Envela Corp (ELA)

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Unless the context indicates otherwise for one of our specific operating segments, references to “we,” “us,” “our,” the “Company,” and “Envela” refer to the consolidated business operations of Envela Corporation, and all of its direct and indirect subsidiaries.

Forward-Looking Statements

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This Quarterly Report on Form 10-Q for the quarter ended March 31, 2026 (this “Form 10-Q”), including but not limited to: (i) the section of this Form 10-Q entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations;” (ii) information concerning our business prospects or future financial performance, anticipated revenues, expenses, profitability or other financial items; and (iii) our strategies, plans and objectives, together with other statements that are not historical facts, includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements generally can be identified by the use of forward-looking terminology, such as “may,” “will,” “should,” “could,” “can,” “would,” “believe,” “anticipate,” “project,” “plan,” “expect,” “estimate,” “goal,” “seek,” “ensure,” “potential,” “opportunity,” “intend,” “predict,” “committed,” “likely,” “continue,” “strive,” “aim,” “scheduled,” “focused on,” “long-term,” “future,” “over time,” “ongoing,” “uncertain,” “moving forward,” or “subject to.” We intend that all forward-looking statements be subject to the safe harbors created by these laws. All statements other than statements of historical information provided herein are forward-looking and based on current expectations regarding important risk factors. Many of these risks and uncertainties are beyond our ability to control, and, in many cases, we cannot predict all of the risks and uncertainties that could cause our actual results to differ materially from those expressed in the forward-looking statements. Actual results could differ materially from those expressed in the forward-looking statements, and readers should not regard those statements as a representation by us or any other person that the results expressed in the statements will be achieved. Important risk factors that could cause results or events to differ from current expectations are described under the section entitled “Risk Factors” in the Company’s 2025 Annual Report and any material updates are described under the section of this Form 10-Q entitled “Risk Factors” and elsewhere in this Form 10-Q. These factors are not intended to be an all-encompassing list of risks and uncertainties that may affect the operations, performance, development, and results of our business. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation to release publicly the results of any revisions to these forward-looking statements, which may be made to reflect events or circumstances after the date thereon, including, without limitation, changes in our business strategy or planned capital expenditures, or store growth plans, or to reflect the occurrence of unanticipated events.

Introduction

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This section includes a discussion of our operations for the three months ended March 31, 2026 and 2025. The following discussion and analysis provide information that management believes is relevant to assessing and understanding our financial condition, liquidity, and results of operations. The discussion should be read in conjunction with the Company’s 2025 Annual Report, the unaudited condensed consolidated financial statements, and the related Notes thereto included in Part I, Item 1 of this report.

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Critical Accounting Policies and Estimates

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There were no material changes to our critical accounting policies and estimates as described in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of the Company’s 2025 Annual Report.

Economic Conditions

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Impacts of Demand for Safe-Haven Metals

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While the current market for safe-haven metals has generally led to stronger premiums within our consumer segment, especially for gold and silver, demand for these metals has created industry-wide backlogs and slowed payments from refiners, which the Company has experienced. The impact on working capital is having to pay more to procure inventory, and the delayed conversion of accounts receivable from refiners. While the length of the current cycle and the steps

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domestic refiners will take to address processing capacity are indeterminate, the Company is closely monitoring its inbound buying practices, cash, inventory levels, and its accounts receivable exposure with its refining customers. The Company believes it has sufficient liquidity to maintain its current buying practices, yet it can adjust its buying programs to reduce exposure should these conditions materially affect its conversion of accounts receivable.

Impacts of Government Legislation

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On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law, which includes significant changes to federal tax law and other regulatory provisions that may impact the Company. We have evaluated the provisions of the new law and its potential effects on our effective tax rate, results of operations, and financial condition. OBBBA allows businesses to immediately deduct the full cost of qualifying assets in the year they are placed in service, rather than spreading the deduction over several years, and is effective for property acquired and placed in service after January 19, 2025. OBBBA also requires businesses to recognize the effects of tax law changes in the period of enactment, such as remeasuring estimated U.S. deferred tax assets and liabilities. The Company intends to utilize bonus depreciation, effectively reducing taxable income in the respective tax period and the cash deployed to settle such obligations. There was no material impact on the effective tax rate, financial condition, results of operations, or cash flows during the quarter ended March 31, 2026. In future fiscal periods, the impact of OBBBA is contingent on the continued election of bonus depreciation and the amount of qualifying assets acquired by the Company.

