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 (“U.S”) Generally Accepted Accounting Principles (“U.S. GAAP”) and, in the opinion of management, reflects all adjustments necessary to fairly state the Company’s results of operations, financial position, stockholders’ equity, and cash flows for the periods presented.

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 has no variable interest entities that require 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, and 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 and product returns industry. 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. Our product returns business reintroduces products back into the supply chain, creating another opportunity for the asset to be used. 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 the responsible reuse and recycling of electronic devices.

See Note 3 – Accounting Policies and Estimates and Note 9 – 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 from Contracts with Customers, provides guidance on identifying performance obligations in revenue-generating transactions. The Company applies a five-step approach in determining the amount and timing of revenue to be recognized: (i) identifying the contract with a customer; (ii) identifying the performance obligations in the contract; (iii) determining the transaction price; (iv) allocating the transaction price to the performance obligations in the contract; and (v) 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 from refining when our inventory arrives at the destination port, and the performance obligation is satisfied by transferring control of the goods identified in the customer contract. The initial invoice is recognized in full when our performance obligation is satisfied. Under ASC 606, an estimate of the variable consideration to which we are entitled is included in the transaction price, based on the estimated weight and the current spot price of the metal. An adjustment to revenue is made once the underlying weight and any metal spot price movements are resolved, which usually takes around six weeks. Any adjustment arising from the resolution of the underlying uncertainty is netted against the settlement due under the original contract. Historically, these amounts have not been material.

The commercial segment also provides recycling and product returns services according to a Scope of Work (“SOW”). Revenue from recycling and product returns services are 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 for inbound asset or material movements to our facilities. Revenue from freight arrangement services is recognized upon settlement with our business partners, which occurs when the SOW is 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 10 – Revenue for further details.

Sales Returns and Allowances

Sales are recorded, net of expected returns. In some cases, customers in the consumer and commercial segments 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, 2025, and December 31, 2024, the consumer segment’s allowance for returns was $18,190 and $11,942, respectively.

As of December 31, 2025, and December 31, 2024, the commercial segment’s allowance for returns was $42,339 and $48,569, 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 that require an assay and are of short duration and settled on comparable terms. Overall customer concentrations, as a percentage of sales, may vary due to the product mix sold in each comparative period. Individual customer concentrations are also affected by each customer’s production schedule; accordingly, the Company identifies the most appropriate sales outlet to ensure timely transaction settlement.

For the year ended December 31, 2025, two customers aggregated 54.9% of our salesand represented 68.3% of our accounts receivable balance. These customers were attributed to our consumer segment.

For the year ended December 31, 2024, one customer aggregated 30.8% of our salesand represented 6.8% of our accounts receivable balance. These customers were attributed to our consumer segment.

The Company believes that no single customer is critical to its business, given its diverse revenue streams and the optionality of its sales outlets, which are primarily associated with base and precious metals.

Categorization of Costs and Allocation of Corporate Overhead

Critical to understanding the nature of our operations and presentation of our results of operations is the categorization of costs and allocation of corporate overhead.

Detailed below are the categorization of costs associated with cost of goods sold and selling, general and administrative expenses:

Cost of Goods Sold

Cost of goods sold includes the cost of commodities, harvested components from technology, and merchandise sold, as well as the costs of inbound and outbound freight.

Selling, General and Administrative Expenses

Selling, general, and administrative expenses include facility costs, asset and commodity processing costs, processing and store-level personnel costs, and waste disposal costs. Selling, general, and administrative expenses also include personnel costs for sourcing business partner relationships and outbound sales, as well as support and corporate overhead costs associated with accounting and finance, legal, risk management, compliance, information systems, logistics, marketing, and any third-party service providers.

The Company allocates its corporate overhead to its operating segments, which includes selling, general and administrative expenses, along with depreciation and amortization, other income, interest expense, and income tax expense.

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

Shipping and Handling Costs

Within the consumer and commercial segments, inbound and outbound freight costs are a component of cost of goods sold. Shipping and handling costs are accounted for as fulfillment costs.

For the years ended December 31, 2025, and December 31, 2024, the consumer segment’s shipping and handling costs were $68,309 and $95,765, respectively.

For the years ended December 31, 2025, and December 31, 2024, the commercial segment’s shipping and handling costs were $3,904,724 and $4,840,381, respectively.

Advertising Costs

Advertising costs for the consumer and commercial segments are expensed as incurred.

For the years ended December 31, 2025, and December 31, 2024, the consumer segment’s advertising costs were $1,121,334 and $1,309,013, respectively.

