CAUTIONARY STATEMENT REGARDING RISKS AND UNCERTAINTIES THAT MAY AFFECT FUTURE
Please see the part of this Kind 10-Ok entitled “Observe About Ahead-Trying
Statements” on web page 2.
The coronavirus illness 2019 (COVID-19) pandemic has adversely affected world financial enterprise circumstances. Future gross sales on merchandise like ours may decline, and the final word affect is unsure and topic to vary. We took steps throughout Fiscal 2020 to have as many staff earn a living from home as doable. We additionally adopted governmental directives to put on masks and undertake the social distance pointers the place doable. The length of this pandemic and the affect, both direct or oblique can't be predicted. The Firm believed further liquidity was essential to help ongoing operations throughout this era of uncertainty. We utilized for and acquired roughly
$1.67 million, 1% curiosity, federally backed mortgage to pay staff and canopy sure hire and utility-related prices throughout the COVID-19 pandemic (the "Federal Mortgage"). The mortgage is forgivable to the extent that sure standards are met. We've utilized for forgiveness and that forgiveness utility is at present beneath evaluate by the SBA.
Adjustments in Monetary Presentation Throughout Fiscal Yr 2020
In the course of the first quarter of fiscal 12 months 2020, we revised the way in which we evaluate and report our monetary info to align extra intently with the Firm's technique to have interaction in numerous recommerce actions via two precept enterprise segments-DGSE and ECHG.
Envelacontinues to report its income and working bills primarily based on its DGSE and ECHG working segments, and starting in fiscal 12 months 2020, disaggregated its income, inside the working segments, primarily based on its resale and recycle presentation foundation. The Firm's historic disaggregation of income has been recast to evolve to our present presentation. For extra info, see "Merchandise 1. Enterprise-Working Segments" above.
DGSE Treasured Metals Pricing and Enterprise Affect
As a result of DGSE buys and resells treasured metals, it's impacted by adjustments in treasured metals pricing which rises and falls primarily based upon world provide and demand dynamics, with the best affect on us regarding gold because it represents a good portion of the valuable metals by which we commerce. Gold costs stabilized throughout fiscal 12 months 2019 beginning at
$1,238an oz, as decided by the London AM Repair on January 1, 2019, climbing to $1,523an oz, as decided by the London PM Repair on December 31, 2019, representing an improve of 19% throughout fiscal 12 months 2019. Gold costs surged throughout the beginnings of the COVID-19 pandemic, beginning at $1,523an oz, as decided by the London AM Repair on January 1, 2020, and rose strongly throughout the first half of 2020 peaking at $2,060an oz throughout August. Nevertheless, gold costs dipped from the height to shut at $1,891an oz, as decided by the London PM Repair on December 31, 2020, registering a 24% improve throughout fiscal 12 months 2020. The World Gold Council("WGC"), famous that gold demand improved enormously throughout 2019 on account of uncertainty within the world monetary markets and rising geopolitical unrest. As famous, gold costs observably surged throughout the beginnings of the COVID-19 pandemic and value tempered towards the tip of the 12 months. In line with Stuart Burnsof the Trade Information, bodily demand may decide up throughout 2021 due to China'sforecasted double-digit progress and world restoration from the pandemic. The WGC has projected the value of gold to stay over $1,800an oz this 12 months. The pandemic, financial downturn, and civil unrest, appear to have been affecting the recommerce enterprise in unpredictable methods - there are fewer clients elevating cash by promoting objects. That is the other of what one would possibly anticipate when a file variety of persons are unemployed. Authorities stimulus checks, eviction moratoriums and forbearances on mortgages and pupil loans could also be contributing to this impact. Up to now, this drop has been offset by different areas of our enterprise. This variety, mixed with DGSE's continued concentrate on disciplined operations, makes us optimistic for DGSE's continued future success. 21 PART II Merchandise 7
When costs rise for gold or different treasured metals, DGSE has noticed that particular person sellers are usually extra more likely to promote their undesirable crafted-precious-metal objects and on the similar time retail clients have a tendency to purchase bullion and different gold merchandise in order to not miss out on potential market features. Monitoring the rise in gold costs, DGSE's crafted-precious-metal purchases elevated 45% in fiscal 12 months 2019. In fiscal 12 months 2020, nevertheless, DGSE skilled a dip in crafted-precious-metal purchases by 21%. The Firm attributes this dip to the affect of the COVID-19 and numerous shutdown orders, which impacted foot visitors and its retail areas. Whereas the valuable metals business has improved, our focus will probably be to proceed to develop our jewellery, diamond and superb watch enterprise, in addition to preserve our enterprise of buying crafted-precious-metal objects, a diversified technique which we consider will proceed to develop and be a revenue engine sooner or later.
