Envela Corp

NOTE 1 — BASIS OF PRESENTATION

The consolidated financial statements include the accounts of Envela and its wholly owned subsidiaries. The accounting for the accompanying consolidated financial statements has been prepared in accordance with United States Generally Accepted Accounting Principles (“U.S. GAAP”) and, in the opinion of management, reflects all adjustments necessary to state fairly the Company’s financial position, results of operations, stockholders’ equity, and cash flows for the periods presented. The Company’s operations are located within the contiguous U.S. and its functional and reporting currency is the U.S. Dollar (“$”).

Envela files annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements, and other information with the SEC. Such information and amendments to reports previously filed or furnished are available on the Company’s corporate website, www.envela.com, as soon as reasonably practicable after such materials are filed with or furnished to the SEC. The SEC also maintains an internet site at www.sec.gov that contains the Company’s filings.

NOTE 2 — PRINCIPLES OF CONSOLIDATION AND NATURE OF OPERATIONS

Throughout this document, Envela Corporation is referred to as “we,” “us,” “our,” “Envela,” or the “Company.”

Principles of Consolidation

Envela serves as a holding company, conducting its operations via subsidiaries engaged in various businesses and activities within the recommerce and recycling sectors. The Company does not have any variable interest entities requiring consolidation. All intercompany transactions and balances have been eliminated.

Nature of Operations

The products and services we offer are delivered by our subsidiaries under their distinct brands, rather than directly by Envela itself. Significant business activities within our reportable segments are detailed below:

Our consumer segment primarily operates in the jewelry industry, specializing in the online and brick-and-mortar sale of authenticated high-end luxury goods, including pre-owned fine jewelry, diamonds and gemstones, luxury watches, along with secondary market bullion. We incorporate recycled diamonds and gemstones into our new designs meaning they were previously set and unset, producing a low-carbon and ethical origin product. The Company caters to consumers seeking environmentally responsible options for engagement rings, wedding bands, and other fine jewelry at accessible prices. Our profound commitment to extending the lifespan of luxury goods stems from our understanding that well-crafted items have an enduring quality, enabling them to maintain their beauty and value as they are passed from one owner to another.

Our commercial segment specializes in the de-manufacturing of end-of-life electronic assets to reclaim commodities and other materials, while also engaging in the ITAD industry. The separated commodities, including metals, plastics, and glass, are sold to downstream processors where they are further processed and reintroduced into new products. ITAD services maximize the residual value of retired IT assets by adhering to a reuse-first philosophy and ensuring equipment is refurbished and re-marketed after data sanitization. The Company offers services that manage the entire lifecycle of technology products to ensure data security, regulatory compliance, and environmental sustainability. We are proud of our role in supporting a circular economy through responsible reuse and recycling of electronic devices.

See Note 10 – Segment Information for further details.

NOTE 3 — ACCOUNTING POLICIES AND ESTIMATES

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. Examples of estimates and assumptions include revenue recognition, determining the nature and timing of satisfaction of performance obligations, variable consideration, and other obligations such as product returns and refunds; loss contingencies; the fair value of and/or potential impairment of goodwill and intangible assets for the reporting units; useful lives of our tangible and intangible assets; allowances for credit losses; the market value of, and demand for, our inventory and the potential outcome of uncertain tax positions that have been recognized on our consolidated financial statements or tax returns. Actual results could differ from those estimates and assumptions.

Revenue Recognition

Accounting Standards Codification (“ASC”) 606, Revenue Recognition provides guidance to identify performance obligations for revenue-generating transactions. The Company applies a five-step approach in determining the amount and timing of revenue to be recognized: (1) identifying the contract with a customer; (2) identifying the performance obligations in the contract; (3) determining the transaction price; (4) allocating the transaction price to the performance obligations in the contract; and (5) recognizing revenue when the corresponding performance obligation is satisfied.

For the consumer segment, revenue from monetary transactions (e.g., cash and accounts receivable) with wholesale customers is recognized when the merchandise is delivered or at the point of sale for retail customers, and consideration for the transaction has been made either by immediate payment or through a receivable obligation. For e-commerce, revenue is recognized when the customer has fulfilled their obligation to pay or promise to pay and goods have been shipped.

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

The Company offers third-party financing for retail customers. Revenue is recognized upon transfer of title, with the promise of the third-party financing company to pay.

