sales tax		57,894		150,070
Other administrative expenss		30,000		-
Subtotal		339,279		382,068
ECHG
Accrued interest		7,862		14,547
Payroll		337,180		334,431
Unvouchered payables - inventory		252,020		461,481
Material & shipping costs (COGS)		500,326		78,647
Other accrued expenses		-		51,506
Subtotal		1,097,388		940,612
Envela
Accrued interest		7,448		8,355
Payroll		25,642		25,175
Professional fees		125,617		220,101
Property Tax		43,400		84,920
Other administrative expenses		10,794		18,453
State income tax		92,226		109,682
Subtotal		305,127		466,686
	$	1,741,794	$	1,789,366

XML

SEGMENT INFORMATION

6 Months Ended

Jun. 30, 2022

SEGMENT INFORMATION

NOTE 10 - SEGMENT INFORMATION

NOTE 10 — SEGMENT INFORMATION

We determine our business segments based upon an internal reporting structure. Our financial performance is based on the following two segments: DGSE and ECHG.

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

The ECHG segment includes Echo, ITAD USA, Teladvance, CEX and Avail. These five companies are involved in recycling and the reuse of electronic components.

We allocate a portion of certain corporate costs and expenses, including information technology as well as rental income and expenses relating to our corporate headquarters, to our business segments. These income and expenses are included in selling, general and administrative (“SG&A”) expenses, depreciation and amortization, other income, interest expense and income tax expense. Our management team evaluates each segment and makes decisions about the allocation of resources according to each segment’s profit. Allocation amounts are generally agreed upon by management and may differ from arms-length allocations.

The following separates DGSE’s and ECHG’s financial results of operations for the three months ended June 30, 2022 and 2021:

	For The Three Months Ended June 30,
	2022									2021
	DGSE			ECHG			Consolidated			DGSE		ECHG		Consolidated
Revenue:
Sales	$	30,339,127		$	12,300,591		$	42,639,718		$	23,012,324	$	10,711,682	$	33,724,006
Cost of goods sold		26,150,543			5,011,175			31,161,718			19,915,328		6,680,788		26,596,116
Gross profit		4,188,584			7,289,416			11,478,000			3,096,996		4,030,894		7,127,890
Expenses:
Selling, general and administrative expenses		2,194,494			4,889,409			7,083,903			1,889,895		2,941,330		4,831,225
Depreciation and amortization		101,434			178,082			279,516			97,435		118,784		216,219
		2,295,928			5,067,491			7,363,419			1,987,330		3,060,114		5,047,444
Operating income		1,892,656			2,221,925			4,114,581			1,109,666		970,780		2,080,446
Other income/expense:
Other income (expense), net		(49,018	)		(46,411	)		(95,429	)		119,460		163,595		283,055
Interest expense		61,663			59,379			121,042			68,692		109,012		177,704
Income before income taxes		1,781,975			2,116,135			3,898,110			1,160,434		1,025,363		2,185,797
Income tax expense		15,391			34,861			50,252			14,185		18,500		32,685
Net income	$	1,766,584		$	2,081,274		$	3,847,858		$	1,146,249	$	1,006,863	$	2,153,112

The following separates DGSE’s and ECHG’s financial results of operations for the six months ended June 30, 2022 and 2021:

	For The Six Months Ended June 30,
	2022									2021
	DGSE			ECHG			Consolidated			DGSE		ECHG		Consolidated
Revenue:
Sales	$	66,121,999		$	23,932,817		$	90,054,816		$	41,926,825	$	17,287,622	$	59,214,447
Cost of goods sold		57,709,953			11,155,829			68,865,782			36,022,194		9,760,099		45,782,293
Gross profit		8,412,046			12,776,988			21,189,034			5,904,631		7,527,523		13,432,154
Expenses:
Selling, general and administrative expenses		4,332,443			9,311,215			13,643,658			3,672,332		5,312,122		8,984,454
Depreciation and amortization		208,397			363,066			571,463			194,257		226,874		421,131
		4,540,840			9,674,281			14,215,121			3,866,589		5,538,996		9,405,585
Operating income		3,871,206			3,102,707			6,973,913			2,038,042		1,988,527		4,026,569
Other income/expense:
Other income (expense), net		(77,009	)		(76,996	)		(154,005	)		231,191		323,805		554,996
Interest expense		122,904			121,377			244,281			137,177		219,549		356,726
Income before income taxes		3,671,293			2,904,334			6,575,627			2,132,056		2,092,783		4,224,839
Income tax expense		28,568			51,976			80,544			27,890		35,565		63,455
Net income	$	3,642,725		$	2,852,358		$	6,495,083		$	2,104,166	$	2,057,218	$	4,161,384

XML

REVENUE RECOGNITION

6 Months Ended

Jun. 30, 2022

REVENUE RECOGNITION

NOTE 11 - REVENUE RECOGNITION

NOTE 11 — REVENUE RECOGNITION

ASC 606 provides guidance to identify performance obligations for revenue-generating transactions. The initial step is to identify the contract with a customer created with the sales invoice or a repair ticket. Secondly, we identify the performance obligations in the contract, as we promise to deliver the purchased item or promised repairs in return for payment or future payment as a receivable. The third step is determining the transaction price of the contract obligation, as in the full ticket price, negotiated price or a repair price. The next step is to allocate the transaction price to the performance obligations, as we designate a separate price for each item. The final step in the guidance is to recognize revenue as each performance obligation is satisfied.

The following disaggregation of total revenue is listed by sales category and segment for the three months ended June 30, 2022 and 2021:

CONSOLIDATED	Three Months Ended June 30,
	2022							2021
	Revenues		Gross Profit		Margin			Revenues		Gross Profit		Margin
DGSE
Resale	$	28,165,026	$	3,719,954		13.2	%	$	20,893,838	$	2,678,640		12.8	%
Recycled		2,174,101		468,630		21.6	%		2,118,486		418,356		19.7	%
Subtotal		30,339,127		4,188,584		13.8	%		23,012,324		3,096,996		13.5	%
ECHG
Resale		9,102,001		5,566,507		61.2	%		8,595,910		3,019,685		35.1	%
Recycled		3,198,590		1,722,909		53.9	%		2,115,772		1,011,209		47.8	%
Subtotal		12,300,591		7,289,416		59.3	%		10,711,682		4,030,894		37.6	%
	$	42,639,718	$	11,478,000		26.9	%	$	33,724,006	$	7,127,890		21.1	%

The following disaggregation of total revenue is listed by sales category and segment for the six months ended June 30, 2022 and 2021:

CONSOLIDATED	Six Months Ended June 30,
	2022							2021
	Revenues		Gross Profit		Margin			Revenues		Gross Profit		Margin
DGSE
Resale	$	61,842,159	$	7,462,806		12.1	%	$	38,214,479	$	5,135,784		13.4	%
Recycled		4,279,840		949,240		22.2	%		3,712,346		768,847		20.7	%
Subtotal		66,121,999		8,412,046		12.7	%		41,926,825		5,904,631		14.1	%
ECHG
Resale		18,681,858		10,140,775		54.3	%		13,336,902		5,631,869		42.2	%
Recycled		5,250,959		2,636,213		50.2	%		3,950,720		1,895,654		48.0	%
Subtotal		23,932,817		12,776,988		53.4	%		17,287,622		7,527,523		43.5	%
	$	90,054,816	$	21,189,034		23.5	%	$	59,214,447	$	13,432,154		22.7	%

DGSE’s over-the-counter sales with the retail public and wholesale dealers are recognized when merchandise is delivered, and payment has been made either by immediate payment or through a receivable obligation at one of our retail locations. We also recognize revenue upon the shipment of goods when retail and wholesale customers have fulfilled their obligation to pay, or promise to pay through e-commerce or phone sales. We have elected to account for shipping and handling costs as fulfillment costs after the customer obtains control of the goods. Crafted-precious-metal items at the end of their useful lives are sold to a refiner. Since the local refiner is located in the Dallas/Fort Worth area, we deliver the metal to the refiner. The metal is melted and assayed, price is determined from the assay and payment is made usually in a day or two. Revenue is recognized from the sale once payment is received.

DGSE also offers a structured layaway plan. When a retail customer utilizes the layaway plan, we collect a minimum payment of 25% of the sales price, establish a payment schedule for the remaining balance and hold the merchandise as collateral as security against the customer’s deposit until all amounts due are paid in full. Revenue for layaway sales is recognized when the merchandise is paid in full and delivered to the retail customer. Layaway revenue is also recognized when a customer fails to pay in accordance with the sales contract and the sales item is returned to inventory with the forfeit of deposited funds, typically after 90 days.

In limited circumstances, we exchange merchandise for similar merchandise and/or monetary consideration with both dealers and retail customers, for which we recognize revenue in accordance with ASC 845, Nonmonetary Transactions. When we exchange merchandise for similar merchandise and there is no monetary component to the exchange, we do not recognize any revenue. Instead, the basis of the merchandise relinquished becomes the basis of the merchandise received, less any indicated impairment of value of the merchandise relinquished. When we exchange merchandise for similar merchandise and there is a monetary component to the exchange, we recognize revenue to the extent of the monetary assets received and determines the cost of sale based on the ratio of monetary assets received to monetary and non-monetary assets received multiplied by the cost of the assets surrendered.

