Envela (ELA) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Presents the company's unaudited financial statements and management's analysis of financial condition and results of operations ITEM 1. FINANCIAL STATEMENTS This section presents the unaudited condensed consolidated financial statements for the periods ended June 30, 2025 and 2024 CONDENSED CONSOLIDATED STATEMENTS OF INCOME Three Months Ended June 30: | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Sales | $54,876,833 | $45,297,002 | | Cost of goods sold | $42,488,910 | $33,907,545 | | Gross margin | $12,387,923 | $11,389,457 | | Operating income | $3,255,445 | $1,909,142 | | Net income | $2,752,399 | $1,564,179 | | Basic EPS | $0.11 | $0.06 | | Diluted EPS | $0.11 | $0.06 | Six Months Ended June 30: | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Sales | $103,132,662 | $85,154,782 | | Cost of goods sold | $78,776,715 | $63,444,641 | | Gross margin | $24,355,947 | $21,710,141 | | Operating income | $6,373,866 | $4,249,285 | | Net income | $5,245,746 | $3,471,718 | | Basic EPS | $0.20 | $0.13 | | Diluted EPS | $0.20 | $0.13 | CONDENSED CONSOLIDATED BALANCE SHEETS As of June 30, 2025 and December 31, 2024: | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $22,851,869 | $20,609,003 | | Total current assets | $56,580,655 | $51,603,807 | | Total assets | $82,715,760 | $77,870,489 | | Total current liabilities | $12,360,432 | $12,518,134 | | Total liabilities | $24,939,202 | $25,218,351 | | Total stockholders' equity | $57,776,558 | $52,652,138 | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Six Months Ended June 30: | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operations | $3,722,594 | $3,002,262 | | Net cash used in investing | $(879,509) | $(1,265,004) | | Net cash used in financing | $(600,219) | $(2,247,110) | | Net change in cash and cash equivalents | $2,242,866 | $(509,852) | | Cash and cash equivalents, end of period | $22,851,869 | $17,344,001 | CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Three Months Ended June 30, 2025: | Metric | Amount | | :--- | :--- | | Balance as of April 1, 2025 | $55,142,859 | | Net Income | $2,752,399 | | Shares repurchased | $(118,700) | | Balance as of June 30, 2025 | $57,776,558 | Six Months Ended June 30, 2025: | Metric | Amount | | :--- | :--- | | Balance as of January 1, 2025 | $52,652,138 | | Net Income | $5,245,746 | | Shares repurchased | $(121,326) | | Balance as of June 30, 2025 | $57,776,558 | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 – BASIS OF PRESENTATION - The unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial information and SEC regulations, and should be read in conjunction with the 2024 Annual Report on Form 10-K[22] NOTE 2 – PRINCIPLES OF CONSOLIDATION AND NATURE OF OPERATIONS - Envela operates as a holding company through subsidiaries in re-commerce and recycling sectors, with all intercompany transactions eliminated[24] - The Consumer Segment focuses on online and brick-and-mortar sales of authenticated high-end luxury goods, including pre-owned fine jewelry, diamonds, luxury watches, and secondary market bullion, emphasizing environmentally responsible options[25] - The Commercial Segment specializes in de-manufacturing end-of-life electronic assets for commodity reclamation and IT asset disposition (ITAD), promoting a circular economy through reuse and recycling[26][27][28] NOTE 3 – ACCOUNTING POLICIES AND ESTIMATES - Revenue recognition follows ASC 606, with the Consumer Segment recognizing revenue upon merchandise delivery or point of sale for retail, and shipment for e-commerce[31][32][33] - The Commercial Segment recognizes refining revenue upon transfer of control of goods at the destination port, with an estimate for variable consideration based on precious metal spot price and weight[34][35] - For the six months ended June 30, 2025, two customers accounted for 50.3% of sales and 19.1% of accounts receivable, indicating significant customer concentration[43] Shipping and Handling Costs (Three Months Ended June 30): | Segment | 2025 | 2024 | | :--- | :--- | :--- | | Consumer | $13,914 | $49,350 | | Commercial | $926,483 | $1,194,203 | Shipping and Handling Costs (Six Months Ended June 30): | Segment | 2025 | 2024 | | :--- | :--- | :--- | | Consumer | $30,600 | $49,789 | | Commercial | $1,917,808 | $2,588,280 | Advertising Costs (Three Months Ended June 30): | Segment | 2025 | 2024 | | :--- | :--- | :--- | | Consumer | $290,277 | $324,868 | | Commercial | $124,873 | $61,672 | Advertising Costs (Six Months Ended June 30): | Segment | 2025 | 2024 | | :--- | :--- | :--- | | Consumer | $570,440 | $572,982 | | Commercial | $206,008 | $132,977 | - The Company had a deferred tax asset of $90,858 as of June 30, 2025, up from $49,526 as of December 31, 2024, with no valuation allowance recorded[52] - The FASB issued ASU 2024-03 in November 2024, requiring additional expense disaggregation disclosures, effective for annual periods beginning after December 15, 2026[74] NOTE 4 – INVENTORIES Inventories as of June 30, 2025 and December 31, 2024: | Segment | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Consumer Trade inventories | $25,221,844 | $23,973,333 | | Commercial Trade inventories | $2,159,340 | $1,732,191 | | Total Inventories | $27,381,184 | $25,705,524 | NOTE 5 – GOODWILL Goodwill Changes as of June 30, 2025 and December 31, 2024: | Segment | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Consumer Opening balance | $— | $300,000 | | Consumer Additions (reductions) | $— | $(300,000) | | Commercial Opening balance | $3,621,453 | $3,621,453 | | Commercial Additions (reductions) | $— | $— | | Total Goodwill | $3,621,453 | $3,621,453 | - The decrease in consumer goodwill by $300,000 in Fiscal 2024 was due to measurement period adjustments related to the Scottsdale Transaction (acquisition of a jewelry fabricator)[77] NOTE 6 – PROPERTY AND EQUIPMENT, NET Property and Equipment, Net as of June 30, 2025 and December 31, 2024: | Segment | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Consumer Sub-total | $9,540,555 | $9,315,672 | | Commercial Sub-total | $595,203 | $677,491 | | Corporate Sub-total | $3,666,682 | $3,521,999 | | Total Property and Equipment, Net | $13,802,440 | $13,515,162 | - Construction in progress for Consumer and Corporate segments totaled $62,211 and $83,185 respectively, as of June 30, 2025, and are not yet depreciable[79] NOTE 7 – INTANGIBLE ASSETS, NET Intangible Assets, Net as of June 30, 2025 and December 31, 2024: | Segment | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Consumer Sub-total | $42,382 | $46,297 | | Commercial Sub-total | $3,358,418 | $3,673,145 | | Corporate Sub-total | $379,966 | $378,336 | | Total Intangible Assets, Net | $3,780,766 | $4,097,778 | Estimated Future Amortization Expense as of June 30, 2025: | Year | Consumer | Commercial | Corporate | Total | | :--- | :--- | :--- | :--- | :--- | | 2025 | $4,464 | $314,724 | $54,280 | $373,468 | | 2026 | $8,928 | $629,448 | $108,562 | $746,938 | | 2027 | $8,928 | $629,448 | $108,562 | $746,938 | | 2028 | $8,056 | $629,448 | $108,562 | $746,066 | | 2029 | $3,273 | $539,923 | $— | $543,196 | | Thereafter | $4,809 | $615,427 | $— | $620,236 | | Total | $38,458 | $3,358,418 | $379,966 | $3,776,842 | NOTE 8 – ACCRUED EXPENSES Accrued Expenses as of June 30, 2025 and December 31, 2024: | Segment | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Consumer Sub-total | $582,565 | $506,113 | | Commercial Sub-total | $1,624,310 | $2,407,191 | | Corporate Sub-total | $176,021 | $302,039 | | Total Accrued Expenses | $2,382,896 | $3,215,343 | NOTE 9 – SEGMENT INFORMATION Operating Income (Three Months Ended June 30): | Segment | 2025 | 2024 | | :--- | :--- | :--- | | Consumer | $726,955 | $(100,657) | | Commercial | $2,528,490 | $2,009,799 | | Consolidated | $3,255,445 | $1,909,142 | Operating Income (Six Months Ended June 30): | Segment | 2025 | 2024 | | :--- | :--- | :--- | | Consumer | $869,320 | $103,366 | | Commercial | $5,504,546 | $4,145,919 | | Consolidated | $6,373,866 | $4,249,285 | Capital Expenditures (Three Months Ended June 30): | Segment | 2025 | 2024 | | :--- | :--- | :--- | | Consumer | $291,521 | $435,671 | | Commercial | $52,271 | $108,222 | | Corporate | $153,380 | $333,139 | | Total | $497,172 | $877,032 | Capital Expenditures (Six