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

The commercial segment recognizes refining revenue when our inventory arrives at the destination port and the performance obligation is satisfied by transferring the control of the promised goods that are identified in the customer contract. The initial invoice is recognized in full when our performance obligation is satisfied. Under the guidance of ASC 606, an estimate of the variable consideration that we are expected to be entitled to is included in the transaction price stated at the current precious metal spot price and weight of the precious metal. An adjustment to revenue is made once the underlying weight and any precious metal spot price movement is resolved, which is usually around six weeks. Historically, these amounts have not been material.

The commercial segment also provides recycling services according to a Scope of Work (“SOW”). Revenue from recycling services is recognized upon completion of the SOW at a predetermined amount based on the number of units processed and a preset price per unit or weight measurement.

The commercial segment provides freight arrangement services related to inbound assets or material movements to our facilities. Revenue from freight arrangement services is recognized at settlement with our inbound customers which occurs

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

The commercial segment recognizes revenue on outright sales when terms and transaction price are agreed to, the product is shipped, and the title is transferred.

See Note 11 – Revenue for further details.

Sales Returns and Allowances

Sales are recorded, net of expected returns. In some cases, the consumer and commercial segment’s customers may return a product purchased within 30 days of receipt. Our allowance for estimated returns is based on our review of historical returns experience and reduces our reported revenues accordingly.

As of December 31, 2024, and December 31, 2023, the consumer segment’s allowance for returns was $11,942 and $28,402, respectively.

As of December 31, 2024, and December 31, 2023, the commercial segment’s allowance for returns was $48,569 and $0, respectively.

Concentrations and Credit Risk

The Company is potentially subject to concentrations of counterparty credit risk. The concentrations described herein pertain to certain domestic precious metals transactions requiring an assay that are short duration and settled on comparable terms. Overall customer concentrations as a percentage of sales may vary as a result of the mix of products being sold within each comparative period. Individual customer concentrations are also impacted by each customer’s production schedule and as such, the Company identifies the most appropriate sales outlet to ensure a timely transaction settlement.

For the year ended December 31, 2024, one customer aggregated 30.1% of our salesand represented 6.8% of our accounts receivable balance.

For the year ended December 31, 2023, one customer aggregated 29.5% of our salesand represented 27.9% of our accounts receivable balance.

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

Shipping and Handling Costs

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

For the years ended December 31, 2024, and December 31, 2023, the consumer segment’s shipping and handling costs were $95,765 and $13,076, respectively.

For the years ended December 31, 2024, and December 31, 2023, the commercial segment’s shipping and handling costs were $4,840,381 and $5,686,236, respectively.

Advertising Costs

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

For the years ended December 31, 2024, and December 31, 2023, the consumer segment’s advertising costs were $1,309,013 and $945,340, respectively.

For the years ended December 31, 2024, and December 31, 2023, the commercial segment’s advertising costs were $281,814 and $37,110, respectively.

Leases

We determine if an arrangement is a lease at inception. We do not separate non-lease components from lease components to which they relate and have accounted for the combined lease and non-lease components as a single lease component. Many of our lease agreements contain renewal options; however, we do not recognize right-of-use assets or lease liabilities for renewal periods unless it is determined that we are reasonably certain of renewing the lease at inception or when a triggering event occurs.

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, Leases requires us to use the interest rate that a lessee would have to pay to borrow on a collateralized basis over a similar term in 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. For leases one year or less, the Company has elected not to record lease liabilities and right-of-use assets and instead recognize the expense associated with the lease payments using the straight-line basis.

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 consolidated 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 be applicable 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.

The Company believes that its significant filing positions are highly certain and that all of its other significant income tax filing positions and deductions would be sustained upon audit or the final resolution would not have a material effect on the consolidated financial statements. Therefore, the Company has not established any significant reserves for uncertain tax positions. The Company recognizes accrued interest and penalties resulting from audits by tax authorities in the provision for income taxes in the consolidated statements of income. During Fiscal 2024 and Fiscal 2023, the Company did not incur any federal income tax interest or penalties.

See Note 18 – Income Taxes for further details.