The Company offers the option of third-party financing to customers wishing to borrow money for the purchase. The customer applies on-line with the financing company and upon going through the credit check will be approved or denied. If accepted, the customer is allowed to purchase according to the limits set by the financing company. Once the customer does purchase merchandise, based on their financing agreement, we record and recognize the sale at that point, based on the promise to pay by the finance company up to the customer’s approved limit.

We have a return policy (money-back guarantee). The policy covers retail transactions involving jewelry, graded rare coins and currency only. Customers may return jewelry, graded rare coins and currency purchased within 30 days of the receipt of the items for a full refund as long as the items are returned in exactly the same condition as they were delivered. In the case of jewelry, graded rare coins and currency sales on account, customers may cancel the sale within 30 days of making a commitment to purchase the items. The receipt of a deposit and a signed purchase order evidences the commitment. Any customer may return a jewelry item or graded rare coins and currency if they can demonstrate that the item is not authentic, or there was an error in the description of a graded coin or currency piece. Returns are accounted for as a reversal of the original transaction, with the effect of reducing revenues and cost of sales, and returning the merchandise to inventory. We have established an allowance for estimated returns related to sales based on historical returns and reduced our reported revenues and cost of sales accordingly. Our return allowance as of June 30, 2022 and December 31, 2021 remained the same for both periods, at approximately $28,000.

ECHG has several revenue streams and recognize revenue according to ASC 606 at an amount that reflects the consideration to which the entities expect to be entitled in exchange for transferring goods or services to the customer. The revenue streams are as follows.

· Outright sales are recorded when product is shipped. Once the price is established and the terms are agreed to and the product is shipped, the revenue is recognized. The Echo Entities have fulfilled their performance obligation with an agreed upon transaction price, payment terms and shipping the product.

· Echo recognizes refining revenue when our inventory arrives at the destination port and the performance obligation is satisfied by transferring the control of the promised goods that are identified in the customer contract. Ninety percent (90%) of our refining revenue is generated from one refining partner that has an international refining facility. This refining partner pays us sixty percent (60%) of an Invoice within five working days upon the receipt of the Ocean Bill of Lading issued by the Ocean Carrier. Our 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 we expect to be entitled is included in the transaction price stated at the current precious metal spot price and weight of the precious metal. 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 weeks. Any adjustment from the resolution of the underlying uncertainty is netted with the remaining forty percent (40%) due from the original contract.

· Hard drive sales by the Echo Entities are limited to customers who are required to prepay shipments. Once the commodity price is established and agreed upon by both parties, customers send payment in advance. The Company releases the shipment on the same day when payment receipt is confirmed, and revenue is recognized on day of shipment. If payment is received on the last day of the month and shipment goes out the following day the payment received is deferred revenue and recognized the following month when the shipment is made.

· Echo also provides recycling services according to a Scope of Work and services are recognized when promised services are rendered. We have recycling services conducted at the Echo facility and another type of service is conducted at the client’s facility. The Scope of Work will determine the charges and whether it is completed on campus or off campus. Payment terms are also dictated in the Scope of Work.

Accounts Receivable: We record trade receivables when revenue is recognized. When appropriate, we will record an allowance for doubtful accounts, which is primarily determined by an analysis of our trade receivables aging. The allowance is determined based on historical experience of collecting past due amounts, based on the degree of their aging. In addition, specific accounts that are doubtful of collection are included in the allowance. These provisions are reviewed to determine the adequacy of the allowance for doubtful accounts. Trade receivables are charged off when there is certainty as to their being uncollectible. Trade receivables are considered delinquent when payment has not been made within contract terms. DGSE had no allowance for doubtful accounts balance as of June 30, 2022 and December 31, 2021. Some of ECHG’s customers are on payment terms, and although low risk, occasionally the need arises to record an allowance for receivables that are deemed high risk to collect. We established an allowance for estimated uncollectable receivables related to sales based on historical collections. Our allowance as of June 30, 2022 and December 31, 2021 was $26,582 and $1,582, respectively.

Income Taxes: Income taxes are accounted for under the asset and liability method prescribed by ASC 740, Income Taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets unless it is more likely than not such assets will be realized.

We account for our position in tax uncertainties in accordance with ASC 740, Income Taxes. The guidance establishes standards for accounting for uncertainty in income taxes. The guidance provides several clarifications related to uncertain tax positions. Most notably, a “more likely-than-not” standard for initial recognition of tax positions, a presumption of audit detection and a measurement of recognized tax benefits based on the largest amount that has a greater than 50 percent likelihood of realization. The guidance applies a two-step process to determine the amount of tax benefit to be recognized in the financial statements. First, we must determine whether any amount of the tax benefit may be recognized. Second, we determine how much of the tax benefit should be recognized (this would only apply to tax positions that qualify for recognition.) No additional liabilities have been recognized as a result of the implementation. We have not taken a tax position that, if challenged, would have a material effect on the financial statements or the effective tax rate for the three and six months ended June 30, 2022 and 2021.

XML

LEASES

6 Months Ended

Jun. 30, 2022

LEASES

NOTE 12 - LEASES

NOTE 12 — LEASES

In determining our right-of-use assets and lease liabilities, we apply a discount rate to the minimum lease payments within each lease agreement. ASC 842 requires us to use the interest rate that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. If we cannot readily determine the discount rate implicit in lease agreements, we utilize our incremental borrowing rate.

The Company has seven operating leases as of June 30, 2022—five in the Dallas/Fort Worth Metroplex, one in Charleston, South Carolina and one in Chandler, Arizona. The lease for DGSE’s flagship store located at 13022 Preston Road, Dallas, Texas expires on January 31, 2027, with an option to extend the lease for an additional five years, at market rate as determined by the prevailing market rate for comparable space in comparable buildings in the vicinity. The lease for DGSE’s Grand Prairie, Texas location was renewed starting July 1, 2022, expiring June 30, 2027, with an option to extend the lease for an additional five years. The lease for DGSE’s Mt Pleasant, South Carolina location expires April 30, 2025, with no additional renewal options. The lease for DGSE’s Euless, Texas location expires June 30, 2025, with an option to extend the lease for an additional five years. The lease for ECHG’s Echo location on W. Belt Line Road, in Carrollton, Texas, expires January 31, 2026. The lease for ECHG’s Teladvance location, which also houses ITAD USA, on Realty Road in Carrollton, Texas expires January 31, 2027. The lease for ECHG’s Avail location in Chandler, Arizona expires May 31, 2025. All of the Company’s seven leases as of June 30, 2022 are triple net, for which it pays its proportionate share of common area maintenance, property taxes and property insurance. Leasing costs for the three months ended June 30, 2022 and 2021 was $659,860 and $588,896 respectively. Leasing costs for the six months ended June 30, 2022 and 2021 was $1,282,723 and $895,433, respectively, comprised of a combination of minimum lease payments and variable lease costs.

As of June 30, 2022, the weighted average remaining lease term and weighted average discount rate for operating leases was 3.75 years and 4.4%, respectively. For the three months ended June 30, 2022 and 2021, the Company’s cash paid for operating lease liabilities was $650,606 and $588,026, respectively. For the six months ended June 30, 2022 and 2021, the Company’s cash paid for operating lease liabilities was $1,266,703 and $923,253, respectively.

Future annual minimum lease payments as of June 30, 2022:

	Operating
	Leases
DGSE
2022 (excluding the six months ending June 30, 2022)	$	267,938
2023		541,984
2024		552,414
2025		412,269
2026 and thereafter		405,114
Total minimum lease payments		2,179,719
Less imputed interest		(188,707	)
DGSE Sub-Total		1,991,012
ECHG
2022 (excluding the six months ending June 30, 2022)		661,506
2023		1,357,381
2024		1,396,129
2025		1,321,297
2026 and thereafter		507,780
Total minimum lease payments		5,244,093
Less imputed interest		(381,784	)
ECHG Sub-Total		4,862,309
Total		6,853,321
Current portion		1,631,270
	$	5,222,051

XML

BASIC AND DILUTED AVERAGE SHARES

6 Months Ended

Jun. 30, 2022

BASIC AND DILUTED AVERAGE SHARES

NOTE 13 - BASIC AND DILUTED AVERAGE SHARES

NOTE 13 — BASIC AND DILUTED AVERAGE SHARES

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

	For the Three Months Ended
	June 30,
	2022		2021
Basic weighted average shares		26,924,631		26,924,631
Effect of potential dilutive securities		15,000		15,000
Diluted weighted average shares		26,939,631		26,939,631

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

	For the six Months Ended
	June 30,
	2022		2021
Basic weighted average shares		26,924,631		26,924,631
Effect of potential dilutive securities		15,000		15,000
Diluted weighted average shares		26,939,631		26,939,631

For the three and six months ended June 30, 2022 and 2021, there were 15,000 common stock options, warrants, and Restricted Stock Units (RSUs) unexercised, respectively. For the three and six months ended June 30, 2022 and 2021, there were no anti-dilutive shares.