For the years ended December 31, 2025, and December 31, 2024, the commercial segment’s advertising costs were $419,028 and $281,814, 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 we are reasonably certain of renewing the lease at inception or upon a triggering event.

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 of one year or less, the Company has elected not to record lease liabilities and right-of-use assets and instead recognizes the expense associated with lease payments on a straight-line basis.

See Note 11 – Leases for further details.

Store Pre-Opening Costs

The Company may incur significant costs associated with new store openings, including, but not limited to, advertising, employee recruitment, licenses, permits, supplies, training, travel, and general store readiness, and these costs are expensed as incurred.

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 of a change in tax rates on deferred tax assets and liabilities 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 its other significant income tax filing positions and deductions would be sustained upon audit, or that any 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.

See Note 17 – 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, 2025, and December 31, 2024.

As of December 31, 2025, the Company had a deferred tax liability of $147,381. As of December 31, 2024, the Company had a deferred tax asset of $49,526. The Company didnot have a valuation allowance as of December 31, 2025, or December 31, 2024.

See Note 17 – 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. For the periods presented in these consolidated financial statements, the Company’s CODM was identified as the Chief Executive Officer.

See Note 2 – Principles of Consolidation and Nature of Operations and Note 9 – Segment Information for further details.

Earnings Per Share

Basic earnings per share of our Common Stock, is computed by dividing net earnings available to holders of the 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 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 12 – 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 14 – 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 releases such liability upon remittance to the taxing authority, without affecting 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 bear interest at rates that reflect current market rates. None of these instruments are held for trading purposes.

Financial instruments that may subject the Company to concentration of credit risk include cash and cash equivalents, as well as accounts receivable. At times, cash and cash equivalents exceed federally insured limits.

Cash and Cash Equivalents

The Company considers all highly liquid investments with maturities 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 represents 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 in collecting past-due amounts, the degree of their aging, and current economic factors impacting balances. In addition, specific accounts that are considered and expected to be uncollectible are included in the allowance for credit losses. Accounts receivable are considered delinquent when payment is not made within the contract terms. Accounts receivable are written off when all efforts to collect have been exhausted, and the potential for recovery is considered remote.

As of December 31, 2025, and December 31, 2024, the consumer segment’s allowance for credit losses was $0 and $0, respectively.

As of December 31, 2025, and December 31, 2024, the commercial segment’s allowance for credit losses was $735,944 and $433,159, 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. The cost of inventory is the amount paid for an individual asset or lot of goods. 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 equals the amount paid for the individual asset or lot of goods, or, in instances where we have an obligation to sell the asset before we pay for it, we use the retail cost method to estimate its value. Inherent in the retail cost method are certain management judgments and estimates that may affect the ending inventory valuation of such assets and the gross profit recognized at the time of sale. We believe that our estimates, used in applying the retail cost method to value such assets, reasonably reflect their cost. The cost of our processed and unprocessed inventory, primarily consisting of base metals and electronic scrap with grades containing precious metals, is determined using 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 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 years ended December 31, 2025 and 2024, and the Company did not record a goodwill impairment charge in any of the periods presented.

See Note 5 – 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 6 – 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 7 – Intangible Assets, Net for further details.

New Accounting Standards

In November 2024, the FASB issued Accounting Standards Update (“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.

In September 2025, the FASB issued ASU 2025-06, Intangibles - Goodwill and Other - Internal Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software (“ASU 2025-06”). ASU 2025-06 updates the accounting for internal-use software by replacing former stage-based rules with a principles-based framework. Entities will now capitalize costs associated with internal-use software only when management has authorized and committed funding, and it is probable that the project will be completed and the software will be used to perform the intended function. ASU 2025-06 also supersedes website development cost guidance, moving it to ASC 350-40. The guidance is effective for annual and interim periods beginning after December 15, 2027, with early adoption and prospective, retrospective or

a modified transition application permitted. The Company is currently evaluating the potential impact of adopting this new guidance on the consolidated financial statements and related disclosures.

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements ("ASU 2025-11"). ASU 2025-11 is intended to improve the navigability of guidance in ASC 270, Interim Reporting, and clarify when it applies. The amendments also provide additional guidance on what disclosures should be provided in interim reporting periods. The guidance is effective for annual and interim periods beginning after December 15, 2027, with early adoption and prospective or retrospective application permitted. The Company is currently evaluating the potential impact of adopting this new guidance on the consolidated financial statements and related disclosures.

