LEASES

9 Months Ended

Sep. 30, 2022

LEASES

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 at the time of the lease signing. 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 September 30, 2022—five in the Dallas/Fort Worth Metroplex, one in Mt. Pleasant, 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 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 September 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 September 30, 2022 and 2021 was $655,669 and $620,829 respectively. Leasing costs for the nine months ended September 30, 2022 and 2021 was $1,938,392 and $1,516,262, respectively, comprised of a combination of minimum lease payments and variable lease costs.

As of September 30, 2022, assuming none of the extension options are exercised the weighted average remaining lease term and weighted average discount rate for operating leases was 2.5 years and 4.4%, respectively. The remaining lease term and discount rate are being averaged compared to the total leases. For the three months ended September 30, 2022 and 2021, the Company’s cash paid for operating lease liabilities was $654,471 and $619,584, respectively. For the nine months ended September 30, 2022 and 2021, the Company’s cash paid for operating lease liabilities was $1,934,791 and $1,496,524, respectively.

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

	Operating
	Leases
DGSE
2022 (excluding the nine months ending September 30, 2022)	$	134,498
2023		541,984
2024		552,414
2025		412,269
2026 and thereafter		405,114
Total minimum lease payments		2,046,279
Less imputed interest		(167,168	)
DGSE Sub-Total		1,879,111
ECHG
2022 (excluding the nine months ending September 30, 2022)		330,753
2023		1,357,381
2024		1,396,129
2025		1,321,297
2026 and thereafter		507,780
Total minimum lease payments		4,913,340
Less imputed interest		(335,519	)
ECHG Sub-Total		4,577,821
Total		6,456,932
Current portion		1,658,990
	$	4,797,942