XML

LONG-TERM DEBT

6 Months Ended

Jun. 30, 2022

LONG-TERM DEBT

NOTE 14 - LONG-TERM DEBT

NOTE 14 — LONG-TERM DEBT

Long-term debt consists of the following:

	Outstanding Balance
	June 30,		December 31,		Current
	2022		2021		Interest Rate			Maturity
DGSE
Note payable, Farmers Bank (1)	$	2,719,906	$	2,770,729		3.10	%	November 15, 2026
Note payable, Truist Bank (2)		891,874		909,073		3.65	%	July 9, 2030
Note payable, Texas Bank & Trust (3)		465,157		474,009		3.75	%	September 14, 2025
Note payable, Texas Bank & Trust (4)		1,721,937		1,752,446		3.25	%	July 30, 2031
DGSE Sub-Total		5,798,874		5,906,257
ECHG
Note payable, Farmers Bank (1)		6,171,150		6,286,459		3.10	%	November 15, 2026
Line of Credit (5)		-		1,700,000		3.10	%	November 15, 2024
Avail Transaction note (6)		1,833,333		2,000,000		0.00	%	April 1, 2025
ECHG Sub-Total		8,004,483		9,986,459
Envela
Note payable, Texas Bank & Trust (7)		2,788,377		2,843,415		3.25	%	November 4, 2025
Sub-Total		16,591,734		18,736,131
Current portion		1,241,480		2,765,794
	$	15,350,254	$	15,970,337

(1) On May 20, 2019, in connection with the Echo Transaction, the Company entered into two loan agreements with John R. Loftus, the Company’s CEO, President and Chairman of the Board. ECHG, LLC executed a five-year, $6,925,979 note for the Echo Transaction, amortized over 20 years at a 6% annual interest rate. The interest and principal payment due monthly was $49,646. DGSE executed a five-year, $3,074,021 note to pay off the accounts payable – related party balance to a former Related Party as of May 20, 2019. That promissory note was also amortized over 20 years at a 6% annual interest rate. The interest and principal payment due monthly on the note for DGSE was $22,203. On November 23, 2021, the ECHG and DGSE notes, with remaining principal balances of $6,309,962 and $2,781,087, respectively, were refinanced by Farmers State Bank of Oakley, Kansas with annual interest rates of 3.1%. The ECHG and DGSE notes have monthly interest and principal payments of $35,292 and $15,555, respectively.     

(2) On July 9, 2020, DGSE closed the purchase of a retail building located at 610 E. Round Grove Road in Lewisville, Texas for $1,195,000. The purchase was partly financed through a $956,000, 10 year loan (the “Truist Lewisville Loan”), bearing an annual interest rate of 3.65%, amortized over 20 years, payable to Truist Bank (f/k/a BB&T Bank). The note has monthly interest and principal payments of $5,645.

(3) On September 14, 2020, 1106 NWH Holdings, LLC, a wholly owned subsidiary of DGSE, closed on the purchase of a retail building located at 1106 W. Northwest Highway in Grapevine, Texas for $620,000. The purchase was partly financed through a $496,000, five-year loan (the “TB&T Grapevine Loan”), bearing an annual interest rate of 3.75%, amortized over 20 years, payable to Texas Bank and Trust. The note has monthly interest and principal payments of $2,941.

(4) On July 30, 2021, 9166 Gaylord Holdings, LLC, a wholly owned subsidiary of DGSE, closed the purchase of a retail building located at 9166 Gaylord Parkway in Frisco, Texas for $2,215,500. The purchase was partly financed through a $1,772,000, five-year loan (the “TB&T Frisco Loan”), bearing an annual interest rate of 3.75%, amortized over 20 years, payable to Texas Bank and Trust. The note has monthly interest and principal payments of $10,509.

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

(6) On October 29, 2021, ECHG entered into the Avail Transaction to purchase all of the assets, liabilities and rights and interests of Avail AZ, for $4.5 million. The purchase was facilitated by an initial payment of $2.5 million at closing, and the remaining $2.0 million to be paid out by 12 quarterly payments starting April 1, 2022, of $166,667 each. The Installment note payable for the Avail Transaction imputed at 3.1%

(7) On November 4, 2020, 1901 Gateway Holdings, LLC, a wholly owned subsidiary of the Company, closed on the purchase of an office building located at 1901 Gateway Drive, Irving, Texas for $3.521 million. The building was partially financed through a $2,960,000, 5-year loan (the “TB&T Irving Loan”), bearing an interest rate of 3.25%, amortized over 20 years, payable to Texas Bank and Trust. The note has monthly interest and principal payments of $16,792.

Future scheduled principal payments of our notes payable and notes payable, related party, as of June 30, 2022 are as follows:

Note payable, Farmers State Bank - DGSE
Year Ending December 31,	Amount
2022 (excluding the six months ended June 30, 2022)	$	51,387
2023		105,428
2024		108,743
2025		112,163
2026		2,342,185
Subtotal	$	2,719,906

Note payable, Truist Bank - DGSE
Year Ending December 31,	Amount
2022 (excluding the six months ended June 30, 2022)	$	17,456
2023		35,988
2024		37,342
2025		38,748
2026		40,206
Thereafter		722,134
Subtotal	$	891,874
Note payable, Texas Bank & Trust - DGSE
Year Ending December 31,	Amount
2022 (excluding the six months ended June 30, 2022)	$	8,971
2023		18,503
2024		19,209
2025		418,474
Subtotal	$	465,157
Note payable, Texas Bank & Trust - DGSE
Year Ending December 31,	Amount
2022 (excluding the six months ended June 30, 2022)	$	35,079
2023		72,363
2024		74,750
2025		77,216
2026		79,512
Thereafter		1,383,017
Subtotal	$	1,721,937
Note payable, Farmers Bank - ECHG
Year Ending December 31,	Amount
2022 (excluding the six months ended June 30, 2022)	$	116,590
2023		239,204
2024		246,725
2025		254,484
2026		5,314,147
Subtotal	$	6,171,150

Note payable - Avail Transaction
Year Ending December 31,	Amount
2022 (excluding the six months ended June 30, 2022)	$	333,334
2023		666,668
2024		666,668
2025		166,663
Subtotal	$	1,833,333
Note payable, Texas Bank & Trust - Envela
Year Ending December 31,	Amount
2022 (excluding the six months ended June 30, 2022)	$	54,948
2023		112,661
2024		116,450
2025		2,504,318
Subtotal	$	2,788,377
	$	16,591,734

Future scheduled aggregate amount of principal payments and maturities of our notes payable as of June 30, 2022 are as follows:

	Scheduled
	Principal		Loan
Scheduled Principal Payments and Maturities by Year:	Payments		Maturities		Total
2022 (excluding the six months ended June 30, 2022)	$	617,765	$	-	$	617,765
2023		1,250,815		-		1,250,815
2024		1,269,887		-		1,269,887
2025		595,584		2,976,482		3,572,066
2026		434,160		7,341,891		7,776,051
2027 and Thereafter		558,168		1,546,982		2,105,150
Total	$	4,726,379	$	11,865,355	$	16,591,734

XML

STOCKBASED COMPENSATION

6 Months Ended

Jun. 30, 2022

STOCKBASED COMPENSATION

NOTE 15 - STOCK-BASED COMPENSATION

NOTE 15 — STOCK-BASED COMPENSATION

The Company accounts for share-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.

There was no stock-based compensation expense for the three and six months ended June 30, 2022 and 2021.

XML

RELATED PARTY TRANSACTIONS

6 Months Ended

Jun. 30, 2022

RELATED PARTY TRANSACTIONS

NOTE 16 - RELATED PARTY TRANSACTIONS

NOTE 16 — RELATED PARTY TRANSACTIONS

The Company has a corporate policy governing the identification, review, consideration and approval or ratification of transactions with related persons, as that term is defined in the Instructions to Item 404(a) of Regulation S-K, promulgated under the Securities Act (each such person a Related Party”). Under this policy, all Related Party transactions are identified and approved prior to consummation of the transaction to ensure they are consistent with the Company’s best interests and the best interests of its stockholders. Among other factors, the Company’s Board considers the size and duration of the transaction, the nature and interest of the of the Related Party in the transaction, whether the transaction may involve a conflict of interest, and if the transaction is on terms that are at least as favorable to the Company as would be available in a comparable transaction with an unaffiliated third party. The Company’s Board reviews all Related Party transactions at least annually to determine if it is in the best interest of the Company and the Company’s stockholders to continue, modify, or terminate any of the Related Party transactions. Envela’s Related Person Transaction Policy is available for review in its entirety under the “Investors” menu of the Company’s corporate relations website at www.envela.com.

On May 20, 2019, in connection with the Echo Transaction, the Company entered into two loan agreements with John R. Loftus, the Company’s CEO, President and Chairman of the Board. ECHG, LLC executed a five-year, $6,925,979 note for the Echo Transaction, amortized over 20 years at a 6% annual interest rate. The interest and principal payment due monthly was $49,646. DGSE executed a five-year, $3,074,021 note to pay off the accounts payable – related party balance to a former Related Party as of May 20, 2019. That promissory note was also amortized over 20 years at a 6% annual interest rate. The interest and principal payment due monthly on the note for DGSE was $22,203. Both notes were being serviced by operational cash flow. On November 23, 2021, both notes were refinanced by Farmers State Bank of Oakley, Kansas. For the three months ended June 30, 2022 and 2021, the Company paid Mr. Loftus $0 and $142,144, respectively, in interest on the Company’s notes payable, related party. For the six months ended June 30, 2022 and 2021, the Company paid Mr. Loftus $0 and $285,353, respectively, in interest on the Company’s notes payable, related party.