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Impacts of Increases in Interest Rates and Inflation

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Rising interest rates and inflation, coupled with commodity price risk, mainly associated with fluctuations in the market prices of precious metals and diamonds, could affect consumer discretionary spending. Furthermore, adverse macroeconomic conditions can also impact demand for the resale of personal technology assets.

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To counterbalance economic cycles that impact market selling prices and/or underlying operating costs, we adjust the inbound purchase price of commodity-based products, luxury hard assets, and resale technology.

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We continuously monitor our inventory positions and associated working capital to respond to market conditions and to meet seasonal business cycles and expansionary plans. These economic cycles may, from time to time, require the business to use its line of credit or seek additional capital.

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Impacts of Tariffs

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The U.S. government has recently adopted new approaches to trade policy, announced tariffs on certain foreign goods and certain global tariffs, and signaled the possibility of significant additional tariff increases or tariff expansions. Specifically, under Section 232 of the Trade Expansion Act of 1962, tariffs were imposed on the importation of aluminum, copper, steel, and certain derivative products, but excluded gold and silver. The impact of such tariffs and retaliatory tariffs by other countries continues to evolve and requires regular monitoring and evaluation. The deemed impacts of tariffs on each of our reportable segments are detailed below:

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Consumer Segment

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The consumer segment does not source inventory from or sell it into international markets, so it is not directly impacted by tariffs. However, global market uncertainty caused by tariffs can increase commodity costs on safe-haven metals such as gold and silver, which may increase working capital requirements. The Company mitigates increased working capital requirements by monitoring its inventory position and turnover and by maintaining disciplined buying practices to preserve margins.

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Commercial Segment

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The commercial segment periodically purchases limited quantities of personal technology assets and replacement parts for resale from international markets. Tariffs may increase costs for original equipment manufacturers, retailers, and parts distributors and, as a result, may require the Company to pay more for the purchase of personal technology assets for resale and replacement parts, thereby increasing the Company’s required working capital. The Company mitigates increased working capital requirements by monitoring its inventory position and turnover, maintaining disciplined buying practices, and using optimal domestic or international sales channels to preserve margins.

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There can be no assurance that the measures we have adopted will be successful in mitigating the aforementioned risks.

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Our Business

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Envela serves as a holding company, conducting its operations via subsidiaries engaged in various businesses and activities within the recommerce and recycling sectors. 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:

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Consumer Segment

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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 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.

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Commercial Segment

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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.

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Segment Activities

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The Company believes it is well-positioned to take advantage of its overall capital structure.

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Consumer Segment

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Our strategy is to expand the number of locations we operate by opening new locations throughout the U.S. Likewise, we continue to ev

[Excerpt truncated for page length; source filing is linked above.]

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Statement Regarding Risks and Uncertainties that May Affect Future Results

The following discussion of our financial condition and results of operations should be read together with our financial statements and related notes and other financial information included in this Annual Report. The following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Annual Report, particularly in the section titled “Risk Factors.” Our historical results are not necessarily indicative of the results that may be expected for any period in the future.

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Refer to Cautionary Note Regarding Forward-Looking Statements on page 4 for further details.

Introduction

This management’s discussion and analysis provides comparisons of material changes in the consolidated financial statements for the years ended December 31, 2025, and December 31, 2024. The following discussion and analysis also provides information that management believes is relevant to the assessment and understanding of our results of operation, financial condition, liquidity, and capital resources.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires our management to make judgments and estimates that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenue generated and expenses incurred during the reporting periods. Our estimates are based on our historical experience and various other factors we believe are reasonable under the circumstances, and the results of which form the basis for judgments about the carrying value of assets and liabilities that are not readily determinable from other sources. Actual results may differ from these judgments and estimates under different assumptions or conditions, and any such differences may be material.

See Note 3 – Accounting Policies and Estimates for further details.

Economic Conditions

Impacts of Demand for Safe-Haven Metals

While the current market for safe-haven metals has generally led to stronger premiums within our consumer segment, especially for gold and silver, demand for these metals has created industry-wide backlogs and slowed payments from refiners, which the Company has experienced. The impact on working capital is having to pay more to procure inventory, and the delayed conversion of accounts receivable from refiners. While the length of the current cycle and the steps domestic refiners will take to address processing capacity are indeterminate, the Company is closely monitoring its inbound buying practices, cash, inventory levels, and its accounts receivable exposure with its refining customers. The Company believes it has sufficient liquidity to maintain its current buying practices, yet it can adjust its buying programs to reduce exposure should these conditions materially affect its conversion of accounts receivable.