Months Ended June 30): | Segment | 2025 | 2024 | | :--- | :--- | :--- | | Consumer | $560,474 | $704,624 | | Commercial | $52,271 | $108,222 | | Corporate | $269,414 | $449,175 | | Total | $882,159 | $1,262,021 | Total Assets as of: | Segment | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Consumer | $43,903,025 | $40,454,328 | | Commercial | $16,001,230 | $33,068,887 | | Corporate | $22,811,505 | $4,347,274 | | Total | $82,715,760 | $77,870,489 | NOTE 10 – REVENUE Sales and Gross Margin (Three Months Ended June 30): | Segment | 2025 Sales | 2025 Gross Margin | 2025 Margin % | 2024 Sales | 2024 Gross Margin | 2024 Margin % | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Consumer | $43,173,758 | $4,657,986 | 10.8% | $31,990,028 | $4,021,329 | 12.6% | | Commercial | $11,703,075 | $7,729,937 | 65.5% | $13,306,974 | $7,368,128 | 65.5% | | Consolidated | $54,876,833 | $12,387,923 | 22.6% | $45,297,002 | $11,389,457 | 25.1% | Sales and Gross Margin (Six Months Ended June 30): | Segment | 2025 Sales | 2025 Gross Margin | 2025 Margin % | 2024 Sales | 2024 Gross Margin | 2024 Margin % | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Consumer | $79,944,362 | $8,868,889 | 11.1% | $60,216,045 | $7,570,518 | 12.6% | | Commercial | $23,188,300 | $15,487,058 | 66.8% | $24,938,737 | $14,139,623 | 56.7% | | Consolidated | $103,132,662 | $24,355,947 | 23.6% | $85,154,782 | $21,710,141 | 25.5% | Contract Liabilities (Customer Deposits and Gift Cards): | Segment | Opening Balance - 1/1/2025 | Closing Balance - 6/30/2025 | | :--- | :--- | :--- | | Consumer | $435,508 | $1,601,699 | | Commercial | $— | $3,623 | NOTE 11 – LEASES Future Minimum Lease Payments as of June 30, 2025: | Year | Consumer Operating Leases | Commercial Operating Leases | Total | | :--- | :--- | :--- | :--- | | 2025 | $503,126 | $621,338 | $1,124,464 | | 2026 | $1,186,142 | $474,320 | $1,660,462 | | 2027 | $887,803 | $33,454 | $921,257 | | 2028 | $652,641 | $— | $652,641 | | 2029 | $533,234 | $— | $533,234 | | Thereafter | $203,191 | $— | $203,191 | | Total minimum lease payments | $3,966,137 | $1,129,112 | $5,095,249 | | Less: imputed interest | $(342,884) | $(23,498) | $(366,382) | | Sub-total | $3,623,253 | $1,105,614 | $4,728,867 | | Less: current portion | | | $(1,818,941) | | Total non-current | | | $2,909,926 | Leasing Costs (Six Months Ended June 30): | Cost Type | 2025 | 2024 | | :--- | :--- | :--- | | Operating lease cost | $1,208,522 | $984,880 | | Variable lease cost | $420,664 | $387,028 | | Short-term lease cost | $100,977 | $180,729 | | Total | $1,730,163 | $1,552,637 | - As of June 30, 2025, the weighted average remaining lease term for operating leases was 2.8 years, with a weighted average discount rate of 4.2%[89] NOTE 12 – BASIC AND DILUTED AVERAGE SHARES Weighted Average Shares Outstanding (Three Months Ended June 30): | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Basic | 25,991,979 | 26,248,554 | | Diluted | 25,991,979 | 26,263,554 | Weighted Average Shares Outstanding (Six Months Ended June 30): | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Basic | 25,993,802 | 26,333,796 | | Diluted | 25,993,802 | 26,348,796 | - The Board approved a stock repurchase program on March 14, 2023, authorizing up to 1.0 million shares at a price not exceeding $9.00, expiring March 31, 2026[91] - An additional 100,000 shares were authorized on March 27, 2025, bringing the total to 1.1 million shares[92] Share Repurchases (Six Months Ended June 30, 2025): | Period | Shares Purchased | Average Price Paid per Share | Total Price Paid | | :--- | :--- | :--- | :--- | | January 1 - June 30, 2025 | 20,663 | $5.87 | $121,326 | NOTE 13 – DEBT Long-Term Debt Obligations as of June 30, 2025 and December 31, 2024: | Segment | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Consumer Sub-total | $5,160,828 | $5,285,948 | | Commercial Sub-total | $5,442,691 | $5,735,838 | | Corporate Sub-total | $2,439,767 | $2,500,393 | | Total | $13,043,286 | $13,522,179 | | Less: current portion | $(3,374,442) | $(3,591,351) | | Total non-current | $9,668,844 | $9,930,828 | Future Principal Payments on Long-Term Debt as of June 30, 2025: | Year | Consumer | Commercial | Corporate | Total | | :--- | :--- | :--- | :--- | :--- | | 2025 | $550,619 | $127,986 | $2,439,767 | $3,118,372 | | 2026 | $2,473,027 | $5,314,705 | $— | $7,787,732 | | 2027 | $116,040 | $— | $— | $116,040 | | 2028 | $120,234 | $— | $— | $120,234 | | 2029 | $125,011 | $— | $— | $125,011 | | Thereafter | $1,775,897 | $— | $— | $1,775,897 | | Total | $5,160,828 | $5,442,691 | $2,439,767 | $13,043,286 | - The Company was in compliance with all debt obligation covenants for the three and six months ended June 30, 2025 and 2024[98] NOTE 14 – STOCK-BASED COMPENSATION - Shareholders approved the 2025 Equity Incentive Plan on June 25, 2025, authorizing up to 1.1 million shares of Common Stock for awards, effective for 10 years[102] - No awards have been granted under this plan as of June 30, 2025, resulting in no stock-based compensation expense for the reported periods[103] NOTE 15 – RELATED PARTY TRANSACTIONS - The Company utilizes space owned by a related party for material processing, with no consideration exchanged, and estimates any potential costs would be immaterial[104] NOTE 16 – CONTINGENCIES - Management believes that the resolution of currently pending lawsuits, claims, and proceedings will not have a material adverse effect on the Company's financial position, results of operations, or liquidity[105] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's perspective on the Company's financial condition, operational results, liquidity, and capital resources Forward-Looking Statements - The report contains forward-looking statements subject to safe harbors, and actual results may differ materially due to various risks and uncertainties[107] Introduction - This section discusses operations for the three and six months ended June 30, 2025 and 2024, and should be read with the 2024 Annual Report and unaudited condensed consolidated financial statements[108] Critical Accounting Policies and Estimates - There were no material changes to the Company's critical accounting policies and estimates from those described in the 2024 Annual Report[109] Economic Conditions - The 'One Big Beautiful Bill Act' signed on July 4, 2025, includes federal tax law changes, but the Company does not expect a material impact on its financial results[109][110] - High interest rates, inflation, and commodity price risks may affect consumer spending, but the Company adjusts inbound purchase prices to counterbalance these economic cycles[111][112] - Tariffs do not directly impact the Consumer Segment, while the Commercial Segment may face increased costs for international personal technology assets and parts[114][115] Our Business - Envela operates as a holding company with subsidiaries in re-commerce and recycling, including a Consumer Segment for luxury goods and a Commercial Segment for electronics[117][118][119] - The Commercial Segment specializes in de-manufacturing end-of-life electronic assets for commodity reclamation and IT asset disposition (ITAD), emphasizing data security and environmental sustainability[120] Segment Activities - The Consumer Segment aims to expand its physical store footprint across the U.S. and evaluate complementary product and service offerings[122] - The Commercial Segment plans to grow both organically and through acquisitions, leveraging its bolstered management team and operating systems[123] Results of Operations Comparison of the Three Months Ended June 30, 2025 and 2024 Consolidated Sales (Three Months Ended June 30): | Year | Sales | Change Amount | Change % | | :--- | :--- | :--- | :--- | | 2025 | $54,876,833 | $9,579,831 | 21.1% | | 2024 | $45,297,002 | | | - Consumer Segment sales increased by 35.0% to $43,173,758, driven by stronger volumes and pricing in wholesale precious metals and favorable retail store performance[126][129] - Commercial Segment sales decreased by 12.1% to $11,703,075, primarily due to unfavorable performance in electronic scrap grades and lower ITAD revenue[127][130] Consolidated Cost of Goods Sold (Three Months Ended June 30): | Year | Cost of Goods Sold | Change Amount | Change % | | :--- | :--- | :--- | :--- | | 2025 | $42,488,910 | $8,581,365 | 25.3% | | 