For added info relating to DGSE, see “Merchandise 1. Enterprise-Working
ECHG Enterprise Drivers and Impacts
ECHG owns and operates Echo,
ITAD USAand Teladvance, via which it primarily buys and resells or recycles shopper digital elements and IT gear. Echo focuses on end-of-life electronics recycling and in addition affords disposal transportation and product monitoring, ITAD USAoffers IT gear disposition together with compliance and knowledge sanitization providers, and Teladvance operates as a value-added reseller by offering choices and providers to corporations wanting to both improve capabilities or dispose of apparatus. Like DGSE, ECHG additionally maintains relationships with refiners or recyclers to which it sells extracted priceless supplies from electronics and IT gear that aren't acceptable for resale or reuse.
For added info relating to DGSE, see “Merchandise 1. Enterprise-Working
Vital Accounting Insurance policies and Estimates
Our important accounting insurance policies are disclosed in Observe 1 of our consolidated monetary statements. The next dialogue addresses our most important accounting insurance policies, that are these which might be each vital to the portrayal of our monetary situation and outcomes of operations and that require important judgment or use of advanced estimates. References to fiscal years under are denoted with the phrase "Fiscal" and the related 12 months. Inventories: DGSE stock is valued on the decrease of price or web realizable worth ("NRV"). We purchase a majority of our stock from particular person clients, together with pre-owned jewellery, watches, bullion, uncommon cash and financial collectibles. We purchase these things primarily based on our personal inside estimate of the truthful market worth of the objects on the time of buy. We think about components such as the present spot market value of treasured metals and present market demand for the objects being bought. We complement these purchases from particular person clients with stock bought from wholesale distributors. These wholesale purchases can take the type of full asset purchases, or consigned stock. Consigned stock is accounted for on our steadiness sheet with a completely offsetting contra account in order that consigned stock has a web zero steadiness. Nearly all of our stock has some part of its worth that's primarily based on the spot market value of treasured metals. As a result of the general market worth for treasured metals usually fluctuates, these fluctuations may have both a constructive or damaging affect on the worth of our stock and will positively or negatively affect our profitability. We monitor these fluctuations to consider any crucial impairment to stock. The Echo stock principally consists of processed and unprocessed digital scrap supplies. The worth of the fabric is derived from recycling the treasured and different scrap metals included within the scrap. The processed and unprocessed supplies are carried on the decrease of the typical price of the materials throughout the month of buy or NRV. The in-transit materials is carried at decrease of price or market utilizing the retail technique. Underneath the retail technique the valuation of the stock at price and the ensuing gross margins are calculated by making use of a price to retail ratio to the retail worth of the stock. Impairment of Lengthy-Lived and Amortized Intangible Belongings: We carry out impairment evaluations of our long-lived property, together with property, plant and gear and intangible property with finite lives at any time when enterprise circumstances or occasions point out that these property could also be impaired. When the estimated future undiscounted money flows to be generated by the property are lower than the carrying worth of the long-lived property, the property are written right down to truthful market worth and a cost is recorded to present operations. Based mostly on our evaluations, no impairment was required as of
December 31, 2020or 2019. 22 PART II Merchandise 7
Income Recognition: In
Could 2014, the Monetary Accounting Requirements Board(FASB) issued Accounting Requirements replace (ASU) No. 2014-09, Income from Contracts with Clients(Subject 606), which outdated income recognition necessities in Subject 605, Income Recognition. The ASU is predicated on the precept that income is acknowledged to depict the switch of products or providers to clients in an quantity that displays the consideration to which the entity expects to be entitled in change for these items or providers. The ASU additionally requires further disclosure concerning the nature, quantity, timing, and uncertainty of income and money flows arising from buyer contracts, together with important judgements and adjustments in judgements and property acknowledged from price incurred to acquire or fulfill a contract. ASC 606 offers steerage to determine efficiency obligations for revenue-generating transactions. The preliminary step is to determine the contract with a buyer created with the gross sales bill or restore ticket. Secondly, to determine the efficiency obligations within the contract as we promise to ship the bought merchandise or promised repairs in return for cost or future cost as a receivable. The third step is figuring out the transaction value of the contract obligation as within the full ticket value, negotiated value or a restore value. The subsequent step is to allocate the transaction value to the efficiency obligations as we designate a separate value for every merchandise. The ultimate step in the steerage of ASC 606 is to acknowledge income as every efficiency obligation is glad. Our over-the-counter gross sales with the