Valuation of Deferred Tax Assets

The Company’s deferred tax assets include certain future tax benefits. The Company records a valuation allowance against any portion of those deferred income tax assets when it believes, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax asset will not be realized. The Company reviews the likelihood that the benefit of the deferred tax assets will be realized and the need for valuation allowances on a quarterly basis, or more frequently if events indicate that a review is required. We have not taken a tax position that, if challenged, would have a material effect on the consolidated financial statements or the effective tax rate for the years ended December 31, 2024, and December 31, 2023.

As of December 31, 2024, the Company had a deferred tax asset of $49,526. As of December 31, 2023, the Company had a deferred tax liability of $38,668. The Company didnot have a valuation allowance as of December 31, 2024, or December 31, 2023.

See Note 18 – Income Taxes for further details.

Segment Information

The accounting standards for reporting information about operating segments define an operating segment as a component of an enterprise that engages in business activities from which it may earn revenues and incur expenses for which discrete financial information is available that is evaluated regularly by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources and in assessing performance. As of December 31, 2024, the Company’s CODM was identified as the Chief Executive Officer.

The Company allocates its corporate expenses to its operating segments, including selling, general and administrative expenses, depreciation and amortization, other income, interest expense, and income tax expense.

See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations for further details.

See Note 2 – Principles of Consolidation and Nature of Operations and Note 10 – Segment Information for further details.

Earnings Per Share

Basic earnings per share of Common Stock is computed by dividing net earnings available to holders of our Common Stock by the weighted average number of common shares outstanding for the reporting period. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts 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.

See Note 13 – Basic and Diluted Average Shares for further details.

Stock-Based Compensation

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

See Note 15 – Stock-Based Compensation for further details.

Taxes Collected from Customers

The Company’s policy is to present taxes collected from customers and remitted to governmental authorities on a net basis. The Company records the amounts collected as a current liability and relieves such liability upon remittance to the taxing authority without impacting revenues or expenses.

Financial Instruments

The carrying amounts reported in the consolidated balance sheets for cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate fair value because of the immediate or short-term maturity of these financial instruments. The carrying amounts reported for the notes receivable and notes payable approximate fair value because the underlying instruments have an interest rate that reflects current market rates. None of these instruments are held for trading purposes.

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and cash equivalents and accounts receivable. At times, cash and cash equivalents exceed federally insured limits.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. The carrying amounts reported in the consolidated balance sheets approximate fair value.

Accounts Receivable, Net of Allowances

Accounts receivable represent amounts primarily due from customers on products and services. Our allowance for credit losses is primarily determined by an analysis of our accounts receivable aging, using the expected losses methodology. The allowance for credit losses is determined based on historical experience of collecting past due amounts, based on the degree of their aging. In addition, specific accounts that are considered and expected to be uncollectable are included in the allowance for credit losses. Accounts receivables are considered delinquent when payment has not been made within contract terms. Accounts receivables are written off when all efforts to collect have been exhausted and the potential for recovery is considered remote.

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

As of December 31, 2024, and December 31, 2023, the commercial segment’s allowance for credit losses was $433,159 and $260,858, respectively.

A summary of the allowance for credit losses is presented below:

Inventories

The consumer segment states its inventory at the lower of cost and net realizable value. We cost our inventory based on our own internal estimate of the fair value of the items at the time of purchase. We consider factors such as the current spot market price of precious metals and the current market demand for the items being purchased. Consigned inventory has a net zero balance. The majority of our inventory has some component of its value that is based on the spot market price of precious metals. We monitor metals-based commodity markets to assess any adverse impact on the carrying value of our inventory.

The commercial segment states its inventory at the lower of cost and net realizable value. The cost of our technology assets is determined utilizing the retail cost method. The cost of our processed and unprocessed inventory, primarily consisteing of base metals and electronic scrap materials, is determined utilizing the weighted average cost method. We monitor metals-based commodity markets to assess any adverse impact on the carrying value of our inventory.

See Note 4 – Inventories for further details.

Goodwill

Goodwill is not amortized but is evaluated for impairment on an annual basis during the fourth quarter of our fiscal year, or earlier if events or circumstances indicate the carrying value may be impaired. There were no triggering events identified during the year ended December 31, 2024, and the Company did not record a goodwill impairment charge in any of the periods presented.

See Note 6 – Goodwill for further details.