Impacts of Government Legislation

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law, which includes significant changes to federal tax law and other regulatory provisions that may impact the Company. We have evaluated the provisions of the new law and its potential effects on our effective tax rate, results of operations, and financial condition. OBBBA allows businesses to immediately deduct the full cost of qualifying assets in the year they are placed in service, rather than spreading the deduction over several years, and is effective for property acquired and placed in service after January 19, 2025. OBBBA also requires businesses to recognize the effects of tax law changes in the period of enactment, such as remeasuring estimated U.S. deferred tax assets and liabilities. The Company intends to utilize bonus depreciation, effectively reducing taxable income in the respective tax period and the cash deployed to settle such obligations. There was no material impact on the effective tax rate, financial condition, results of operations, or cash flows during the period ending December 31, 2025. In future fiscal periods, the impact of OBBBA is contingent on the continued election of bonus depreciation and the amount of qualifying assets acquired by the Company.

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Impacts of High Interest Rates and Inflation

The U.S. and other global economies are currently experiencing high interest rates and elevated inflation, coupled with commodity price risk, mainly associated with fluctuations in the market prices of precious metals and diamonds, which could affect consumer discretionary spending. Furthermore, adverse macroeconomic conditions can also impact demand for the resale of personal technology assets.

To counterbalance economic cycles that impact market selling prices and/or underlying operating costs, we adjust the inbound purchase price of commodity-based products, luxury hard assets, and resale technology.

We continuously monitor our inventory positions and associated working capital to respond to market conditions and to meet seasonal business cycles and expansionary plans. These economic cycles may, from time to time, require the business to use its line of credit or seek additional capital.

Impacts of Tariffs

The U.S. government has recently adopted new approaches to trade policy, announced tariffs on certain foreign goods and certain global tariffs, and signaled the possibility of significant additional tariff increases or tariff expansions. Specifically, under Section 232 of the Trade Expansion Act of 1962, tariffs were imposed on the importation of aluminum, copper, steel, and certain derivative products, but excluded gold and silver. The impact of such tariffs and retaliatory tariffs by other countries continues to evolve and requires regular monitoring and evaluation. The deemed impacts of tariffs on each of our reportable segments are detailed below:

Consumer Segment

The consumer segment does not source inventory from or sell it into international markets, so it is not directly impacted by tariffs. However, global market uncertainty caused by tariffs can increase commodity costs on safe-haven metals such as gold and silver, which may increase working capital requirements. The Company mitigates increased working capital requirements by monitoring its inventory position and turnover and by maintaining disciplined buying practices to preserve margins.

Commercial Segment

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The commercial segment periodically purchases limited quantities of personal technology assets and replacement parts for resale from international markets. Tariffs may increase costs for original equipment manufacturers, retailers, and parts distributors and, as a result, may require the Company to pay more for the purchase of personal technology assets for resale and replacement parts, thereby increasing the Company’s required working capital. The Company mitigates increased working capital requirements by monitoring its inventory position and turnover, maintaining disciplined buying practices, and using optimal domestic or international sales channels to preserve margins.

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There can be no assurance that the measures we have adopted will be successful in mitigating the aforementioned risks.

Our Business

Envela serves as a holding company, conducting its operations via subsidiaries engaged in various businesses and activities within the recommerce and recycling sectors. 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:

Consumer Segment

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

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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.

Commercial Segment

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.

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Segment Activities

The Company believes it is well-positioned to take advantage of its overall capital structure.

Consumer Segment

Our strategy is to expand the number of locations we operate by opening new locations throughout the U.S. Likewise, we continue to evaluate opportunities related to complementary product and service offerings for our stores and online business.

Commercial Segment

Our strategy is to expand both organically and through acquisitions. Our processing facilities are capable of managing the expansion of existing relationships and consolidation of acquisition targets within relative geographic proximity into our existing facilities.

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Results of Operations

The results of operations should be read in conjunction with our financial statements and notes included elsewhere in the Annual Report. Prior year comparisons for 2024 and 2023, are included in “Part II. Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal years ended December 31, 2024 and 2023, which was filed with the SEC on March 26, 2025.

Any reference in this Annual Report to a “year-over-year” change is to the relevant comparison between activity from each twelve-month period ended December 31, 2025 and 2024.