retail public and wholesale sellers are acknowledged when merchandise is delivered, and cost has been made both by fast cost or via a receivable obligation at considered one of our retail areas. We additionally acknowledge income upon the cargo of products when retail and wholesale clients have fulfilled their obligation to pay, or promise to pay, via e-commerce or telephone gross sales. We've elected to account for transport and dealing with prices as achievement prices after the shopper obtains management of the items. Crafted-precious-metal objects on the finish of their helpful lives are bought to a refiner. Because the native refiner is positioned within the Dallas/Fort Pricespace we ship the metallic to the refiner. The metallic is melted and assayed, value is decided from the assay and cost is made often in a day or two. Income is acknowledged from the sale as soon as cost is acquired. DGSE additionally affords a structured layaway plan. When a retail buyer makes use of the layaway plan, we acquire a minimal cost of 25% of the gross sales value, set up a cost schedule for the remaining steadiness and maintain the merchandise as collateral as safety in opposition to the shopper's deposit till all quantities due are paid in full. Income for layaway gross sales is acknowledged when the merchandise is paid in full and delivered to the retail buyer. Layaway income can be acknowledged when a buyer fails to pay in accordance with the gross sales contract and the gross sales merchandise is returned to stock with the forfeit of deposited funds, usually after 90 days. In restricted circumstances, we change merchandise for comparable merchandise and/or financial consideration with each sellers and retail clients, for which we acknowledge income in accordance with Accounting Requirements Codification ("ASC") 845, Nonmonetary Transactions. Once we change merchandise for comparable merchandise and there's no financial part to the change, we don't acknowledge any income. As a substitute, the idea of the merchandise relinquished turns into the idea of the merchandise acquired, much less any indicated impairment of worth of the merchandise relinquished. Once we change merchandise for comparable merchandise and there's a financial part to the change, we acknowledge income to the extent of the financial property acquired and determines the price of sale primarily based on the ratio of financial property acquired to financial and non-monetary property acquired multiplied by the price of the property surrendered. The Firm affords the choice of third-party financing to clients wishing to borrow cash for the acquisition. The shopper applies on-line with the financing firm and upon going via the credit score test will probably be accepted or denied. If accepted, the shopper is allowed to buy based on the boundaries set by the financing firm. As soon as the shopper does buy merchandise, primarily based on their financing settlement, we file and acknowledge the sale at that time, primarily based on the promise to pay by the finance firm as much as the shopper's accepted restrict. We've a return coverage (money-back assure). The coverage covers retail transactions involving jewellery, graded uncommon cash and forex solely. Clients could return jewellery, graded uncommon cash and forex bought inside 30 days of the receipt of the objects for a full refund so long as the objects are returned in precisely the identical situation as they had been delivered. Within the case of knickknack, graded uncommon cash and forex gross sales on account, clients could cancel the sale inside 30 days of constructing a dedication to buy the objects. The receipt of a deposit and a signed buy order evidences the dedication. Any buyer could return a jewellery merchandise or graded uncommon cash and forex if they'll display that the merchandise is just not genuine, or there was an error within the description of a graded coin or forex piece. Returns are accounted for as a reversal of the authentic transaction, with the impact of lowering revenues, and value of gross sales, and returning the merchandise to stock. We've established an allowance for estimated returns associated to 12 months ended December 31, 2020("Fiscal 2020") and 12 months ended December 31, 2019("Fiscal 2019") gross sales, which is predicated on our evaluate of historic returns expertise and reduces our reported revenues and value of gross sales accordingly. As of December 31, 2020and 2019, our allowance for returns remained the identical at roughly $28,000for each years. 23 PART II Merchandise 7 The Echo Entities have a number of income streams and acknowledge income in accordance to ASC 606 at an quantity that displays the consideration to which the entities anticipate to be entitled in change for transferring items or providers to the buyer. The income streams are as follows. ? Outright gross sales are recorded when product is shipped. As soon as the value is established and the phrases are agreed to and the product is shipped, the income is acknowledged. The Echo Entities have fulfilled their efficiency obligation with an agreed upon transaction value, cost phrases and transport the product. ? Echo acknowledges refining income when our stock arrives on the vacation spot port and the efficiency obligation is glad by transferring the management of the promised items which might be recognized within the buyer contract. Ninety % (90%) of our refining income is generated from one refining accomplice that has an worldwide refining facility. This refining accomplice pays us sixty % (60%) of an Bill inside 5 working days upon the receipt of the Ocean Invoice of Lading issued by the Ocean Provider. Our