Property and Equipment, Net

Property and equipment are carried at cost less accumulated depreciation and are depreciated on a straight-line basis over the estimated useful lives of the assets; except for construction in progress which has not yet been placed into service. The following table depicts the estimated useful lives of our property and equipment asset classes:

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Expenditures for repairs and maintenance are expensed as incurred; betterments that increase the value or materially extend the life of the related assets are capitalized.

See Note 7 – Property and Equipment, Net for further details.

Intangible Assets, Net

Finite-lived intangible assets are carried at cost less accumulated amortization and are amortized on a straight-line basis over the estimated useful lives of the assets; except for assets under development that have not yet been placed into service. The following table depicts the estimated useful lives of our property and equipment asset classes:

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

See Note 8 – Intangible Assets, Net for further details.

Correction of Immaterial Error

The Company’s commercial segment previously reported revenue from freight arrangement services as a component of cost of goods sold. The Company has further evaluated the nature and scope of its service offering and has determined that it meets the definition of a principal in accordance with ASC 606 and, as such, be reported within revenue.

The following table summarizes the correction of immaterial error:

The error had no impact on gross margin, operating income, net income, and basic and diluted earnings per share nor any other financial statement amount. Further, these errors had no impact on the consolidated balance sheets, statements of stockholders’ equity, and statements of cash flows. These corrections do not affect any of the metrics used to calculate and evaluate management’s compensation and have no impact on bonuses, commissions, stock-based compensation, or any other employee remuneration. Historical amounts have been corrected and are presented on a comparable basis.

See Note 11 – Revenue for further details.

Changes in Disclosure

The Company has elected to discontinue reporting the disaggregation of inventory and revenue by resale and recycle. The Company’s business operations continue to evolve and include fee-for-service revenue that does not always correlate to these categories and underlying inventory positions; further, our inventory positions within these disaggregated presentations can vary at any point in time as they are a diverse mix of technology assets, base and precious metals and luxury hard assets. The Company believes that its disclosure of the nature of its operations, the inventory held at each segment and associated risk factors provides a sufficient understanding of its impact on our business.

See Note 5 – Inventories and Note 11 – Revenue for further details.

Reclassifications

For the Company’s 2023 Annual Report, the amount reported for other current assets within the Consolidated Balance Sheets is related entirely to notes receivables. The Company has elected to present notes receivable as its own line item and has reclassified the historical presentation of the aforementioned as of December 31, 2023.

See the Consolidated Balance Sheets for further details.

The Company previously did not disclose construction in progress and intangible assets under development. The Company has determined that providing this information further enhances the understanding of the nature of our capital expenditures. The Company has elected to reclassify the historical presentation of the aforementioned as of December 31, 2023.

See Note 7 – Property and Equipment, Net for further details.

The Company previously reported the development of its enterprise resource planning system within property and equipment, net. The Company has further evaluated the nature of this asset under ASC 350, Intangibles – Goodwill and Other, and has determined that it is a nonmonetary asset without physical substance and was acquired separately from hardware and as such be reported within intangible assets, net. The Company has elected to reclassify the historical presentation of the aforementioned as of December 31, 2023. Cash expenditures for the enterprise resource planning system have been reclassified to “Purchases of intangible assets” within the Consolidated Statements of Cash Flows.

See Note 8 – Intangible Assets, Net for further details.

New Accounting Standards

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”), which requires an entity to disclose additional information about specific expense categories. The guidance is effective for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption and retrospective application permitted. The Company is currently evaluating the potential impact of adopting this new guidance on the consolidated financial statements and related disclosures.

Recently Adopted Accounting Standards

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which requires disclosure of segment expenses that are significant and regularly provided to the CODM. In addition, ASU 2023-07 requires the Company to disclose the title and position of its CODM and how the CODM uses segment profit or loss information in assessing segment performance and deciding how to allocate resources. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. Retrospective application to all prior periods presented in the financial statements is required. The Company adopted this guidance effective January 1, 2024. As ASU 2023-07 applies to reportable segment disclosures, the adoption did not have a material impact on the Company’s consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvement to Income Tax Disclosures (“ASU 2023-09”), which updates income tax disclosures related to the effective income tax rate reconciliation and requires disclosure of income taxes paid by jurisdiction. The guidance is effective for annual periods beginning after December 15, 2024, and may be applied prospectively or retrospectively, with early adoption permitted. The Company adopted this guidance with retrospective application, effective January 1, 2024. As ASU 2023-09 applies to income tax disclosures, the adoption did not have a material impact on the Company’s consolidated financial statements.