In December 2025, the FASB issued ASU 2025-12, Codification Improvements ("ASU 2025-12"). ASU 2025-12 addresses suggestions received from stakeholders regarding the ASC and makes other incremental improvements to U.S. GAAP. The update represents changes to the codification that clarify, correct errors in, or make other improvements to a variety of topics that are intended to make it easier to understand and apply. The guidance is effective for annual and interim periods beginning December 15, 2026, with early adoption and prospective or retrospective application permitted. For amendments to Topic 260: Earnings Per Share, shall be applied retrospectively. 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.

In July 2025, the FASB issued ASU 2025-05, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets (“ASU 2025-05”), which provides a practical expedient related to the estimation of expected credit losses for current accounts receivable and current contract assets that arise from transactions accounted for under ASC 606, Revenue from Contracts with Customers. The practical expedient permits an entity to assume that current conditions as of the balance sheet date do not change for the remaining life of the current accounts receivable and current contract assets. The guidance is effective for annual and interim periods beginning after December 15, 2025, with early adoption and prospective application permitted. The Company adopted the practical expedient guidance effective January 1, 2025. As ASU 2025-05 applies to credit losses for accounts receivable and contract assets, the adoption did not have a material impact on the Company’s consolidated financial statements.

No other recently issued or effective ASUs had, or are expected to have, a material impact on our financial position and results of operations.

NOTE 4 — INVENTORIES

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

NOTE 5 — GOODWILL

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

NOTE 6 — PROPERTY AND EQUIPMENT, NET

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

NOTE 7 — 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, 2025:

NOTE 8 — ACCRUED EXPENSES

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

NOTE 9 — 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, 2025 and 2024:

The following table depicts a reconciliation from segment operating income to income before income taxes for the years ended December 31, 2025 and 2024:

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, 2025 and 2024:

The following table depicts the Company’s total assets:

NOTE 10 — REVENUE

The following table depicts the Company’s disaggregation of total sales and gross margin for the years ended December 31, 2025 and 2024:

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

The Company has no contract assets, and the contract liabilities are customer deposits, store credit, and gift cards, which are reported within other current liabilities in the consolidated balance sheets.

NOTE 11 — LEASES

The following table depicts the Company’s future annual minimum leases payments as of December 31, 2025:

All of the Company’s leased facilities, as of December 31, 2025, 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. Lease costs are comprised of a combination of minimum lease payments and variable lease costs.

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, 2025 and 2024:

As of December 31, 2025, the weighted average remaining lease term and weighted average discount rate for operating leases were 4.6 years and 5.1%. 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%.

NOTE 12 — 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, 2025 and 2024:

For the years ended December 31, 2025 and 2024, there wereno Common Stock options unexercised. For the years ended December 31, 2025, and 2024, 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 to 1.0 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.

On March 27, 2025, the Board unanimously approved the repurchase of an additional 100 thousand shares of the Common Stock, bringing the total authorization under the existing repurchase program to 1.1 million shares.

The following table lists the repurchase of Company shares for the year ended December 31, 2025:

For the year ended December 31, 2025, the Company repurchased 32,225 shares for $188,908, for an average price of $5.86.

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 13 — 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, 2025:

Refer to (1) through (9) below the previous table for descriptions of the Company’s Debt Obligations.

The Company was in compliance with all of its debt obligation covenants for the years ended December 31, 2025, and December 31, 2024.

The following table depicts the Company’s future scheduled aggregate principal payments and maturities as of December 31, 2025:

NOTE 14 — STOCK-BASED COMPENSATION

On June 25, 2025, our shareholders approved the adoption of the 2025 Equity Incentive Plan (the “2025 Plan”), effective June 25, 2025. The 2025 Plan provides for the grant of up to 1.1 million shares of Common Stock pursuant to awards granted under the plan.

The 2025 Plan will remain in effect for a term of 10 years from the effective date, unless sooner terminated by the Board of Directors.

As of December 31, 2025, no awards have been granted under the 2025 Plan. In the 2024 comparative period, there was no stock-based compensation activity under any prior plans. As a result, no stock-based compensation expense was recognized for the years ended December 31, 2025 and 2024.

NOTE 15 — 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 16 — 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 our results of operations, financial position, 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, 2025 and 2024.

NOTE 17 — INCOME TAXES

The Company’s income from continuing operations before income tax expense for Fiscal 2025 and Fiscal 2024 was $18,723,218 and $8,749,180, 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, 2025 and 2024:

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, are equal to or greater than five percent of total income taxes paid, for the years ended December 31, 2025 and 2024:

The following chart provides details 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, 2025 and December 31, 2024.

NOTE 18 — 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 2025 and 2024, the Company contributed $49,633 and $13,472 to the DCP, respectively.