preliminary Bill is acknowledged in full when our efficiency obligation is glad, as said within the first sentence. Underneath the steerage of ASC 606, an estimate of the variable consideration that we anticipate to be entitled is included within the transaction value said on the present treasured metallic spot value and weight of the valuable metallic. An adjustment to income is made within the interval as soon as the underlying weight and any treasured metallic spot value motion is resolved, which is often round six (6) weeks. Any adjustment from the decision of the underlying uncertainty is netted with the remaining forty % (40%) due from the unique contract. ? Arduous drive gross sales by the Echo Entities are restricted to clients who're required to prepay shipments. As soon as the commodity value is established and agreed upon by each events, clients ship cost prematurely. The Firm releases the cargo on the identical day when cost receipt is confirmed, and income is acknowledged on day of cargo. If cost is acquired on the final day of the month and cargo goes out the next day the cost acquired is deferred income and acknowledged the next month when the cargo is made. ? The Echo Entities additionally present recycling providers based on a Scope of Work and providers are acknowledged when promised providers are rendered. We've recycling providers carried out on the Echo facility and one other kind of service is carried out on the consumer's facility. The Scope of Work will decide the fees and whether or not it's accomplished on campus or off campus. Cost phrases are additionally dictated within the Scope of Work. Accounts Receivable: We file commerce receivables when income is acknowledged. When acceptable, we are going to file an allowance for uncertain accounts, which is primarily decided by an evaluation of our commerce receivables growing older. The allowance is set primarily based on historic expertise of accumulating late quantities, primarily based on the diploma of their growing older. As well as, particular accounts that are uncertain of assortment are included within the allowance. These provisions are reviewed to find out the adequacy of the allowance for uncertain accounts. Commerce receivables are charged off when there's certainty as to their being uncollectible. Commerce receivables are thought of delinquent when cost has not been made inside contract phrases. DGSE had no allowance for uncertain accounts steadiness for the years ending December 31, 2020and 2019. The Echo Entities additionally had no allowance for uncertain accounts steadiness for the years ending December 31, 2020and 2019. Observe Receivable: We file ECHG's notice receivable as a non-current asset on account of the notice being quarterly curiosity solely funds, with a maturity date of February 20, 2023. Curiosity is accrued quarterly and funds are utilized in opposition to the accruals. Every now and then, the steadiness is elevated via amendments to the notice. We carry out impairment evaluations on the notice on December 31of every 12 months, or at any time when enterprise circumstances or occasions point out that the notice receivable could also be impaired. The notice receivable, as well as, has a warrant and name choice agreements to the lender which represents the precise of the lender to buy an fairness curiosity for a specific amount inside a sure time. There isn't a assure that the warrant will probably be exercised. As of December 31, 2020, primarily based on our analysis, no impairment was required. 24 PART II Merchandise 7
Revenue Taxes: Revenue taxes are accounted for beneath the asset and legal responsibility technique prescribed by ASC 740, Revenue Taxes. Deferred tax property and liabilities are acknowledged for the longer term tax penalties attributable to variations between the monetary assertion carrying quantities of current property and liabilities and their respective tax bases and working loss and tax credit score carryforwards. Deferred tax property and liabilities are measured utilizing enacted tax charges anticipated to use to taxable earnings within the years by which these non permanent variations are anticipated to be recovered or settled. The impact on deferred tax property and liabilities of a change in tax charges is acknowledged in earnings within the interval that features the enactment date. A valuation allowance is recorded to scale back the carrying quantities of deferred tax property until it's extra doubtless than not such property will probably be realized. We account for our place in tax uncertainties in accordance with ASC 740, Revenue Taxes. The steerage establishes requirements for accounting for uncertainty in earnings taxes. The steerage offers a number of clarifications associated to unsure tax positions. Most notably, a "extra likely-than-not" customary for preliminary recognition of tax positions, a presumption of audit detection and a measurement of acknowledged tax advantages primarily based on the most important quantity that has a better than 50 % chance of realization. The steerage applies a two-step course of to find out the quantity of tax profit to be acknowledged within the monetary statements. First, we should decide whether or not any quantity of the tax profit could also be acknowledged. Second, we decide how a lot of the tax profit must be acknowledged (this might solely apply to tax positions that qualify for recognition.) No further liabilities have been acknowledged on account of the implementation. We've not taken a tax place that, if challenged, would have a cloth impact on the monetary statements or the efficient tax price throughout Fiscal 2020 and Fiscal 2019, respectively.