Comparison of the Years Ended December 31, 2025 and 2024

The following table depicts our disaggregated consolidated statements of income for the years ended December 31, 2025 and 2024:

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The individual segments reported the following for the years ended December 31, 2025 and 2024:

Sales

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Consolidated

Sales increased by $60,645,133, or 33.6%, during the year ended December 31, 2025, to $241,021,362, as compared to $180,376,229 during the same period in Fiscal 2024.

Consumer Segment

Sales in the consumer segment increased by $62,248,071, or 47.7%, during the year ended December 31, 2025, to $192,717,539, as compared to $130,469,468 during the same period in Fiscal 2024. The change was primarily attributed to higher transaction volumes, which were supported by the upward movement in gold and silver prices throughout the year. Overall sales benefited from favorable supply flows when compared to the same period in Fiscal 2024.

Commercial Segment

Sales in the commercial segment decreased by $1,602,938, or 3.2%, during the year ended December 31, 2025, to $48,303,823, as compared to $49,906,761 during the same period in Fiscal 2024. The change was primarily attributed to less revenue from: ITAD revenue share settlements and personal technology assets sourced from our trade-in programs, which were partially offset by increased service revenue from product returns and secured processing of end-of-life assets, electronic scrap grades and associated recoveries. Our electronic scrap grades and associated recoveries experienced a strong fourth quarter of Fiscal 2025, which was a key driver of the vertical’s full-year results.

Cost of Goods Sold

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Consolidated

Cost of goods sold increased by $51,035,927, or 37.5%, during the year ended December 31, 2025, to $187,096,369, as compared to $136,060,442 during the same period in Fiscal 2024.

Consumer Segment

Cost of goods sold in the consumer segment increased by $55,205,691, or 48.2%, during the year ended December 31, 2025, to $169,793,289, as compared to $114,587,598 during the same period in Fiscal 2024. The change was primarily attributed to the aforementioned higher sales volumes and the upward movement of gold and silver prices compared to the same period in Fiscal 2024.

Cost of goods sold as a percent of sales was 88.1% during the year ended December 31, 2025, as compared to 87.8% during the year ended December 31, 2024. The change was primarily attributed to a greater impact from the recognition of costs associated with wholesale precious metals transactions.

Commercial Segment

Cost of goods sold in the commercial segment decreased by $4,169,764, or 19.4%, during the year ended December 31, 2025, to $17,303,080, as compared to $21,472,844 during the same period in Fiscal 2024. The change was primarily attributed to the aforementioned impact of fewer ITAD revenue-share settlements and, incrementally, to the recognition of costs associated with the sale of trade-in-related personal technology assets, which was partially offset by an increase in cost of goods sold from electronic scrap grades and associated recoveries.

Cost of goods sold as a percent of sales was 35.8% during the year ended December 31, 2025, as compared to 43.0% during the year ended December 31, 2024. The change was primarily attributed to favorable margins from our ITAD revenue-share settlements and trade-in-related product mix, despite lower overall sales, while our margins on electronic waste and associated recoveries were in line with the same period in Fiscal 2024.

Gross Margin

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Consolidated

Gross margin increased by $9,609,206, or 21.7%, during the year ended December 31, 2025, to $53,924,993, as compared to $44,315,787 during the same period in Fiscal 2024.

Consumer Segment

Gross margin in the consumer segment increased by $7,042,380, or 44.3%, during the year ended December 31, 2025, to $22,924,250, as compared to $15,881,870 during the same period in Fiscal 2024. The net impact of the aforementioned increase in sales of $62,248,071 and increase in cost of goods sold of $55,205,691 resulted in the $7,042,380 increase in gross margin.

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Commercial Segment

Gross margin in the commercial segment increased by $2,566,826, or 9.0%, during the year ended December 31, 2025, to $31,000,743, as compared to $28,433,917 during the same period in Fiscal 2024. The net impact of the aforementioned decrease in sales of $1,602,938 and decrease in cost of goods sold of $4,169,764 resulted in the $2,566,826 increase in gross margin.

Selling, General and Administrative

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Consolidated

Selling, general and administrative expenses decreased by $655,659, or 1.9%, during the year ended December 31, 2025, to $33,949,473, as compared to $34,605,132 during the same period in Fiscal 2024.

Consumer Segment

Selling, general and administrative expenses in the consumer segment increased by $242,622, or 1.6%, during the year ended December 31, 2025, to $15,454,592, as compared to $15,211,970 during the same period in Fiscal 2024. The change was primarily attributed to new store cost structures, partially offset by reductions in store onboarding and new-store marketing costs, as well as select reductions in human capital costs.