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

NOTE 4 — CHANGES IN BUSINESS

The Scottsdale Transaction qualified as a business combination for accounting purposes, which involves the application of the acquisition method described in ASC 805, Business Combinations. The asset purchase agreement was entered into by a wholly-owned subsidiary of the Company. The purchase price was $150 thousand. The total purchase consideration transferred for the Scottsdale Transaction was $100 thousand in cash and a $50 thousand note payable obligation.

See Note 14 – Debt for further details.

The primary purpose of the Scottsdale Transaction was to broaden customer offerings with a complimentary brand and provide another outlet for the reuse of ethically sourced precious metals and gemstones in the manufacturing of new products.

The results of operations relating to the Scottsdale Transaction have been reflected in the Company’s consolidated financial statements from the initial date of acquisition. The Scottsdale Transaction was not material to the Company’s consolidated financial statements, and therefore, pro forma operating results and other disclosures for the Scottsdale Transaction are not presented except as referenced below.

As part of the Scottsdale Transaction, on September 12, 2023 the consumer segment recorded goodwill of $300 thousand as part of the initial purchase price allocation. During the year ended December 31, 2024, with the finalization of the terms of the Scottsdale Transaction, the Company made certain measurement period adjustments to the preliminary purchase price allocation, which resulted in a $300 thousand decrease to goodwill, a $150 thousand decrease due to the amendment of the purchase price, and a $150 thousand decrease due to the recognition of the assets acquired as part of the acquisition.

See Note 6 – Goodwill for further details.

In accordance with ASC 805, Business Combinations, the table presented below represents the final allocation of purchase price consideration.

The following table summarizes the fair values that were allocated to the Scottsdale Transaction:

NOTE 5 — INVENTORIES

The following table summarizes the details of the Company’s inventories:

NOTE 6 — GOODWILL

The following table summarizes the details of the Company’s changes in goodwill:

NOTE 7 — PROPERTY AND EQUIPMENT, NET

The following table summarizes the details of the Company’s property and equipment, net:

NOTE 8 — INTANGIBLE ASSETS, NET

The following table summarizes the details of the Company’s intangible assets, net:

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

NOTE 9 — ACCRUED EXPENSES

The following table summarizes the details of the Company’s accrued expenses:

NOTE 10 — SEGMENT INFORMATION

The CODM uses operating income to evaluate the performance of the overall business, make investing decisions, and allocate resources. The following table depicts the Company’s segment results of operations, including significant expenses that are regularly reviewed by the CODM, for the years ended December 31, 2024 and 2023:

The following table depicts a reconciliation from segment operating income to income before income taxes for the years ended December 31, 2024 and 2023:

Other significant segment items that are regularly reviewed by the CODM are capital expenditures, which the Company defines as any purchases of property and equipment or intangible assets. The following table depicts capital expenditures for the years ended December 31, 2024 and 2023:

The following table depicts the Company’s total assets:

NOTE 11 — REVENUE

The following table depicts the Company’s disaggregation of total sales and gross margin for the years ended December 31, 2024 and 2023:

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

The Company hasno contract assets, and the only contract liabilities are customer deposits and gift cards, which are reported within other liabilities in the consolidated balance sheets.

NOTE 12 — LEASES

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

All of the Company’s leased facilities as of December 31, 2024, are non-cancellable. The leases are a combination of triple net leases, for which the Company pays its proportionate share of common area maintenance, property taxes, and property

insurance, and modified gross leases, for which the Company directly pays for common area maintenance and property insurance.

The following table depicts supplemental cash flow information related to operating leases:

The following table depicts the Company’s leasing costs for the years ended December 31, 2024 and 2023:

As of December 31, 2024, the weighted average remaining lease term and weighted average discount rate for operating leases were 3.0 years and 3.9%. As of December 31, 2023, the weighted average remaining lease term and weighted average discount rate for operating leases were 2.0 years and 4.4%.