Outcomes of Operations
Income. Income associated to DGSE's persevering with operations elevated by
$18,141,237, or 27%, throughout fiscal 2020, to $85,661,391, as in comparison with $67,520,154throughout Fiscal 2019. Resale income, resembling bullion, jewellery, watches and uncommon cash, elevated by $19,702,014in Fiscal 2020, or 33%, to $79,790,419as in comparison with $60,088,405throughout Fiscal 2019. Recycled-material gross sales decreased 21% to $5,870,972for Fiscal 2020, as in comparison with $7,431,749for Fiscal 2019. Income elevated for resale objects for Fiscal 2020, in comparison with Fiscal 2019 primarily because of the obvious improve in shopper demand following the lifting of governmental orders to chorus from promoting non-essential objects in our retail shops because of the COVID-19 pandemic and the associated spiking of gold costs because of the pandemic. The lower in recycled-materials income is primarily because of the spike in resale income stemming from the COVID-19 pandemic, as we bought stock for Fiscal 2020, extra stock was stored for our retail shops as in comparison with Fiscal 2019, and recycled much less.
Income associated to ECHG for Fiscal 2020 was
accounted for 31% of the full. The property of the Echo Legacy Entities had been
therewith, and Teladvance was acquired on
is just not similar to Fiscal 2020.
Gross Margin: Gross margin associated to DGSE, elevated in Fiscal 2020 by
$1,452,046to $10,369,870, as in comparison with $8,917,824throughout Fiscal 2019. The improve in gross revenue was primarily associated to a 33% improve in resale income though the resale margin decreased from 12.9% in Fiscal 2019 to 11.5% in Fiscal 2020. The gross revenue for recycled materials gross sales for Fiscal 2020 in comparison with Fiscal 2019 stayed comparatively the identical though gross sales decreased by 21%. The gross sales declined however the revenue margin elevated from 15.6% in Fiscal 2019 to 19.7% in Fiscal 2020. The ECHG revenue margin for Fiscal 2020 was $12,699,093. Resale revenue margin was 49% or $9,504,607, an general share of 75% of ECHG's complete revenue margin. Recycling's gross margin of 36.0% accounted for $3,194,486, or 25% of the full. The property of the Echo Legacy Entities had been acquired on Could 20, 2019and the Echo Entities had been fashioned in connection therewith, and Teladvance was acquired on August 2, 2019; subsequently, Fiscal 2019 is just not similar to Fiscal 2020.