XML

CONTINGENCIES

6 Months Ended

Jun. 30, 2022

Commitments and contingencies

NOTE 17 - CONTINGENCIES

 NOTE 17 — CONTINGENCIES

The coronavirus disease 2019 (COVID-19) pandemic has adversely affected global economic business conditions. Future sales on products like ours could decline or fluctuate due to increased or fluctuating commodities prices, particularly gold. Although we are continuing to monitor and assess the effects of the COVID-19 pandemic, the ultimate impact is highly uncertain and subject to change. The duration of any such impact cannot be predicted, nor can the timing of the development, distribution and acceptance of effective vaccines, booster shots or other treatments for potential COVID-19 divergent strains, including the Delta variant, omicron variant or other variants that may surface. In addition, the effects of the COVID-19 pandemic are subject to, among other things, the effect of government responses to the COVID-19 pandemic on our operations, including vaccine mandates, impacts of the COVID-19 pandemic on global and domestic economic conditions, including with respect to commercial activity, our customers and business partners, as well as consumer preferences and demand.

Escalating global tensions caused by the conflict between Russia and Ukraine has upset the stability within the region of the former Soviet era block. This could lead to further volatility in global energy and other industries that could negatively impact our operations. The U.S. government has imposed sanctions and export controls against Russia and Russian interests and threatened additional sanctions and controls. The impact of these measures, as well as other measures taken, as it concerns our operations is currently unknown.

XML

ACCOUNTING POLICIES AND ESTIMATES (Policies)

6 Months Ended

Jun. 30, 2022

ACCOUNTING POLICIES AND ESTIMATES

Financial Instruments

The carrying amounts reported in the condensed consolidated balance sheets for cash equivalents, trade receivables, prepaid expenses, other current assets, accounts payable, accrued expenses and customer deposits and other liabilities approximate fair value because of the immediate or short-term nature of these financial instruments. Notes payable and line of credit approximate fair value due to the market interest rate charged.

Earnings Per Share

Basic earnings per share of our common stock, par value $0.01 per share (our “Common Stock”), is computed by dividing net earnings available to holders of the Company’s Common Stock by the weighted average number of shares of Common Stock outstanding for the reporting period. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts requiring the Company to issue Common Stock were exercised or converted into Common Stock. For the calculation of diluted earnings per share, the basic weighted average number of shares is increased by the dilutive effect of stock options and warrants outstanding determined using the treasury stock method.

Goodwill

Goodwill is not amortized but evaluated for impairment on an annual basis during the fourth quarter of our fiscal year, or earlier if events or circumstances indicate the carrying value may be impaired. The Company’s goodwill is related to ECHG only and not the entire Company. ECHG has its own, separate financial information to perform goodwill impairment testing at least annually or if events indicate that those assets may be impaired. As a result of the current market and economic conditions related to the coronavirus pandemic (“COVID-19”) and the war between Ukraine and Russia, in accordance with step 1 of the guidelines set forth in ASC 350-20-35-3A, the Company concluded there were no impairments of goodwill that resulted from those triggering events as of June 30, 2022. The Company will continue to evaluate goodwill for the ECHG segment. For tax purposes, goodwill is amortized and deductible over fifteen years.

ECHG goodwill was allocated in connection with three acquisitions of the assets now held by Echo on May 20, 2019 (the “Echo Transaction”), of the assets now held by Teladvance on June 9, 2021 (the “CExchange Transaction”) and of the assets now held by Avail on October 29, 2021 (the “Avail Transaction”). The preliminary goodwill associated with the Avail Transaction was $3,491,285. There was an adjustment made to goodwill concerning the Avail Transaction from an additional cash payment made during the three months ending June 30, 2022 of $216,988, bringing the total goodwill for the Avail Transaction to $3,708,273 as of June 30, 2022. There have been no other adjustments or impairment charges to goodwill. As of June 30, 2022 and December 31 2021, goodwill was $6,357,453 and $6,140,465, respectively.

Recent Accounting Pronouncements

In June 2016, the FASB issued a new credit loss accounting standard ASU 2016-13. The new accounting standard introduces the current expected credit losses methodology for estimating allowances for credit losses which will be based on expected losses rather than incurred losses. We will be required to use a forward-looking expected credit loss methodology for accounts receivable, loans and other financial instruments. The standard will be adopted upon the effective date for us beginning January 1, 2023 by using a modified retrospective transition approach to align our credit loss methodology with the new standard. The Company is evaluating the financial statement implications of ASU 2016-13.

There were no other new accounting standards that had a material impact on the Company’s consolidated financial statements during the six-month period ended June 30, 2022, and there were no other new accounting standards or pronouncements that were issued but not yet effective as of June 30, 2022 that the Company expects to have a material impact on its consolidated financial statements.

XML

INVENTORIES (Tables)

6 Months Ended

Jun. 30, 2022

INVENTORIES

Schedule Of Inventories

	June 30,		December 31,
	2022		2021
DGSE
Resale	$	15,964,881	$	10,422,072
Recycle		15,791		11,995
Subtotal		15,980,672		10,434,067
ECHG
Resale		1,236,523		3,350,159
Recycle		586,901		264,210
Subtotal		1,823,424		3,614,369
	$	17,804,096	$	14,048,436

XML

ACQUISITION (Tables)

6 Months Ended

Jun. 30, 2022

ACQUISITIONS

Schedule Of Assets Acquired Of Purchase Price

Description	Amount
Assets
Cash	$	988,870
Account receivables		395,144
Inventories		486,736
Prepaid expenses		93,727
Fixed assets - net		247,038
Right-of-use assets		609,511
Other assets		13,268
Liabilities
Account payables		(562,778	)
Accrued liabilities		(653,289	)
Operating lease liabilities		(609,511	)
Net assets		1,008,716
Goodwill		3,708,272
Total Purchase Price	$	4,716,988

Schedule Of Consolidated Statement Of Income

	Consolidated Statement  of Income For the Three Months Ended		Proforma Combined For the Three Months Ended
	June 30, 2022		June 30, 2021
	(unaudited)		(unaudited)
Revenue	$	42,639,718	$	35,525,133
Income from continuing operations	$	3,847,858	$	2,482,863
Net income	$	3,847,858	$	2,482,863
Basic net income per common share	$	0.14	$	0.09
Diluted net income per common share	$	0.14	$	0.09

	Consolidated Statement of Income For the Six Months Ended		Proforma Combined For the Six Months Ended
	June 30, 2022		June 30, 2021
	(unaudited)		(unaudited)
Revenue	$	90,054,816	$	62,635,207
Income from continuing operations	$	6,495,083	$	4,837,758
Net income	$	6,495,083	$	4,837,758
Basic net income per common share	$	0.24	$	0.18
Diluted net income per common share	$	0.24	$	0.18

XML

GOODWILL (Tables)

6 Months Ended

Jun. 30, 2022

GOODWILL

Schedule Of Goodwill

	June 30,		December 31,
	2022		2021
Opening balance	$	6,140,465	$	1,367,109
Additions (1)		216,988		4,773,356
Goodwill	$	6,357,453	$	6,140,465

XML

PROPERTY AND EQUIPMENT (Tables)

6 Months Ended

Jun. 30, 2022

PROPERTY AND EQUIPMENT

Schedule Of Property And Equipment

	June 30,			December 31,
	2022			2021
DGSE
Land	$	1,640,220		$	1,640,220
Building and improvements		2,781,903			2,764,529
Leasehold improvements		1,450,695			1,450,695
Machinery and equipment		1,056,315			1,056,315
Furniture and fixtures		603,945			526,250
Vehicles		22,859			22,859
		7,555,937			7,460,868
Less: accumulated depreciation		(2,501,296	)		(2,343,923	)
Sub-Total		5,054,641			5,116,945
ECHG
Building and improvements		135,491			135,491
Machinery and equipment		1,167,321			1,109,306
Furniture and fixtures		145,950			145,950
		1,448,762			1,390,747
Less: accumulated depreciation		(366,438	)		(212,147	)
Sub-Total		1,082,324			1,178,600
Envela
Land		1,106,664			1,106,664
Building and improvements		2,502,216			2,456,324
Machinery and equipment		28,626			23,676
		3,637,506			3,586,664
Less: accumulated depreciation		(112,070	)		(76,021	)
Sub-Total		3,525,436			3,510,643
	$	9,662,401		$	9,806,188

XML

INTANGIBLE ASSETS (Tables)