NOTE 13 — BASIC AND DILUTED AVERAGE SHARES

The following table is a reconciliation of the Company’s basic and diluted weighted average common shares for the years ended December 31, 2024 and 2023:

For the year ended December 31, 2024, there wereno Common Stock options unexercised. For the year ended December 31, 2023, there was a total of 15 thousand Common Stock options unexercised. For the years ended December 31, 2024, and 2023, there wereno anti-dilutive shares, nor warrants outstanding.

On March 14, 2023, a stock repurchase program was unanimously approved by the Company’s Board, which gave management authorization to purchase up toone million shares of the Company’s Common Stock, at a per-share price not to exceed $9.00, on the open market. The plan expires on March 31, 2026.

The following table lists the repurchase of Company shares for the year ended December 31, 2024:

For the year ended December 31, 2024, the Company repurchased 512,957 shares for $2,413,774, for an average price of $4.71.

NOTE 14 — DEBT

The following table summarizes the details of the Company’s long-term debt obligations:

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

previously presented within our commercial segment and is now presented within corporate as the line of credit provides borrowing capacity for all segments.

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

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

NOTE 15 — STOCK-BASED COMPENSATION

On June 21, 2004, our shareholders approved the adoption of the 2004 Stock Option Plan (the “2004 Plan”), which reserved 1,700,000 shares of our Common Stock for issuance upon exercise of options to purchase our Common Stock. Prior to 2012, the Company granted options to purchase an aggregate of 1,459,634 shares of our Common Stock under the 2004 Plan to certain of our officers, directors, key employees, and other individuals who provided us with goods and services. As of December 31, 2024, of the options issued under the 2004 Plan,845,634 had been exercised,614,000 had expired, andzero (0) remain outstanding. Since no further issuances can be made under the 2004 Plan andno options remain outstanding, the 2004 Plan has been formally terminated.

On December 7, 2016, stockholders of the Company approved the adoption of the 2016 Equity Incentive Plan (the “2016 Plan”), which reserved 1,100,000 shares for issuance pursuant to awards issued thereunder. As of December 31, 2024, no awards had been made under the 2016 Plan. The 2016 plan was never utilized andno equity awards were made, the 2016 Plan has been formally terminated.

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. Under this policy, all related party transactions are identified and approved prior to consummation of the transaction to ensure they are consistent with the Company’s best interests and the best interests of its shareholders. The Company utilizes a space owned by a related party, for the secure processing and handling of materials before distribution. No consideration is exchanged between the parties, but the Company estimates that, if costs were incurred, they would be immaterial to its consolidated financial statements.

NOTE 17 — CONTINGENCIES

We review the need to accrue for any loss contingency and establish a liability when, in the opinion of management, it is probable that a matter would result in a liability and the amount of loss, if any, can be reasonably estimated. We do not believe that the resolution of any currently pending lawsuits, claims, and proceedings, either individually or in the aggregate, will have a material adverse effect on financial position, results of operations, or liquidity. However, the

outcomes of any currently pending lawsuits, claims, and proceedings cannot be predicted, and therefore, there can be no assurance that this will be the case. There are no loss contingencies subject to reporting for the years ended December 31, 2024 and 2023.

NOTE 18 — INCOME TAXES

The Company’s income from continuing operations before income tax expense for Fiscal 2024 and Fiscal 2023 was $8,749,180 and $9,021,370, respectively, and was derived entirely from domestic operations.

The following table summarizes the components of income tax expense, disaggregated by current and deferred, and by federal and state:

The following table provides a reconciliation of the Company’s federal tax rate to its effective tax rate:

The following table summarizes income taxes paid, net of any refunds received for the years ended December 31, 2024 and 2023:

The following table summarizes income taxes paid, net of any refunds received, disaggregated by individual jurisdictions in which income taxes paid, net of refunds received is equal to or greater than five percent of total income taxes paid, for the years ended December 31, 2024 and 2023:

The following chart provides detail of the significant temporary differences giving rise to deferred tax assets and liabilities:

No valuation allowance was recorded against the net deferred tax asset (liability) balance as of December 31, 2024 and December 31, 2023.

NOTE 19 — DEFINED CONTRIBUTION PLANS

The Company sponsors a defined contribution 401(k) plan (“DCP”). Employee contributions under the DCP are fully vested, with employer matching contributions being subject to a service vesting schedule. In Fiscal 2024 and 2023, the Company contributed $13,472 and $14,300 to the DCP, respectively.