The next desk represents our historic working income and gross revenue
outcomes by class:
For the Years Ended December 31, 2020 December 31, 2019 Revenues Gross Revenue Margin Revenues Gross Revenue Margin DGSE Resale
$79,790,4199,215,494 11.5% $60,088,405 $7,760,36512.9% Recycled 5,870,972 1,154,376 19.7% 7,431,749 1,157,459 15.6% Subtotal 85,661,391 10,369,870 12.1% 67,520,154 8,917,824 13.2% ECHG Resale 19,395,834 9,504,607 49.0% 8,722,281 4,692,114 53.8% Recycled 8,864,790 3,194,486 36.0% 5,782,062 2,645,904 45.8% Subtotal 28,260,624 12,699,093 44.9% 14,504,343 7,338,018 50.6% $113,922,015 $23,068,96320.2% $82,024,497 $16,255,84219.8% 25 PART II Merchandise 7
Promoting, Common and Administrative: Promoting, normal and administrative
bills for DGSE decreased
in comparison with
primarily via the power to use company overhead bills to 2
Promoting, normal and administrative bills for ECHG totaled
$8,620,015for Fiscal 2020. The bills consist primarily of payroll, payroll taxes and worker advantages of $5,192,492, hire and variable hire prices, web of sublet earnings, of $813,220, warehouse and workplace provides of $202,728, insurance coverage prices of $97,490, journey bills of $29,623, skilled charges of $91,327, Utilities of $228,620and overhead administrative bills of $979,767. The property of the Echo Legacy Entities had been acquired on Could 20, 2019and the Echo Entities had been fashioned in connection therewith, and Teladvance was acquired on August 2, 2019; subsequently, Fiscal 2019 is just not similar to Fiscal 2020. Depreciation and Amortization:Depreciation and amortization for DGSE elevated by $53,160or 20% in Fiscal 2020 to $321,833as in comparison with $268,673in Fiscal 2019. The rise is primarily because of the added depreciation from two buildings bought, and related build-out prices, that had been put into service throughout the fourth quarter of Fiscal 2020. The Depreciation and Amortization expense for ECHG totaled $406,793for Fiscal 2020. The steadiness is made up of the amortization of intangibles acquired from the Echo Transaction on Could 20, 2019of $335,600and depreciation expense of $71,193. The property of the Echo Legacy Entities had been acquired on Could 20, 2019and the Echo Entities had been fashioned in connection therewith, and Teladvance was acquired on August 2, 2019; subsequently, Fiscal 2019 is just not similar to Fiscal 2020. Different Revenue: Different earnings for DGSE elevated by $58,590in Fiscal 2020, to $113,974in comparison with $55,384in Fiscal 2019. Fiscal 2020, different earnings of $113,974, was primarily the mixture of writing off previous vendor checks of roughly $45,000and half of the hire earnings allotted from tenants on the new Firm headquarters' of $67,632. Fiscal 2019, different earnings of $55,384was primarily the write up of a small plot of land owned by the Firm for a lot of years. Different earnings for ECHG totaled $193,023in Fiscal 2020. The opposite earnings quantity of $193,024is primarily a mixture of curiosity earnings from notice receivable of $114,297and half of the hire earnings allotted from tenants on the new Firm headquarters' of $67,632. The property of the Echo Legacy Entities had been acquired on Could 20, 2019and the Echo Entities had been fashioned in connection therewith, and Teladvance was acquired on August 2, 2019; subsequently, Fiscal 2019 is just not similar to Fiscal 2020. Curiosity Expense: Curiosity expense for DGSE elevated by $47,054or 29% in Fiscal 2020, to $209,295in comparison with $162,241in Fiscal 2019. The rise is due from the promissory notice issued by John R. Loftusto repay an accounts payable - associated get together steadiness on Could 20, 2019, that has a barely increased rate of interest than the accounts payable - associated get together had as an imputed price and the 2 notes payable related to the brand new stand-alone buildings bought throughout the second half of 2020. The curiosity expense for ECHG was $411,204in Fiscal 2020. The curiosity is primarily associated to the notice payable, associated get together, with an excellent steadiness of $6,496,128as of December 31, 2020. The property of the Echo Legacy Entities had been acquired on Could 20, 2019and the Echo Entities had been fashioned in connection therewith, and Teladvance was acquired on August 2, 2019; subsequently, Fiscal 2019 is just not similar to Fiscal 2020. Revenue Tax Expense: Revenue tax expense for DGSE decreased $5,498or 6% in Fiscal 2020, to $89,618in comparison with $95,116in Fiscal 2019. See Observe 15 for Federal Revenue Taxes. Web Revenue: We recorded a web earnings of $6,383,943in Fiscal 2020, in comparison with a web earnings of $2,780,713in Fiscal 2019, a rise in web earnings of $3,603,230is due primarily to a rise of income of roughly $32.0 millionand the acquisition of the property of the Echo Legacy Entities on Could 20, 2019. 