Commercial Segment

Selling, general and administrative expenses in the commercial segment decreased by $898,281, or 4.6%, during the year ended December 31, 2025, to $18,494,881, as compared to $19,393,162 during the same period in Fiscal 2024. The change was primarily attributed to a reduction in variable-cost processing-related expenses, of which human-capital costs were a significant component, along with a reduction in lease costs and facility-related costs from the closure of our Arizona ITAD facility, which occurred in the latter part of the second quarter of Fiscal 2025. We began diverting inbound asset flow before closure, and we fully absorbed the asset flow from the former Arizona ITAD facility into our Texas ITAD facility in the third quarter of Fiscal 2025.

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Depreciation and Amortization

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Consolidated

Depreciation and amortization expense increased by $314,815, or 20.3%, during the year ended December 31, 2025, to $1,866,589, as compared to $1,551,774 during the same period in Fiscal 2024.

Consumer Segment

Depreciation and amortization expense in the consumer segment increased by $267,456, or 51%, during the year ended December 31, 2025, to $791,966, as compared to $524,510 during the same period in Fiscal 2024. The change was primarily attributed to the depreciation of assets placed into service related to our new retail stores.

Commercial Segment

Depreciation and amortization expense in the commercial segment increased by $47,359, or 4.6%, during the year ended December 31, 2025, to $1,074,623, as compared to $1,027,264 during the same period in Fiscal 2024. There was no material impact from assets being capitalized or reaching maturity in each comparative period; as such, there was no discussion point.

Other Income (Expense)

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Consolidated

Other income decreased by $16,753, or 1.6%, during the year ended December 31, 2025, to $1,020,929, as compared to $1,037,682 during the same period in Fiscal 2024.

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Consumer Segment

Other income in the consumer segment increased by $247,734, or 236.9%, during the year ended December 31, 2025, to $352,295, as compared to $104,561 during the same period in Fiscal 2024. The change was primarily attributable to the proportionate share of earned dividend and interest income. Excess cash balances are now aggregated at the corporate level to optimize earnings, rather than being held at the segment level. This resulted in the segment receiving a higher allocation of earned income on excess cash balances. The segment also received an employee retention credit in Fiscal 2025, while Fiscal 2024 included the proportionate share of income from a settlement for repairs related to our corporate headquarters. The impact of dividend and interest income is referenced below.

Dividend income comprised $90,710 and $0 of other income during the years ended December 31, 2025, and December 31, 2024, respectively. Interest income comprised $165,105 and $2,304 of other income during the years ended December 31, 2025, and December 31, 2024, respectively. In aggregate, cash balances were higher in Fiscal 2025, resulting in greater overall dividend and interest income for the Company.

Commercial Segment

Other income in the commercial segment decreased by $264,487, or 28.3%, during the year ended December 31, 2025, to $668,634, as compared to $933,121 during the same period in Fiscal 2024. The change was primarily attributable to the proportionate share of dividend and interest income. Excess cash balances are now aggregated at the corporate level to optimize earnings, rather than being held at the segment level. This resulted in lower segment allocation of earned income on excess cash balances. Further, the same period in Fiscal 2024 included the proportionate share of income from a settlement for repairs related to our corporate headquarters. The impact of dividend and interest income is referenced below.

Dividend income comprised $213,773 and $39,156 of other income during the years ended December 31, 2025, and December 31, 2024, respectively. Interest income comprised $391,806 and $753,315 of other income during the years ended December 31, 2025, and December 31, 2024, respectively. In aggregate, cash balances were higher in Fiscal 2025, resulting in greater overall dividend and interest income for the Company.

Interest Expense

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Consolidated

Interest expense decreased by $40,741, or 9.1%, during the year ended December 31, 2025, to $406,642, as compared to $447,383 during the same period in Fiscal 2024.

Consumer Segment

Interest expense in the consumer segment decreased by $24,189, or 10.6%, during the year ended December 31, 2025, to $204,603, as compared to $228,792 during the same period in Fiscal 2024. The change was primarily attributed to a loan

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pay-off on a retail location that occurred in the third quarter of Fiscal 2025 and to a reduced allocation of interest expense as we paid off our loan on our corporate headquarters in the fourth quarter of Fiscal 2025.