2024 | $33,907,545 | | | - Consumer Segment cost of goods sold increased by 37.7% to $38,515,772, mainly due to higher sales volumes and rising gold prices[131][133][134] - Commercial Segment cost of goods sold decreased by 33.1% to $3,973,138, attributed to lower sales volumes and higher margins from personal technology assets and ITAD[135][136] Consolidated Gross Margin (Three Months Ended June 30): | Year | Gross Margin | Change Amount | Change % | | :--- | :--- | :--- | :--- | | 2025 | $12,387,923 | $998,466 | 8.8% | | 2024 | $11,389,457 | | | - Consumer Segment gross margin increased by 15.8% to $4,657,986[137][139] - Commercial Segment gross margin increased by 4.9% to $7,729,937[140] Consolidated Selling, General and Administrative (Three Months Ended June 30): | Year | SG&A | Change Amount | Change % | | :--- | :--- | :--- | :--- | | 2025 | $8,672,067 | $(445,981) | (4.9)% | | 2024 | $9,118,048 | | | - Consumer Segment SG&A decreased by 6.8% to $3,735,427, due to cost reductions from store onboarding and optimizing headcount[141][143] - Commercial Segment SG&A decreased by 3.4% to $4,936,640, primarily due to reduced ERP onboarding support and variable-cost production expenses[144] Consolidated Depreciation and Amortization (Three Months Ended June 30): | Year | D&A | Change Amount | Change % | | :--- | :--- | :--- | :--- | | 2025 | $460,411 | $98,144 | 27.1% | | 2024 | $362,267 | | | - Consumer Segment D&A increased by 73.8% to $195,604, mainly due to depreciation of assets from new retail stores[145][147] Consolidated Other Income (Three Months Ended June 30): | Year | Other Income | Change Amount | Change % | | :--- | :--- | :--- | :--- | | 2025 | $394,251 | $168,834 | 74.9% | | 2024 | $225,417 | | | - Consumer Segment other income increased by 1,851.2% to $156,158, primarily due to an employee retention credit and earnings on excess cash balances[149][151] - Commercial Segment other income increased by 9.5% to $238,093, mainly due to earnings on excess cash balances[153] Consolidated Interest Expense (Three Months Ended June 30): | Year | Interest Expense | Change Amount | Change % | | :--- | :--- | :--- | :--- | | 2025 | $(106,228) | $2,913 | (2.7)% | | 2024 | $(109,141) | | | Consolidated Income Tax Expense (Three Months Ended June 30): | Year | Income Tax Expense | Change Amount | Change % | | :--- | :--- | :--- | :--- | | 2025 | $(791,069) | $(329,830) | 71.5% | | 2024 | $(461,239) | | | - The effective income tax rate was 22.3% in 2025 and 22.8% in 2024[162] Consolidated Net Income (Three Months Ended June 30): | Year | Net Income | Change Amount | Change % | | :--- | :--- | :--- | :--- | | 2025 | $2,752,399 | $1,188,220 | 76.0% | | 2024 | $1,564,179 | | | - Consumer Segment net income increased by $821,329, moving from a net loss of $177,958 in 2024 to a net income of $643,371 in 2025[163][165] - Commercial Segment net income increased by 21.1% to $2,109,028[166] Consolidated Basic and Diluted EPS (Three Months Ended June 30): | Year | EPS | Change Amount | Change % | | :--- | :--- | :--- | :--- | | 2025 | $0.11 | $0.05 | 83.3% | | 2024 | $0.06 | | | Comparison of the Six Months Ended June 30, 2025 and 2024 Consolidated Sales (Six Months Ended June 30): | Year | Sales | Change Amount | Change % | | :--- | :--- | :--- | :--- | | 2025 | $103,132,662 | $17,977,880 | 21.1% | | 2024 | $85,154,782 | | | - Consumer Segment sales increased by 32.8% to $79,944,362, driven by stronger volumes and pricing in wholesale precious metals and contributions from retail stores[169][171] - Commercial Segment sales decreased by 7.0% to $23,188,300, due to lower sales of personal technology assets, ITAD revenue share settlements, and electronic scrap volumes[172] Consolidated Cost of Goods Sold (Six Months Ended June 30): | Year | Cost of Goods Sold | Change Amount | Change % | | :--- | :--- | :--- | :--- | | 2025 | $78,776,715 | $15,332,074 | 24.2% | | 2024 | $63,444,641 | | | - Consumer Segment cost of goods sold increased by 35.0% to $71,075,473, primarily due to higher wholesale precious metals transactions[175][176] - Commercial Segment cost of goods sold decreased by 28.7% to $7,701,242, attributed to lower sales