26 PART II Merchandise 7 Earnings Per Share: Our web earnings per fundamental and diluted shares attributable to holders of our Widespread Inventory was $0.24, for Fiscal 2020, in comparison with $0.10per fundamental and diluted shares for Fiscal 2019, a rise of $0.14per share. The improve is due primarily from the income improve of roughly $32.0 millionfrom Fiscal 2019 to Fiscal 2020 and the acquisition of the property of the Echo Legacy Entities on Could 20, 2019. Liquidity and Capital Sources: Throughout Fiscal 2020, money flows supplied by working actions totaled $6,897,091in comparison with money flows utilized in working actions totaling $542,828in Fiscal 2019, an elevated money flows supplied by working actions of $7,439,919. Money supplied by working actions for the 12 months ended December 31, 2020, was primarily pushed by the rise in commerce accounts receivable of $151,124, a rise in buyer deposits and different liabilities of $263,572and web earnings, with depreciation, amortization and inventory primarily based compensation to staff of $7,112,894. Offset by the rise of inventories of $497,444, the rise of pay as you go bills of $108,884and the discount of accounts payable and accrued accounts payable of $29,332. Money used in working actions for the 12 months ended December 31, 2019, was primarily pushed by the rise in commerce accounts receivable of $1,877,783, the discount of accounts payable and accrued accounts payable of $492,952, the discount of the accounts payable - associated get together of $3,074,021. Offset by the discount of inventories of $1,464,843, the rise in working leases of 124,713 and web earnings, with depreciation and amortization of $3,301,011. Throughout Fiscal 2020 and Fiscal 2019, money utilized in investing actions totaled $7,964,588and $6,039,505, respectively, a rise of $1,925,083. The money utilized in investing for 2020, was a mixture of investing in a notice receivable of $2,100,000to CExchange, LLC("CExchange"), buying two new retail areas for DGSE totaling $1,815,000and related construct out prices, of which $363,000was money funds utilized in opposition to the purchases of the retail areas and the rest of the steadiness from the purchases was financed via notes payable, and the acquisition of our company headquarters totaling $3,521,021, of which $561,021was money funds utilized in opposition to the workplace constructing and the the rest of the steadiness from the acquisition was financed via notes payable. The money utilized in investing for 2019, was the mixture of property and gear purchases of $102,989, the continuous upgrading our point-of-sale system within the quantity of $60,000and acquisition of the property of the Echo Legacy Entities, web of money acquired, within the quantity of $5,876,516. Throughout Fiscal 2020, money supplied by financing actions totaled $5,774,873, and Fiscal 2019, money supplied by financing actions totaled $9,639,052, a lower in money supplied by financing actions of $3,864,179. The money supplied by financing actions throughout Fiscal 2020 is funds supplied by loans made by Texas Financial institution & Belieffor the company workplace constructing in Irving, Texasand the retail constructing in Grapevine, Texas, each totaling $3,456,000, a mortgage made by Truist Financial institution(f/okay/a BB&T Financial institution) for the retail constructing positioned in Lewisville, Texasfor $956,000and the proceeds from the Federal Mortgage of $1,668,200. Offset by principal funds made in opposition to the 2 promissory notes from Mr. Loftuswithin the quantity of $279,210and principal funds made in opposition to the notes payable loans issued for the buildings bought talked about on this paragraph of roughly $26,000. The money supplied by financing actions throughout Fiscal 2019 is funds supplied to buy the property of the Echo Legacy Entities via a promissory notice from John R. Loftusdated Could 20, 2019for $6,925,979. Moreover, funds supplied to repay an accounts payable - associated get together steadiness of $3,074,021, evidenced by a promissory notice dated Could 20, 2019by John R. Loftusand the drawing on a short-term line of credit score from Texas Financial institution and Beliefof $150,000. Offset by principal funds made in opposition to the two promissory notes From Mr. Loftuswithin the quantity of $360,948and the pay down of the short-term line of credit score from Texas Financial institution and Belieffor $150,000. On Could 17, 2019, the Firm secured a twelve month Line of Credit score from Texas Financial institution and Belieffor $1,000,000. The Line of Credit score was renewed for a further 24 months and elevated to $3,500,000on Could 17, 2020. The Line of Credit score is to fund any money shortfalls that we could have from time-to-time throughout the subsequent 24 months. We do not anticipate the necessity of these funds for operations. Additionally, from time-to-time, we now have adjusted our stock ranges to satisfy seasonal demand or as a way to meet working capital necessities. Administration believes we now have sufficient capital sources to satisfy working capital necessities. If further working capital is required, further loans might be obtained from people or from different business banks. If crucial, stock ranges could also be adjusted as a way to meet unexpected working-capital necessities. We anticipate our capital expenditures to complete roughly $100,000throughout the subsequent twelve months. These expenditures will probably be largely pushed by the acquisition of gear and the build-out of company area in our workplace constructing for tenants, As of December 31, 2020, there have been no commitments excellent for capital expenditures. Within the occasion of great progress in retail and wholesale jewellery gross sales and recycling demand, whether or not purchases or providers, our demand for extra working capital will improve on account of a associated must inventory further jewellery stock, will increase in wholesale accounts receivable and the buying of recycled materials. Traditionally we now have funded these actions via operations.