Commercial Segment

Interest expense in the commercial segment decreased by $16,552, or 7.6%, during the year ended December 31, 2025, to $202,039, as compared to $218,591 during the same period in Fiscal 2024. The change was primarily attributable to the reduced allocation of interest expense as we paid off our loan on our corporate headquarters in the fourth quarter of Fiscal 2025.

Income Tax Expense

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Consolidated

Income tax expense, for both segments, for the year ended December 31, 2025, was $4,126,240, an increase of $2,134,119, as compared to income tax expense of $1,992,121 for the year ended December 31, 2024. Currently, the Company has a deferred tax liability reflecting a future obligation to pay taxes. The Company is subject to a federal tax rate of approximately 21.0% on net income, in addition to state and local taxes. The effective income tax rate was 22.0% and 22.8% for the years ended December 31, 2025 and 2024, respectively. Differences between our effective income tax rate and the U.S. federal statutory rate are the result of state taxes and non-deductible expenses, as was the case for the decrease for the year ended December 31, 2025, compared to the year ended December 31, 2024.

Net Income

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Consolidated

Net income increased by $7,839,919, or 116%, during the year ended December 31, 2025 to $14,596,978, as compared to $6,757,059 during the same period in Fiscal 2024. Refer to the aforementioned attributes discussed within the Comparison of the Years Ended December 31, 2025 and 2024 for further details.

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Consumer Segment

Net income increased in the consumer segment by $5,317,621, or 32,541.6%, during the year ended December 31, 2025 to $5,333,962, as compared to $16,341 during the same period in Fiscal 2024. Refer to the aforementioned attributes discussed within the Comparison of Years Ended December 31, 2025 and 2024 for further details.

Commercial Segment

Net income increased in the commercial segment by $2,522,298, or 37.4%, during the year ended December 31, 2025 to $9,263,016, as compared to $6,740,718 during the same period in Fiscal 2024. Refer to the aforementioned attributes discussed within the Comparison of Years Ended December 31, 2025 and 2024 for further details.

Earnings Per Share

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Consolidated

Basic and diluted earnings per share attributable to holders of our Common Stock increased by $0.30, or 115.4%, during the year ended December 31, 2025 to $0.56, as compared to $0.26 during the same period in Fiscal 2024.

Non-U.S. GAAP Financial Measures

In this management discussion and analysis, we use supplemental measures of our financial performance derived from our consolidated financial information that are not presented in our consolidated financial statements prepared in accordance with U.S. GAAP. When evaluated in conjunction with U.S. GAAP financial measures, the Company believes that these non-U.S. GAAP financial measures add meaningful insight into our results of operations, financial condition, liquidity, and ability to meet financial obligations.

These non-U.S. GAAP financial measures should not be considered a substitute for, nor superior to, financial results and measures determined or calculated in accordance with U.S. GAAP. Each of these non-U.S. GAAP financial measures is not calculated in the same manner by all companies and, accordingly, may not be an appropriate measure for comparing performance among different companies.

We have included the definitions of our non-U.S. GAAP financial measures and reconciliations to the most comparable U.S. GAAP financial measures in the following tables below.

Adjusted EBITDA and Adjusted EBITDAR

Adjusted EBITDA is defined as the sum of (i) net income (loss) of the Company, adjusted for additions (deductions) of (ii) interest expense, (iii) other (income) expense, (iv) income tax expense (benefit), and (v) depreciation and amortization. Management considers Adjusted EBITDA to be a key financial measure to assess our overall operating performance.

Adjusted EBITDAR is defined as (i) Adjusted EBITDA plus (ii) minimum fixed rent expense for properties occupied under operating leases. Management considers Adjusted EBITDAR to be a key financial measure to assess our overall operating performance, excluding the impact of variability in leasing methods and capital structures.

These measures are also inputs into the Company’s leverage ratios.

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The Company’s Adjusted EBITDA and Adjusted EBITDAR are considered non-U.S. GAAP financial measures and are not calculated in accordance with, or preferable to, “net income” or other financial measures of operating performance calculated in accordance with U.S. GAAP.

The following table provides a reconciliation of net income to Adjusted EBITDA and Adjusted EBITDAR for the years ended December 31, 2025 and 2024:

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Debt to Adjusted EBITDA and Net Debt to Adjusted EBITDA Leverage Ratios

The Company’s Debt to Adjusted EBITDA Leverage Ratio is defined as the Company’s (i) Debt Obligations divided by (ii) Adjusted EBITDA. Debt Obligations are defined as the sum of amounts outstanding under notes payable balances.

