SEGMENT INFORMATION

9 Months Ended

Sep. 30, 2022

SEGMENT INFORMATION

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 DGSE segment also includes the Bullion Express brand and the bullion-trading operation, which operates out of the DGSE stores.

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

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 September 30, 2022 and 2021:

	For The Three Months Ended September 30,
	2022								2021
	DGSE		ECHG			Consolidated			DGSE			ECHG			Consolidated
Revenue:
Sales	$	30,427,254	$	14,770,432		$	45,197,686		$	25,482,379		$	12,198,390		$	37,680,769
Cost of goods sold		26,677,891		6,664,138			33,342,029			22,422,881			7,147,772			29,570,653
Gross margin		3,749,363		8,106,294			11,855,657			3,059,498			5,050,618			8,110,116
Expenses:
Selling, general and administrative expenses		2,369,588		5,384,114			7,753,702			1,772,034			3,458,439			5,230,473
Depreciation and amortization		103,022		431,942			534,964			98,787			117,389			216,176
Total operating expenses		2,472,610		5,816,056			8,288,666			1,870,821			3,575,828			5,446,649
Operating income		1,276,753		2,290,238			3,566,991			1,188,677			1,474,790			2,663,467
Interest expense		60,619		59,338			119,957			79,563			109,290			188,853
Other income (expense):
Gain on forgiveness of Federal Loan		-		-			-			675,210			992,990			1,668,200
Write-off of notes receivable and accrued interest receivable		-		-			-			-			(949,174	)		(949,174	)
Other income (expense), net		5,957		(71,221	)		(65,264	)		(37,823	)		(22,961	)		(60,784	)
Income before income taxes		1,222,091		2,159,679			3,381,770			1,746,501			1,386,355			3,132,856
Income tax expense		20,243		43,818			64,061			10,288			16,167			26,455
Net income	$	1,201,848	$	2,115,861		$	3,317,709		$	1,736,213		$	1,370,188		$	3,106,401

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

	For The Nine Months Ended September 30,
	2022									2021
	DGSE			ECHG			Consolidated			DGSE		ECHG			Consolidated
Revenue:
Sales	$	96,549,253		$	38,703,249		$	135,252,502		$	67,409,204	$	29,486,012		$	96,895,216
Cost of goods sold		84,387,844			17,819,967			102,207,811			58,445,075		16,907,871			75,352,946
Gross profit		12,161,409			20,883,282			33,044,691			8,964,129		12,578,141			21,542,270
Expenses:
Selling, general and administrative expenses		6,702,031			14,695,329			21,397,360			5,444,366		8,770,561			14,214,927
Depreciation and amortization		311,419			795,008			1,106,427			293,044		344,263			637,307
Total opeating expenses		7,013,450			15,490,337			22,503,787			5,737,410		9,114,824			14,852,234
Operating income		5,147,959			5,392,945			10,540,904			3,226,719		3,463,317			6,690,036
Interest expense		183,523			180,715			364,238			216,740		328,839			545,579
Other income (expense):
Gain on forgiveness of Federal Loan		-			-			-			675,210		992,990			1,668,200
Write-off of notes receivable and accrued interest receivable		-			-			-			-		(949,174	)		(949,174	)
Other income (expense), net		(71,053	)		(148,216	)		(219,269	)		193,368		300,844			494,212
Income before income taxes		4,893,383			5,064,014			9,957,397			3,878,557		3,479,138			7,357,695
Income tax expense		48,811			95,794			144,605			38,178		51,732			89,910
Net income	$	4,844,572		$	4,968,220		$	9,812,792		$	3,840,379	$	3,427,406		$	7,267,785