We’ve traditionally renewed, prolonged or changed short-term debt because it
matures, and administration believes that we can proceed to take action in
the close to future.
27 PART II Merchandise 7, 7A On
Could 20, 2019, we entered into two (2) mortgage agreements with John R. Loftus, the Firm's CEO, President and Chairman of the Board. The primary notice of $6,925,979, pursuant to the Echo Legacy Entities asset buy settlement, is a 5-year promissory notice amortized over 20 years at 6% annual rate of interest. The second notice of $3,074,021paid off the accounts payable - associated get together steadiness to a former Associated Celebration on Could 20, 2019. The promissory notice is a 5-year notice amortized over 20 years at 6% annual rate of interest. Each notes are being serviced by operational money move. The coronavirus illness 2019 (COVID-19) pandemic has adversely affected world financial enterprise circumstances. Future gross sales on merchandise like ours may decline, and the final word affect is unsure and topic to vary. The length of this pandemic and the affect, both direct or oblique can't be predicted. The Firm believed further liquidity was essential to help ongoing operations throughout this era of uncertainty. We utilized for and acquired roughly $1.67 million, 1% curiosity, Federal Mortgage to pay staff and cowl sure hire and utility-related prices throughout the COVID-19 pandemic. The mortgage is forgivable to the extent that sure standards are met. We've utilized for forgiveness and that forgiveness utility is at present beneath evaluate by the SBA. The Firm leases sure of its amenities beneath working leases. The minimal rental commitments beneath non-cancellable working leases as of December 31, 2020are as follows: Complete 2021 2022 2023 2024 Thereafter Working Leases DGSE $1,205,662 $479,161 $235,674 $212,855 $213,885 $64,087Echo Entities 4,217,873 869,209 786,396 808,022 830,244 924,002 Complete $5,423,535 $1,348,370 $1,022,070
Off-Stability Sheet Preparations.
We would not have any off-balance sheet preparations which have or are fairly more likely to have a present or future impact on our monetary situation, adjustments in monetary situation, revenues or bills, outcomes of operations, liquidity, capital expenditures or capital sources that's materials to our stockholders.
STATEMENT OF MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL STATEMENTS
Administration is liable for the preparation of the consolidated monetary
statements and associated info which might be introduced on this report. The
consolidated monetary statements, which embody quantities primarily based on administration’s
estimates and judgments, have been ready in conformity with accounting
ideas typically accepted in
The Firm designs and maintains accounting and inside management techniques to present cheap assurance at cheap price that property are safeguarded in opposition to loss from unauthorized use or disposition, and that the monetary information are dependable for getting ready consolidated monetary statements and sustaining accountability for property. These techniques are augmented by written insurance policies, an organizational construction offering division of tasks and cautious choice and coaching of certified personnel. The Firm engaged
Whitley Penn LLP, an unbiased registered public accounting agency, to audit and render an opinion on the consolidated monetary statements in accordance with the requirements of the Public Accounting Oversight Board ( United States). Administration's report was not topic to attestation by our unbiased registered public accounting agency pursuant to guidelines of the SECthat allow the corporate to supply solely administration's report on this annual report. The Board, via its Audit Committee, consisting solely of unbiased administrators of the Firm, meets periodically with administration and our unbiased registered public accounting agency to make sure that the Firm is assembly its tasks and to debate issues regarding inside controls and monetary reporting. Whitley Penn LLPand our administration group every have full and free entry to the Audit Committee.
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