The Company’s Net Debt to Adjusted EBITDA Leverage Ratio is defined as the Company’s (i) Net Debt Obligations divided by (ii) Adjusted EBITDA. Net Debt Obligations are defined as the difference between the Company’s (i) Debt Obligations and (ii) Total Cash.

Management considers these financial measures to be helpful in understanding the Company’s ability to service Debt Obligations, excluding, and including the impact of Total Cash available to service such obligations.

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The Company’s Debt to Adjusted Leverage Ratio and Net Debt to Adjusted EBITDA Leverage Ratio are considered non-U.S. GAAP financial measures and are not calculated in accordance with, or preferable to, other financial measures utilized to assess our ability to service “notes payable” in accordance with U.S. GAAP. The Company considers the Debt to Net Income Leverage Ratio, defined as (i) Debt Obligations divided by (ii) net income, to be the representative financial measure of our ability to service “notes payable” utilizing U.S. GAAP-derived financial statement balances and is incorporated into the presentation below.

The following table reconciles components of the Debt to Adjusted EBITDA Leverage Ratio and Net Debt to Adjusted EBITDA Leverage Ratio for the years ended December 31, 2025 and 2024:

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Adjusted Debt to Adjusted EBITDAR Leverage and Adjusted Net Debt to Adjusted EBITDAR Leverage Ratios

The Company’s Adjusted Debt to Adjusted EBITDAR Leverage Ratio is defined as the Company’s (i) Adjusted Debt Obligations divided by (ii) Adjusted EBITDAR. Adjusted Debt Obligations are defined as the sum of the Company’s (i) Debt Obligations and (ii) operating lease liabilities.

The Company’s Adjusted Net Debt to Adjusted EBITDAR Leverage Ratio is defined as the Company’s (i) Adjusted Net Debt Obligations divided by (ii) Adjusted EBITDAR. Adjusted Net Debt Obligations are defined as the difference between the Company’s (i) Adjusted Debt Obligations and (ii) Total Cash.

Management considers these financial measures to be helpful in understanding the Company’s ability to service debt and operating lease obligations, excluding and including the impact of Total Cash available to service such obligations.

The Company’s Adjusted Debt to Adjusted EBITDAR Leverage Ratio and Adjusted Net Debt to Adjusted EBITDAR Leverage Ratio are considered non-U.S. GAAP financial measures and are not calculated in accordance with, or preferable to, other financial measures utilized to assess our ability to service “notes payable” and “operating lease liabilities” in accordance with U.S. GAAP. The Company considers the Adjusted Debt to Net Income Leverage Ratio, defined as the sum of (i) Debt Obligations and (ii) operating lease liabilities divided by (iii) net income, to be the representative financial measure of our ability to service “notes payable” and “operating leases” utilizing U.S. GAAP derived financial statement balances and is incorporated into the presentation below.

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The following table reconciles components of the Adjusted Debt to Adjusted EBITDAR Leverage Ratio and Adjusted Net Debt to Adjusted EBITDAR Leverage Ratio for the years ended December 31, 2025 and 2024:

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Net Cash

Net Cash is defined as the difference between the Company’s (i) cash and cash equivalents (“Total Cash”) and (ii) Debt Obligations. Management considers this financial measure to be helpful in understanding the Company’s liquidity.

The Company’s Net Cash is considered a non-U.S. GAAP financial measure and is not calculated in accordance with, or preferable to, “cash and cash equivalents” and amounts outstanding under “notes payable” balances or other financial measures of liquidity calculated in accordance with U.S. GAAP.

The following table reconciles Net Cash to its comparable U.S. GAAP financial measures:

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Free Cash Flow

Free Cash Flow is defined as the difference between the Company’s (i) net cash provided by operations (“Operating Cash Flow”) and (ii) Capital Expenditures.

Management considers this financial measure to be helpful in understanding the amount of Free Cash Flow that the Company can utilize to meet its financing needs.

The Company’s Free Cash Flow is considered a non-U.S. GAAP financial measure and is not calculated in accordance with, or preferable to, “net cash provided by operations” or other financial measures of cash flow available to meet financing needs calculated in accordance with U.S. GAAP.