volumes and higher margins from personal technology assets and ITAD[177][178][179] Consolidated Gross Margin (Six Months Ended June 30): | Year | Gross Margin | Change Amount | Change % | | :--- | :--- | :--- | :--- | | 2025 | $24,355,947 | $2,645,806 | 12.2% | | 2024 | $21,710,141 | | | - Consumer Segment gross margin increased by 17.2% to $8,868,889[180][182] - Commercial Segment gross margin increased by 9.5% to $15,487,058[183] Consolidated Selling, General and Administrative (Six Months Ended June 30): | Year | SG&A | Change Amount | Change % | | :--- | :--- | :--- | :--- | | 2025 | $17,076,329 | $321,305 | 1.9% | | 2024 | $16,755,024 | | | - Consumer Segment SG&A increased by 5.0% to $7,623,333, due to full cost structures of new stores, partially offset by reduced onboarding costs[184][186] Consolidated Depreciation and Amortization (Six Months Ended June 30): | Year | D&A | Change Amount | Change % | | :--- | :--- | :--- | :--- | | 2025 | $905,752 | $199,920 | 28.3% | | 2024 | $705,832 | | | - Consumer Segment D&A increased by 82.5% to $376,236, primarily due to depreciation of assets from new retail stores[188][190] Consolidated Other Income (Six Months Ended June 30): | Year | Other Income | Change Amount | Change % | | :--- | :--- | :--- | :--- | | 2025 | $599,856 | $135,911 | 29.3% | | 2024 | $463,945 | | | - Consumer Segment other income increased by 880.8% to $157,007, mainly due to an employee retention credit and earnings on excess cash balances[192][194] - Commercial Segment other income decreased by 1.1% to $442,849, attributed to a reduction in earned interest rates and rental income[196] Consolidated Interest Expense (Six Months Ended June 30): | Year | Interest Expense | Change Amount | Change % | | :--- | :--- | :--- | :--- | | 2025 | $(212,549) | $17,446 | (7.6)% | | 2024 | $(229,995) | | | Consolidated Income Tax Expense (Six Months Ended June 30): | Year | Income Tax Expense | Change Amount | Change % | | :--- | :--- | :--- | :--- | | 2025 | $(1,515,427) | $(503,910) | 49.8% | | 2024 | $(1,011,517) | | | - The effective income tax rate was 22.4% in 2025 and 22.6% in 2024[204] Consolidated Net Income (Six Months Ended June 30): | Year | Net Income | Change Amount | Change % | | :--- | :--- | :--- | :--- | | 2025 | $5,245,746 | $1,774,028 | 51.1% | | 2024 | $3,471,718 | | | - Consumer Segment net income increased by $801,947, moving from a net loss of $89,482 in 2024 to a net income of $712,465 in 2025[205][207] - Commercial Segment net income increased by 27.3% to $4,533,281[208] Consolidated Basic and Diluted EPS (Six Months Ended June 30): | Year | EPS | Change Amount | Change % | | :--- | :--- | :--- | :--- | | 2025 | $0.20 | $0.07 | 53.8% | | 2024 | $0.13 | | | Non-U.S. GAAP Financial Measures - The Company uses non-U.S. GAAP financial measures, such as Adjusted EBITDA and Net Cash, to provide a meaningful presentation of its operating and financial performance[211][213][215] Adjusted EBITDA Reconciliation (Three Months Ended June 30): | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Net income (loss) | $2,752,399 | $1,564,179 | | Depreciation and amortization | $460,411 | $362,267 | | Other income | $(394,251) | $(225,417) | | Interest expense | $106,228 | $109,141 | | Income tax expense | $791,069 | $461,239 | | Adjusted EBITDA | $3,715,856 | $2,271,409 | Adjusted EBITDA Reconciliation (Six Months Ended June 30): | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Net income | $5,245,746 | $3,471,718 | | Depreciation and amortization | $905,752 | $705,832 | | Other income | $(599,856) | $(463,945) | | Interest expense | $212,549 | $229,995 | | Income tax expense | $1,515,427 | $1,011,517 | | Adjusted EBITDA | $7,279,618 | $4,955,117 | Net Cash as of: | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total cash | $22,851,869 | $20,609,003 | | Less: debt obligations | $(13,043,286) | $(13,522,179) | | Net Cash | $9,808,583 | $7,086,824 | Liquidity and Capital Resources Condensed Consolidated Statement of Cash Flows (Six Months Ended June 30): | Activity | 2025 | 2024 | Change Amount | Change % | | :--- | :--- | :--- | :--- | :--- | | Operating activities | $3,722,594 | $3,002,262 | $720,332 | 24.0% | | Investing activities | $(879,509) | $(1,265,004) | $385,495 | (30.5)% | | Financing activities | $(600,219) | $(2,247,110) | $1,646,891 | (73.3)% | | Net change in cash and cash equivalents | $2,242,866 | $(509,852) | $2,752,718 | NM | - Cash provided by operations increased by 24.0% to $3,722,594, driven by higher net income and changes in operating assets and liabilities[219][220] - Cash used in investing activities decreased by 30.5% to $879,509, primarily due to reduced spending on the ERP system[221] - Cash used in financing activities decreased by 73.3% to $600,219, mainly due to a reduction in share buybacks[222] - The Company's primary liquidity source is cash from operating activities, with no current draws on its line of credit[223][224] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As a smaller reporting company, Envela Corporation is not required to provide these disclosures - Envela Corporation is exempt from disclosing quantitative and qualitative information about market risk due to its status as a 'smaller reporting company'[226] ITEM 4. CONTROLS AND PROCEDURES This section details the evaluation of the Company's disclosure controls and procedures and reports on internal control changes Evaluation of Disclosure Controls and Procedures - Management concluded that disclosure controls and procedures were effective as of June 30, 2025, providing reasonable assurance of timely reporting[227] Changes in Internal Control over Financial Reporting - There were no material changes in internal control over financial reporting during the period covered by this Quarterly Report[229] PART II. OTHER INFORMATION Covers legal proceedings, risk factors, share repurchases, and other required disclosures ITEM 1. LEGAL PROCEEDINGS This section addresses pending legal actions and their expected financial impact - Management believes that the ultimate resolution of current legal proceedings will not materially adversely affect the Company's financial condition, results of operations, or cash flow[231] ITEM 1A. RISK FACTORS This section states there have been no material changes to previously disclosed risk factors - No material changes have occurred to the risk factors previously disclosed in the Company's 2024 Annual Report[232] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES This section details the Company's share repurchase activities for the three months ended June 30, 2025 Share Repurchases (Three Months Ended June 30, 2025): | Fiscal Period | Total Number of Shares Purchased | Average Price Paid Per Share ($) | Total Price Paid | Maximum Number of Shares that May Yet be Purchased Under the Plan | | :--- | :--- | :--- | :--- | :--- | | Balance as of March 31, 2025 | 929,430 | $4.92 | $4,571,449 | 170,570 | | April 1 - 30, 2025 | — | — | — | 170,570 | | May 1 - 31, 2025 | — | — | — | 170,570 | | June 1 - 30, 2025 | 20,163 | $5.89 | $118,700 | 150,407 | | Balance as of June 30, 2025 | 949,593 | $4.94 | $4,690,149 | 150,407 | - The stock repurchase program authorizes the repurchase of up to 1.1 million shares and expires on March 31, 2026[235] ITEM 3. DEFAULTS UPON SENIOR SECURITIES This item is not applicable to the Company for the reporting period - This item is not applicable[235] ITEM 4. MINE SAFETY DISCLOSURES This item is not applicable to the Company for the reporting period - This item is not applicable[235] ITEM 5. OTHER INFORMATION This section indicates that there is no other information to report for the period - No other information is reported under this item[236] ITEM 6. EXHIBITS This section lists all exhibits filed as part of the Form 10-Q - Key exhibits include the 2025 Equity Incentive Plan, certifications pursuant to Rule 13a-14(a) and 18 U.S.C. Section 1350, and various XBRL documents[237] SIGNATURE This section contains the certifying signature of the Chief Financial Officer - The report was signed by John G. DeLuca, Chief Financial Officer, on August 6, 2025[239] GLOSSARY OF DEFINED TERMS This section provides definitions for key terms used throughout the document - A glossary of defined terms is provided to clarify terminology used in the document[240]