6 Months Ended

Jun. 30, 2022

GOODWILL

Schedule Of Intangible Assets

	June 30,			December 31,
	2022			2021
DGSE
Domain names	$	41,352		$	41,352
Point of sale system		330,000			330,000
		371,352			371,352
Less: accumulated amortization		(302,502	)		(269,502	)
Subtotal		68,850			101,850
ECHG
Trademarks (1)		1,483,000			1,483,000
Customer Contracts (1)		1,873,000			1,873,000
Trademarks/Tradenames (2)		114,000			114,000
Customer Relationships (2)		345,000			345,000
		3,815,000			3,815,000
Less: accumulated amortization		(1,083,355	)		(892,605	)
Subtotal		2,731,645			2,922,395
	$	2,800,495		$	3,024,245

Schedule Of Estimated Amortization Expense

	DGSE		ECHG		Total
2022 (excluding the six months ending June 30, 2022)		33,000		190,750		223,750
2023		30,350		381,500		411,850
2024		5,500		381,500		387,000
2025		-		381,500		381,500
2026		-		381,500		381,500
Thereafter		-		1,014,895		1,014,895
	$	68,850	$	2,731,645	$	2,800,495

XML

ACCRUED EXPENSES (Tables)

6 Months Ended

Jun. 30, 2022

ACCRUED EXPENSES

Schedule Of Accrued Expenses

	June 30,		December 31,
	2022		2021
DGSE
Accrued interest	$	12,079	$	12,627
Payroll		118,857		131,325
Property taxes		120,449		88,046
Sales tax		57,894		150,070
Other administrative expenss		30,000		-
Subtotal		339,279		382,068
ECHG
Accrued interest		7,862		14,547
Payroll		337,180		334,431
Unvouchered payables - inventory		252,020		461,481
Material & shipping costs (COGS)		500,326		78,647
Other accrued expenses		-		51,506
Subtotal		1,097,388		940,612
Envela
Accrued interest		7,448		8,355
Payroll		25,642		25,175
Professional fees		125,617		220,101
Property Tax		43,400		84,920
Other administrative expenses		10,794		18,453
State income tax		92,226		109,682
Subtotal		305,127		466,686
	$	1,741,794	$	1,789,366

XML

SEGMENT INFORMATION (Tables)

6 Months Ended

Jun. 30, 2022

SEGMENT INFORMATION

Schedule Of Segment Reporting

	For The Three Months Ended June 30,
	2022									2021
	DGSE			ECHG			Consolidated			DGSE		ECHG		Consolidated
Revenue:
Sales	$	30,339,127		$	12,300,591		$	42,639,718		$	23,012,324	$	10,711,682	$	33,724,006
Cost of goods sold		26,150,543			5,011,175			31,161,718			19,915,328		6,680,788		26,596,116
Gross profit		4,188,584			7,289,416			11,478,000			3,096,996		4,030,894		7,127,890
Expenses:
Selling, general and administrative expenses		2,194,494			4,889,409			7,083,903			1,889,895		2,941,330		4,831,225
Depreciation and amortization		101,434			178,082			279,516			97,435		118,784		216,219
		2,295,928			5,067,491			7,363,419			1,987,330		3,060,114		5,047,444
Operating income		1,892,656			2,221,925			4,114,581			1,109,666		970,780		2,080,446
Other income/expense:
Other income (expense), net		(49,018	)		(46,411	)		(95,429	)		119,460		163,595		283,055
Interest expense		61,663			59,379			121,042			68,692		109,012		177,704
Income before income taxes		1,781,975			2,116,135			3,898,110			1,160,434		1,025,363		2,185,797
Income tax expense		15,391			34,861			50,252			14,185		18,500		32,685
Net income	$	1,766,584		$	2,081,274		$	3,847,858		$	1,146,249	$	1,006,863	$	2,153,112

	For The Six Months Ended June 30,
	2022									2021
	DGSE			ECHG			Consolidated			DGSE		ECHG		Consolidated
Revenue:
Sales	$	66,121,999		$	23,932,817		$	90,054,816		$	41,926,825	$	17,287,622	$	59,214,447
Cost of goods sold		57,709,953			11,155,829			68,865,782			36,022,194		9,760,099		45,782,293
Gross profit		8,412,046			12,776,988			21,189,034			5,904,631		7,527,523		13,432,154
Expenses:
Selling, general and administrative expenses		4,332,443			9,311,215			13,643,658			3,672,332		5,312,122		8,984,454
Depreciation and amortization		208,397			363,066			571,463			194,257		226,874		421,131
		4,540,840			9,674,281			14,215,121			3,866,589		5,538,996		9,405,585
Operating income		3,871,206			3,102,707			6,973,913			2,038,042		1,988,527		4,026,569
Other income/expense:
Other income (expense), net		(77,009	)		(76,996	)		(154,005	)		231,191		323,805		554,996
Interest expense		122,904			121,377			244,281			137,177		219,549		356,726
Income before income taxes		3,671,293			2,904,334			6,575,627			2,132,056		2,092,783		4,224,839
Income tax expense		28,568			51,976			80,544			27,890		35,565		63,455
Net income	$	3,642,725		$	2,852,358		$	6,495,083		$	2,104,166	$	2,057,218	$	4,161,384

XML

REVENUE RECOGNITION (Tables)

6 Months Ended

Jun. 30, 2022

REVENUE RECOGNITION

Schedule Of Disaggregation Of Revenue Listed By Sales Category And Segment

CONSOLIDATED	Three Months Ended June 30,
	2022							2021
	Revenues		Gross Profit		Margin			Revenues		Gross Profit		Margin
DGSE
Resale	$	28,165,026	$	3,719,954		13.2	%	$	20,893,838	$	2,678,640		12.8	%
Recycled		2,174,101		468,630		21.6	%		2,118,486		418,356		19.7	%
Subtotal		30,339,127		4,188,584		13.8	%		23,012,324		3,096,996		13.5	%
ECHG
Resale		9,102,001		5,566,507		61.2	%		8,595,910		3,019,685		35.1	%
Recycled		3,198,590		1,722,909		53.9	%		2,115,772		1,011,209		47.8	%
Subtotal		12,300,591		7,289,416		59.3	%		10,711,682		4,030,894		37.6	%
	$	42,639,718	$	11,478,000		26.9	%	$	33,724,006	$	7,127,890		21.1	%

CONSOLIDATED	Six Months Ended June 30,
	2022							2021
	Revenues		Gross Profit		Margin			Revenues		Gross Profit		Margin
DGSE
Resale	$	61,842,159	$	7,462,806		12.1	%	$	38,214,479	$	5,135,784		13.4	%
Recycled		4,279,840		949,240		22.2	%		3,712,346		768,847		20.7	%
Subtotal		66,121,999		8,412,046		12.7	%		41,926,825		5,904,631		14.1	%
ECHG
Resale		18,681,858		10,140,775		54.3	%		13,336,902		5,631,869		42.2	%
Recycled		5,250,959		2,636,213		50.2	%		3,950,720		1,895,654		48.0	%
Subtotal		23,932,817		12,776,988		53.4	%		17,287,622		7,527,523		43.5	%
	$	90,054,816	$	21,189,034		23.5	%	$	59,214,447	$	13,432,154		22.7	%

XML

LEASES (Tables)

6 Months Ended

Jun. 30, 2022

LEASES

Schedule Of Future Annual Minimum Lease Payments

	Operating
	Leases
DGSE
2022 (excluding the six months ending June 30, 2022)	$	267,938
2023		541,984
2024		552,414
2025		412,269
2026 and thereafter		405,114
Total minimum lease payments		2,179,719
Less imputed interest		(188,707	)
DGSE Sub-Total		1,991,012
ECHG
2022 (excluding the six months ending June 30, 2022)		661,506
2023		1,357,381
2024		1,396,129
2025		1,321,297
2026 and thereafter		507,780
Total minimum lease payments		5,244,093
Less imputed interest		(381,784	)
ECHG Sub-Total		4,862,309
Total		6,853,321
Current portion		1,631,270
	$	5,222,051

XML

BASIC AND DILUTED AVERAGE SHARES (Tables)

6 Months Ended

Jun. 30, 2022

BASIC AND DILUTED AVERAGE SHARES

Schedule Of Reconciliation Of Basic And Diluted Weighted Average Common Shares

	For the Three Months Ended
	June 30,
	2022		2021
Basic weighted average shares		26,924,631		26,924,631
Effect of potential dilutive securities		15,000		15,000
Diluted weighted average shares		26,939,631		26,939,631

	For the six Months Ended
	June 30,
	2022		2021
Basic weighted average shares		26,924,631		26,924,631
Effect of potential dilutive securities		15,000		15,000
Diluted weighted average shares		26,939,631		26,939,631

XML

LONG-TERM DEBT (Tables)