The following table reconciles Free Cash Flow to the comparable U.S. GAAP financial measures for the years ended December 31, 2025 and 2024:

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Performance Metrics

In addition to non-U.S. GAAP financial measures, management utilizes certain performance metrics to assess its operations. A key performance metric that is calculated consistently across our reportable segments is the Inventory Turnover Ratio. As a purveyor of recommerce assets and recycling-grade base and precious metals, our ability to acquire inventory with appropriate margin, turn over our inventory, and redeploy sale proceeds is critical to our success. Appropriate inventory turns also reduce our exposure to changing consumer preferences and commodity market volatility.

The Company defines its Inventory Turnover Ratio as (i) cost of goods sold less shipping and handling costs divided by (ii) Average Inventory. The Company excludes shipping and handling costs in the definition of Inventory Turnover. The Company defines Average Inventory as the mean value of the Company’s inventory over a specific period, calculated by (i) adding the beginning inventory and ending inventory for that period and (ii) dividing by two.

When evaluated in conjunction with our consolidated financial statements, the Company believes that these performance metrics provide meaningful insight into our results of operations, financial condition, and ability to meet financial obligations.

These performance metrics should not be considered a substitute for, nor superior to, our financial results. These performance metrics are not calculated in the same manner by all companies and, accordingly, may not be an appropriate measure for comparing performance among different companies.

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The following table reconciles the components of Inventory Turnover for the years ended December 31, 2025 and 2024:

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Liquidity and Capital Resources

The following table summarizes the Company’s consolidated statements of cash flows:

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Operating Activities

Cash flows provided by operations decreased by $7,609,846, or 74.7%, during the year ended December 31, 2025, to $2,580,794, as compared to $10,190,640 during the same period in Fiscal 2024. The decrease in cash provided by operations was primarily attributed to an increase in net income, certain non-cash adjustments to reconcile net income to operating cash flow (as detailed in the consolidated statements of cash flows), and the following significant net changes in cash associated with operating assets and liabilities:

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Investing Activities

Cash flows (used in) investing activities decreased by $2,511,908, or 66.8%, during the year ended December 31, 2025, to $1,248,496, as compared to $3,760,404 during the same period in Fiscal 2024. The decrease in cash (used in) investing activities during the year ended December 31, 2025, was primarily impacted by more significant capital being deployed on ERP development, new store buildouts, and an associated real estate purchase for one of our Arizona locations in the same period in Fiscal 2024. Fiscal 2025 expenditures have primarily been related to improvements to our corporate headquarters and new stores.

Financing Activities

Cash flows (used in) financing activities increased by $111,366, or 3.0%, during the year ended December 31, 2025, to $3,786,452, as compared to $3,675,086 during the same period in Fiscal 2024. The increase in cash (used in) financing activities during the year ended December 31, 2025, was primarily attributed to a greater use of cash in the repayment of two notes payable in Fiscal 2025, while cash utilized in Fiscal 2024 was primarily attributed to share buybacks, which were substantially less in Fiscal 2025.

Capital Resources

Although the Company has access to a line of credit, our primary source of liquidity and capital resources currently consists of cash generated from our operating activities. We do not anticipate needing to fund our operations through the use of our line of credit, and we have no amounts drawn as of December 31, 2025. We have historically renewed, extended, or replaced short-term debt as it matures, and management believes that we will be able to continue to do so in the near future.

Capital Expenditures

We regularly identify growth opportunities and business optimizations that require capital deployment. The Company continuously monitors its capital deployment and primarily funds capital expenditures with cash flow from operating activities. Where appropriate, the Company may use debt financing on select projects. When this occurs, the Company further evaluates the project's future cash flows to ensure the debt tenure and payback period are aligned, as well as the appropriateness of the rate of return.

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Consumer Segment

In Fiscal 2025, the consumer segment primarily expended capital on store expansion, albeit to a lesser degree, as only 1 store was opened during the year. In Fiscal 2024, the consumer segment primarily expended capital on the opening of 5 stores.

The Company believes it has the liquidity and capital resources to fund future capital outlays associated with maintaining its asset base and strategic initiatives.

Commercial Segment

In Fiscal 2025, the commercial segment primarily expended capital on facility-related items. In Fiscal 2024, the commercial segment primarily expended capital on processing assets and was the primary beneficiary of our ERP system capital spend.

The Company believes it has the liquidity and capital resources to fund future capital outlays to maintain its asset base and pursue strategic initiatives.

Contractual Obligations

The following table summarizes future contractual obligations related to debt and leases as of December 31, 2025:

Off-Balance Sheet Arrangements

There are no off-balance-sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that are material to our shareholders.

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