6 Months Ended

Jun. 30, 2022

LONG-TERM DEBT

Schedule Of Long-term Debt

	Outstanding Balance
	June 30,		December 31,		Current
	2022		2021		Interest Rate			Maturity
DGSE
Note payable, Farmers Bank (1)	$	2,719,906	$	2,770,729		3.10	%	November 15, 2026
Note payable, Truist Bank (2)		891,874		909,073		3.65	%	July 9, 2030
Note payable, Texas Bank & Trust (3)		465,157		474,009		3.75	%	September 14, 2025
Note payable, Texas Bank & Trust (4)		1,721,937		1,752,446		3.25	%	July 30, 2031
DGSE Sub-Total		5,798,874		5,906,257
ECHG
Note payable, Farmers Bank (1)		6,171,150		6,286,459		3.10	%	November 15, 2026
Line of Credit (5)		-		1,700,000		3.10	%	November 15, 2024
Avail Transaction note (6)		1,833,333		2,000,000		0.00	%	April 1, 2025
ECHG Sub-Total		8,004,483		9,986,459
Envela
Note payable, Texas Bank & Trust (7)		2,788,377		2,843,415		3.25	%	November 4, 2025
Sub-Total		16,591,734		18,736,131
Current portion		1,241,480		2,765,794
	$	15,350,254	$	15,970,337

Schedule of Future Payments of Notes Payable, Related Party

Note payable, Farmers State Bank - DGSE
Year Ending December 31,	Amount
2022 (excluding the six months ended June 30, 2022)	$	51,387
2023		105,428
2024		108,743
2025		112,163
2026		2,342,185
Subtotal	$	2,719,906

Note payable, Truist Bank - DGSE
Year Ending December 31,	Amount
2022 (excluding the six months ended June 30, 2022)	$	17,456
2023		35,988
2024		37,342
2025		38,748
2026		40,206
Thereafter		722,134
Subtotal	$	891,874
Note payable, Texas Bank & Trust - DGSE
Year Ending December 31,	Amount
2022 (excluding the six months ended June 30, 2022)	$	8,971
2023		18,503
2024		19,209
2025		418,474
Subtotal	$	465,157
Note payable, Texas Bank & Trust - DGSE
Year Ending December 31,	Amount
2022 (excluding the six months ended June 30, 2022)	$	35,079
2023		72,363
2024		74,750
2025		77,216
2026		79,512
Thereafter		1,383,017
Subtotal	$	1,721,937
Note payable, Farmers Bank - ECHG
Year Ending December 31,	Amount
2022 (excluding the six months ended June 30, 2022)	$	116,590
2023		239,204
2024		246,725
2025		254,484
2026		5,314,147
Subtotal	$	6,171,150

Note payable - Avail Transaction
Year Ending December 31,	Amount
2022 (excluding the six months ended June 30, 2022)	$	333,334
2023		666,668
2024		666,668
2025		166,663
Subtotal	$	1,833,333
Note payable, Texas Bank & Trust - Envela
Year Ending December 31,	Amount
2022 (excluding the six months ended June 30, 2022)	$	54,948
2023		112,661
2024		116,450
2025		2,504,318
Subtotal	$	2,788,377
	$	16,591,734

Schedule Of Long-term Debt Maturities Of Principal Payments

	Scheduled
	Principal		Loan
Scheduled Principal Payments and Maturities by Year:	Payments		Maturities		Total
2022 (excluding the six months ended June 30, 2022)	$	617,765	$	-	$	617,765
2023		1,250,815		-		1,250,815
2024		1,269,887		-		1,269,887
2025		595,584		2,976,482		3,572,066
2026		434,160		7,341,891		7,776,051
2027 and Thereafter		558,168		1,546,982		2,105,150
Total	$	4,726,379	$	11,865,355	$	16,591,734

XML

ACCOUNTING POLICIES AND ESTIMATES (Details Narrative) - USD ($)		3 Months Ended
	Jun. 09, 2021	Jun. 30, 2022	Dec. 31, 2021	Dec. 31, 2020
ACCOUNTING POLICIES AND ESTIMATES
Goodwill		$ 6,357,453	$ 6,140,465	$ 1,367,109
Basic Earnings Per Share Of Common Stock, Par Value		$ 0.01	$ 0.01
Exchange Transaction Of Goodwill	$ 3,491,285
Additional cash payment		$ 216,988
Total goodwill		$ 3,708,273

XML

INVENTORIES (Details) - USD ($)	Jun. 30, 2022	Dec. 31, 2021
Inventories	$ 17,804,096	$ 14,048,436
DGSE [Member] | Note Payable Farmers State Bank
Inventories	15,980,672	10,434,067
DGSE [Member] | Resale
Inventories	15,964,881	10,422,072
DGSE [Member] | Recycled
Inventories	15,791	11,995
ECHG [Member] | Note Payable Farmers State Banks [Member]
Inventories	1,823,424	3,614,369
ECHG [Member] | Resale
Inventories	1,236,523	3,350,159
ECHG [Member] | Recycles
Inventories	$ 586,901	$ 264,210

XML

ACQUISITION (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
ACQUISITION (Details)
Revenue	$ 42,639,718	$ 35,525,133	$ 90,054,816	$ 62,635,207
Income (loss) From Continuing Operations	3,847,858	2,482,863	6,495,083	4,837,758
Net Income	$ 3,847,858	$ 2,482,863	$ 6,495,083	$ 4,837,758
Basic Net Income Per Common Share	$ 0.14	$ 0.09	$ 0.24	$ 0.18
Diluted Net Income Per Common Share	$ 0.14	$ 0.09	$ 0.24	$ 0.18

XML

ACQUISITION (Details 1) - USD ($)	6 Months Ended
	Jun. 30, 2022	Dec. 31, 2021	Dec. 31, 2020
Total Purchase Price	$ 4,716,988
Goodwill	6,357,453	$ 6,140,465	$ 1,367,109
Avail Transaction [Member]
Cash	988,870
Account Receivables	395,144
Inventory	486,736
Prepaid Expenses	93,727
Fixed Assets - Net	247,038
Right-of-use Assets	609,511
Other Assets	13,268
Account Payables	(562,778)
Accrued Liabilities	(653,289)
Operating Lease Liabilities	609,511
Net Assets	1,008,716
Goodwill	$ 3,708,272

XML

ACQUISITION (Details Narrative) - Avail Recovery Solutions [Member] - USD ($)	6 Months Ended
	Jun. 30, 2022	May 31, 2022	Dec. 31, 2021	Oct. 29, 2021
Accrued And Unpaid Interest				$ 2,000,000
Liabilities And Rights And Interests				4,500,000
Initial Payment				2,500,000
Payments				$ 166,667
Imputed Interest Rate				3.10%
Goodwill			$ 3,491,284	$ 3,491,284
Useful Life	15 years
Cash Paid		$ 216,988

XML

GOODWILL (Details) - USD ($)	6 Months Ended	12 Months Ended
	Jun. 30, 2022	Dec. 31, 2021
GOODWILL
Opening balance	$ 6,140,465	$ 1,367,109
Additions	216,988	4,773,356
Goodwill	$ 6,357,453	$ 6,140,465

XML

GOODWILL (Details Narrative) - USD ($)	Dec. 31, 2021	Oct. 29, 2021	Jun. 09, 2021
Avail Recovery Solutions [Member]
Goodwill	$ 3,491,284	$ 3,491,284
CExchange Transaction [Member]
Goodwill	$ 4,773,356		$ 1,282,072

XML

PROPERTY AND EQUIPMENT (Details) - USD ($)	Jun. 30, 2022	Dec. 31, 2021
Property And Equipment, Net	$ 9,662,401	$ 9,806,188
DGSE [Member]
Property And Equipment, Net	5,054,641	5,116,945
Property And Equipment, Gross	7,555,937	7,460,868
Less: Accumulated Depreciation	(2,501,296)	(2,343,923)
DGSE [Member] | Buildings and Improvements
Property And Equipment, Gross	2,781,903	2,764,529
DGSE [Member] | Leasehold Improvements
Property And Equipment, Gross	1,450,695	1,450,695
DGSE [Member] | Machinery and Equipment
Property And Equipment, Gross	1,056,315	1,056,315
DGSE [Member] | Furniture and Fixtures
Property And Equipment, Gross	603,945	526,250
DGSE [Member] | Vehicles
Property And Equipment, Gross	22,859	22,859
DGSE [Member] | Land [Member]
Property And Equipment, Gross	1,640,220	1,640,220
ECHG [Member]
Property And Equipment, Net	1,082,324	1,178,600
Property And Equipment, Gross	1,448,762	1,390,747
Less: Accumulated Depreciation	(366,438)	(212,147)
ECHG [Member] | Buildings and Improvements
Property And Equipment, Gross	135,491	135,491
ECHG [Member] | Machinery and Equipment
Property And Equipment, Gross	1,167,321	1,109,306
ECHG [Member] | Furniture and Fixtures
Property And Equipment, Gross	145,950	145,950
Envela
Property And Equipment, Net	3,525,436	3,510,643
Property And Equipment, Gross	3,637,506	3,586,664
Less: Accumulated Depreciation	(112,070)	(76,021)
Envela | Buildings and Improvements
Property And Equipment, Gross	2,502,216	2,456,324
Envela | Machinery and Equipment
Property And Equipment, Gross	28,626	23,676
Envela | Land [Member]
Property And Equipment, Gross	$ 1,106,664	$ 1,106,664

XML

INTANGIBLE ASSETS (Details) - USD ($)	Jun. 30, 2022	Dec. 31, 2021
Point of Sale System | DGSE
Intangible Assets, Gross	$ 330,000	$ 330,000
DGSE [Member]
Total Intangibles	68,850	101,850
Intangible Assets, Gross	371,352	371,352
Less: Accumulated Amortization	302,502	269,502
DGSE [Member] | Domain Names
Intangible Assets, Gross	41,352	41,352
ECHG [Member]
Total Intangibles	2,731,645	2,922,395
Intangible Assets, Gross	3,815,000	3,815,000
Less: Accumulated Amortization	1,083,355	892,605
ECHG [Member] | Trademarks
Intangible Assets, Gross	1,483,000	1,483,000
ECHG [Member] | Trademarks/Tradename [Member]
Intangible Assets, Gross	114,000	114,000
ECHG [Member] | Customer Contracts
Intangible Assets, Gross	1,873,000	1,873,000
ECHG [Member] | Customer Relationships [Member]
Intangible Assets, Gross	$ 345,000	$ 345,000

XML

INTANGIBLE ASSETS (Details 1) - USD ($)	Jun. 30, 2022	Dec. 31, 2021
DGSE [Member]
2022	$ 33,000
2023	30,350
2024	5,500
2025	0
Thereafter	0
Total	68,850	$ 101,850
2026	0
ECHG [Member]
2022	190,750
2023	381,500
2024	381,500
2025	381,500
Thereafter	1,014,895
Total	2,731,645	$ 2,922,395
2026	$ 381,500

XML

ACCRUED EXPENSES (Details) - USD ($)	Jun. 30, 2022	Dec. 31, 2021
Accrued Expenses	$ 1,741,794	$ 1,789,366
DGSE [Member]
Accrued Expenses	339,279	382,068
Accrued Interest	12,079	12,627
Payroll	118,857	131,325
Property Tax	120,449	88,046
Sales Tax	57,894	150,070
Other Administrative Expense	30,000	0
ECHG [Member]
Accrued Expenses	1,097,388	940,612
Accrued Interest	7,862	14,547
Payroll	337,180	334,431
Unvouchered Payables - Inventory	252,020	461,481
Material & Shipping Costs (cogs)	500,326	78,647
Other Accrued Expenses	0	51,506
Envela
Accrued Expenses	305,127	466,686
Accrued Interest	7,448	8,355
Payroll	25,642	25,175
Property Tax	43,400	84,920
Other Administrative Expense	10,794	18,453
Professional Fees	125,617	220,101
State Income Tax	$ 92,226	$ 109,682

XML

SEGMENT INFORMATION (Details) - USD ($)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2020
Sales	$ 42,639,718	$ 33,724,006	$ 90,054,816	$ 59,214,447
Cost of goods sold	31,161,718	26,596,116	68,865,782	45,782,293
Gross profit	11,478,000	7,127,890	21,189,034	13,432,154
Selling, general and administrative expenses	7,083,903	4,831,225	13,643,658	8,984,454
Depreciation and amortization	279,516	216,219	571,463	421,131
Total cost of revenue	7,363,419	5,047,444	14,215,121	9,405,585
Operating income	4,114,581	2,080,446	6,973,913	4,026,569
Other income (expense)	(95,429)	283,055	(154,005)	554,996
Interest expense	121,042	177,704	244,281	356,726
Income before income taxes	3,898,110	2,185,797	6,575,627	4,224,839
Income tax expense	50,252	32,685	80,544	63,455
Net Income	3,847,858	2,153,112	6,495,083	4,161,384
DGSE [Member]
Sales	30,339,127	23,012,324	66,121,999	41,926,825
Cost of goods sold	26,150,543	19,915,328	57,709,953	36,022,194
Gross profit	4,188,584	3,096,996	8,412,046	5,904,631
Selling, general and administrative expenses	2,194,494	1,889,895	4,332,443	3,672,332
Depreciation and amortization	101,434	97,435	208,397	194,257
Total cost of revenue	2,295,928	1,987,330	4,540,840	3,866,589
Operating income	1,892,656	1,109,666	3,871,206	2,038,042
Other income (expense)	(49,018)	119,460	(77,009)	231,191
Interest expense	61,663	68,692	122,904	137,177
Income before income taxes	1,781,975	1,160,434	3,671,293	2,132,056
Income tax expense	15,391	14,185	28,568	27,890
Net Income	1,766,584	1,146,249	3,642,725	2,104,166
DGSE [Member] | Resale
Sales	28,165,026	20,893,838	61,842,159	38,214,479	$ 79,790,419
Gross profit	3,719,954	2,678,640	7,462,806	5,135,784
ECHG [Member]
Sales	12,300,591	10,711,682	23,932,817	17,287,622
Cost of goods sold	5,011,175	6,680,788	11,155,829	9,760,099
Gross profit	7,289,416	4,030,894	12,776,988	7,527,523
Selling, general and administrative expenses	4,889,409	2,941,330	9,311,215	5,312,122
Depreciation and amortization	178,082	118,784	363,066	226,874
Total cost of revenue	5,067,491	3,060,114	9,674,281	5,538,996
Operating income	2,221,925	970,780	3,102,707	1,988,527
Other income (expense)	(46,411)	163,595	(76,996)	323,805
Interest expense	59,379	109,012	121,377	219,549
Income before income taxes	2,116,135	1,025,363	2,904,334	2,092,783
Income tax expense	34,861	18,500	51,976	35,565
Net Income	2,081,274	1,006,863	2,852,358	2,057,218
ECHG [Member] | Resale
Sales	9,102,001	8,595,910	18,681,858	13,336,902
Gross profit	$ 5,566,507	$ 3,019,685	$ 10,140,775	$ 5,631,869

XML

REVENUE RECOGNITION (Details) - USD ($)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2020
Revenues	$ 42,639,718	$ 33,724,006	$ 90,054,816	$ 59,214,447
Gross Margin	$ 11,478,000	$ 7,127,890	$ 21,189,034	$ 13,432,154
Margin	26.90%	21.10%	23.50%	22.70%
DGSE [Member]
Revenues	$ 30,339,127	$ 23,012,324	$ 66,121,999	$ 41,926,825
Gross Margin	$ 4,188,584	$ 3,096,996	$ 8,412,046	$ 5,904,631
Margin	13.80%	13.50%	12.70%	14.10%
DGSE [Member] | Resale
Revenues	$ 28,165,026	$ 20,893,838	$ 61,842,159	$ 38,214,479	$ 79,790,419
Gross Margin	$ 3,719,954	$ 2,678,640	$ 7,462,806	$ 5,135,784
Margin	13.20%	12.80%	12.10%	13.40%
DGSE [Member] | Recycled
Revenues	$ 2,174,101	$ 2,118,486	$ 4,279,840	$ 3,712,346
Gross Margin	$ 468,630	$ 418,356	$ 949,240	$ 768,847
Margin	21.60%	19.70%	22.20%	20.70%
ECHG [Member]
Revenues	$ 12,300,591	$ 10,711,682	$ 23,932,817	$ 17,287,622
Gross Margin	$ 7,289,416	$ 4,030,894	$ 12,776,988	$ 7,527,523
Margin	59.30%	37.60%	53.40%	43.50%
ECHG [Member] | Resale
Revenues	$ 9,102,001	$ 8,595,910	$ 18,681,858	$ 13,336,902
Gross Margin	$ 5,566,507	$ 3,019,685	$ 10,140,775	$ 5,631,869
Margin	61.20%	35.10%	54.30%	42.20%
ECHG [Member] | Recycled
Revenues	$ 3,198,590	$ 2,115,772	$ 5,250,959	$ 3,950,720
Gross Margin	$ 1,722,909	$ 1,011,209	$ 2,636,213	$ 1,895,654
Margin	53.90%	47.80%	50.20%	48.00%

XML

REVENUE RECOGNITION (Details Narrative) - USD ($)	6 Months Ended
	Jun. 30, 2022	Dec. 31, 2021
Return Allowance	$ 28,000	$ 28,000
Description Of Sales	minimum payment of 25% of the sales price
ECHG [Member]
Return Allowance	$ 26,582	$ 1,582

XML

LEASES (Details) - USD ($)	Jun. 30, 2022	Dec. 31, 2021
Less Current Portion	$ (1,631,270)	$ (1,573,824)
Long Term Operating Lease Liability	6,853,321
Total	5,222,051
DGSE [Member]
Operating Lease Liability	1,991,012
2022 (excluding The six Months Ended june 30, 2022)	267,938
2023	541,984
2024	552,414
2025	412,269
2026 And Thereafter	405,114
Total Minimum Lease Payments	2,179,719
Less Imputed Interest	(188,707)
ECHG [Member]
Operating Lease Liability	4,862,309
2022 (excluding The six Months Ended june 30, 2022)	661,506
2023	1,357,381
2024	1,396,129
2025	1,321,297
2026 And Thereafter	507,780
Total Minimum Lease Payments	5,244,093
Less Imputed Interest	$ (381,784)

XML

LEASES (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
LEASES
Leasing Costs	$ 659,860	$ 588,896	$ 1,282,723	$ 895,433
Weighted Average Remaining Lease Term			3 years 9 months
Weighted Average Discount Rate	4.40%		4.40%
Cash Paid For Operating Lease Liabilities	$ 650,606	$ 588,026	$ 1,266,703	$ 923,253

XML

BASIC AND DILUTED AVERAGE SHARES (Details) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Mar. 31, 2021	Jun. 30, 2022	Jun. 30, 2021
BASIC AND DILUTED AVERAGE SHARES
Basic Weighted Average Shares	26,924,631	26,924,631	26,924,631	26,924,631
Effect Of Potential Dilutive Securities	15,000	15,000	15,000	15,000
Diluted Weighted Average Shares	26,939,631	26,939,631	26,939,631	26,939,631

XML

BASIC AND DILUTED AVERAGE SHARES (Details 1) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Mar. 31, 2021	Jun. 30, 2022	Jun. 30, 2021
BASIC AND DILUTED AVERAGE SHARES
Basic Weighted Average Shares	26,924,631	26,924,631	26,924,631	26,924,631
Effect Of Potential Dilutive Securities	15,000	15,000	15,000	15,000
Diluted Weighted Average Shares	26,939,631	26,939,631	26,939,631	26,939,631

XML

BASIC AND DILUTED AVERAGE SHARES (Details Narrative) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Mar. 31, 2021	Jun. 30, 2022	Jun. 30, 2021
BASIC AND DILUTED AVERAGE SHARES
Effect Of Potential Dilutive Securities	15,000	15,000	15,000	15,000

XML

LONG-TERM DEBT (Details) - USD ($)	6 Months Ended
	Jun. 30, 2022	Dec. 31, 2021
Subtotal	$ 16,591,734	$ 18,736,131
Current Portion	1,241,480	2,765,794
Noncurrent Portion	15,350,254	15,970,337
Avail Transaction Note
Note Payable, Related Party	$ 1,833,333	2,000,000
Interest Rate	0.00%
Maturity	Apr. 01, 2025
Revolving Line Of Credit
Note Payable, Related Party	$ 0	1,700,000
Interest Rate	3.10%
Maturity	Nov. 15, 2024
DGSE [Member]
Subtotal	$ 5,798,874	5,906,257
DGSE [Member] | Note Payable Farmers State Bank
Subtotal	2,719,906
Note Payable, Related Party	$ 2,719,906	2,770,729
Interest Rate	3.10%
Maturity	Nov. 15, 2026
DGSE [Member] | Note Payable Truist Bank
Subtotal	$ 891,874
Note Payable, Related Party	$ 891,874	909,073
Interest Rate	3.65%
Maturity	Jul. 09, 2030
DGSE [Member] | Note Payable Texas Bank And Trust
Subtotal	$ 465,157
Note Payable, Related Party	$ 465,157	474,009
Interest Rate	3.75%
Maturity	Sep. 14, 2025
DGSE [Member] | Note Payable Texas Bank And Trust 1
Subtotal	$ 1,721,937
Note Payable, Related Party	$ 1,721,937	1,752,446
Interest Rate	3.25%
Maturity	Jul. 30, 2031
ECHG [Member]
Subtotal	$ 8,004,483	9,986,459
ECHG [Member] | Note Payable Farmers State Bank
Subtotal	6,171,150
Note Payable, Related Party	$ 6,171,150	6,286,459
Interest Rate	3.10%
Maturity	Nov. 15, 2026
Envela | Note Payable Texas Bank And Trust
Subtotal	$ 2,788,377
Note Payable, Related Party	$ 2,788,377	$ 2,843,415
Interest Rate	3.25%
Maturity	Nov. 04, 2025

XML

LONG-TERM DEBT (Details 1) - USD ($)	Jun. 30, 2022	Dec. 31, 2021
Subtotal	$ 16,591,734	$ 18,736,131
2022 (excluding The six Months Ended june 30, 2022)	617,765
2023	1,250,815
2024	1,269,887
2025	3,572,066
2026	7,776,051
Thereafter	2,105,150
DGSE [Member]
Subtotal	5,798,874	5,906,257
ECHG [Member]
Subtotal	8,004,483	$ 9,986,459
Note Payable Farmers State Bank | DGSE [Member]
Subtotal	2,719,906
2022 (excluding The six Months Ended june 30, 2022)	51,387
2023	105,428
2024	108,743
2025	112,163
2026	2,342,185
Note Payable Farmers State Bank | ECHG [Member]
Subtotal	6,171,150
2022 (excluding The six Months Ended june 30, 2022)	116,590
2023	239,204
2024	246,725
2025	254,484
2026	5,314,147
Note Payable Truist Bank | DGSE [Member]
Subtotal	891,874
2022 (excluding The six Months Ended june 30, 2022)	17,456
2023	35,988
2024	37,342
2025	38,748
2026	40,206
Thereafter	722,134
Note Payable Texas Bank And Trust | DGSE [Member]
Subtotal	465,157
2022 (excluding The six Months Ended june 30, 2022)	8,971
2023	18,503
2024	19,209
2025	418,474
Note Payable Texas Bank And Trust | Envela
Subtotal	2,788,377
2022 (excluding The six Months Ended june 30, 2022)	54,948
2023	112,661
2024	116,450
2025	2,504,318
Note Payable Texas Bank And Trust 1 | DGSE [Member]
Subtotal	1,721,937
2022 (excluding The six Months Ended june 30, 2022)	35,079
2023	72,363
2024	74,750
2025	77,216
2026	79,512
Thereafter	1,383,017
Note payable - Avail Transaction
Subtotal	1,833,333
2022 (excluding The six Months Ended june 30, 2022)	333,334
2023	666,668
2024	666,668
2025	$ 166,663

XML

LONG-TERM DEBT (Details 2) - USD ($)	Jun. 30, 2022	Dec. 31, 2021
2022 (excluding The six Months Ended june 30, 2022)	$ 617,765
2023	1,250,815
2024	1,269,887
2025	3,572,066
2026	7,776,051
Thereafter	2,105,150
Subtotal	16,591,734	$ 18,736,131
Scheduled Principal payment
2022 (excluding The six Months Ended june 30, 2022)	617,765
2023	1,250,815
2024	1,269,887
2025	595,584
2026	434,160
Thereafter	558,168
Subtotal	4,726,379
Loan Maturities
2022 (excluding The six Months Ended june 30, 2022)	0
2023	0
2024	0
2025	2,976,482
2026	7,341,891
Thereafter	1,546,982
Subtotal	$ 11,865,355

XML

LONG-TERM DEBT (Details Narrative) - USD ($)				1 Months Ended
	Nov. 04, 2020	Sep. 14, 2020	Jul. 09, 2020	Nov. 23, 2021	Oct. 29, 2021	Jul. 30, 2021	May 20, 2019	Jun. 30, 2022	Dec. 31, 2021
Purchase Partly Financed			$ 956,000
New Retail Building			$ 1,195,000
Annual Interest Rate			3.65%
Monthly Interest Payments			$ 5,645
Loan Period			10 years
Amortized Period			20 years
Line Of Credit								$ 0	$ 1,700,000
Note Payable Farmers State Bank
Line Of Credit				$ 3,500,000
Line Of Credit Interest Rate				3.10%
NWH Holdings LLC [Member]
Purchase Partly Financed		$ 496,000
Annual Interest Rate		3.75%
Monthly Interest Payments		$ 2,941
Loan Period		5 years
Amortized Period		20 years
Purchase New Retail Building		$ 620,000
Gateway Holdings [Member]
Purchase Partly Financed	$ 2,960,000					$ 1,772,000,000,000
Annual Interest Rate	3.25%					3.75%
Monthly Interest Payments	$ 16,792					$ 10,509
Loan Period	5 years
Amortized Period	20 years					20 years
Purchase New Retail Building	$ 3,521
DGSE [Member]
Annual Interest Rate							6.00%
Monthly Interest Payments				$ 15,555			$ 49,646
Loan Period							5 years
Amortized Period							20 years
Purchase New Retail Building						$ 2,215,500
Accounts Payable - Related Party Balance							$ 3,074,021
Remaining principal balances				2,781,087
Revised Monthly Interest Payment Due							$ 22,203
ECHG [Member]
Annual Interest Rate							6.00%
Monthly Interest Payments				35,292
Loan Period							5 years
Amortized Period							20 years
Accounts Payable - Related Party Balance							$ 6,925,979
Remaining principal balances				$ 6,309,962
Purchased Assets And Liabilities					$ 4,500,000
Asset Purchase Agreement Description					The purchase was facilitated by an initial payment of $2.5 million at closing, and the remaining $2.0 million to be paid out by 12 quarterly payments starting April 1, 2022, of $166,667 each. The Installment note payable for the Avail Transaction imputed at 3.1%

XML

RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($)	1 Months Ended	3 Months Ended		6 Months Ended
	May 20, 2019	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Outstanding Note Payable				$ 444,396	$ 79,353
John Loftus
Outstanding Note Payable		$ 0	$ 142,144	0	$ 285,353
ECHG [Member] | John Loftus
Accounts Payable Related Party		6,925,979		6,925,979
Promissory Note	$ 6,925,979
Promissory Note Amortization Term	20 years
Interest Rate	6.00%
Due To Related Party		49,646
DGSE [Member] | John Loftus
Accounts Payable Related Party		3,074,021		$ 3,074,021
Promissory Note Amortization Term	20 years
Interest Rate	6.00%
Due To Related Party		$ 22,203