Unless the context indicates otherwise, references to "we," "us," "our," "the
Company" and "Envela" refer to the consolidated business operations of Envela
Corporation (the parent) and all of its direct and indirect subsidiaries.

CAUTIONARY STATEMENT REGARDING RISKS AND UNCERTAINTIES THAT MAY AFFECT FUTURE RESULTS


Forward-Looking StatementsThis Form 10-K, including but not limited to this Item
7, information concerning our business prospects or future financial
performance, anticipated revenues, expenses, profitability or other financial
items, and 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 and Section 21E of the Exchange
Act. Forward-looking statements generally can be identified by the use of
forward-looking terminology, such as "may," "will," "would," "expect," "intend,"
"could," "estimate," "should," "anticipate" or "believe." 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 may contain information about financial results,
economic conditions, trends, and known uncertainties. All forward-looking
statements are 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 of this Form 10-K entitled "Risk Factors" and elsewhere in this Form
10-K. 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 hereon, including without limitation, changes in
our business strategy or planned capital expenditures, store growth plans, or to
reflect the occurrence of unanticipated events.



Overview of Fiscal 2019



On May 20, 2019, Envela, through an asset purchase, accounted for as a business
combination (the "Echo Transaction"), as initially reported on Form 8-K filed
May 24, 2019, purchased the assets of Echo Environmental, LLC and ITAD USA, LLC.
A subsequent 8-K/A filed August 5, 2019, announced the formation of two new
companies, Echo Environmental Holdings, LLC ("Echo") and ITAD USA, LLC ("ITAD"
and together with Echo, the "Echo Entities"), to process, recycle and resell
electronic components from the assets purchased from the Echo Transaction.



The Company now includes segment information, dividing DGSE and the Echo
Entities, in the notes to the financial statements. The object of segment
reporting is to provide a management approach that identifies different types of
businesses within the Company and how we have organized the segments to make
financial decisions. We consider the Company in the recommerce business and have
organized two different segments within our business and presented the
performance of each separately.



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DGSE buys and sells jewelry, diamonds, fine watches, rare coins and currency,
precious metal bullion products, scrap gold, silver, platinum and palladium as
well as collectibles and other valuables. Our customers include individual
consumers, dealers and institutions throughout the United States.



DGSE is impacted by changes in precious metals pricing which rises and falls
based upon global supply and demand dynamics, with the greatest impact relating
to gold. Gold prices showed volatility during Fiscal 2018. The price per ounce
started the year at $1,303 an ounce but dipped down to $1,177 an ounce on August
17, 2018 to rebound slightly, closing at $1,238 an ounce on December 31, 2018,
as measured by London PM Fix. The overall gold price trending down in Fiscal
2018 produced a net loss of 5% from December 31, 2017 to December 31, 2018. Gold
became more stable during Fiscal 2019, steadily rising throughout the year
ending at $1,523 per ounce on December 31, 2019. An increase of 19% during
Fiscal 2019.



The gold scrap market, according to the World Gold Council ("WGC"), was a
roller-coaster ride during Fiscal 2018. The WGC noted that gold demand improved
greatly during 2019 due to uncertainty in the global financial markets and
rising geopolitical unrest. Investor demand should continue to support the
higher prices through 2020, according to the WGC. With the price of gold
stabilizing over $1,500 an ounce, the buying and selling of pre-owned or "scrap"
gold has picked up significantly and we are confident that the future looks
bright for our purchasing model at DGSE.



The impact of the precious metals market on DGSE mirrors much of what the WGC
reports on a macroeconomic level during prior years, DGSE scrap purchases fell
in Fiscal 2018. During Fiscal 2019 our scrap purchases increased 45% over that
of Fiscal 2018. While the precious metals industry has improved, our focus will
be to continue in growing our jewelry, diamond, fine watch and scrap business,
which we believe will continue to grow and be profit engine in the future.



Three years ago, we went back to our roots: buying and selling jewelry and
timepieces at exceptional prices. Scrap buying is a major source of how we
market ourselves. The focus of our marketing and merchandising efforts starting
in Fiscal 2017 was growing our jewelry, diamond and watch businesses, and we had
not seen the results that were anticipated. At the beginning of Fiscal 2017, we
began our marketing campaign to retell our story. We continue to believe that
the most successful locations will be those that can sustain our full retail
"exchange" model: engaging in both buying and selling of precious metals and
related merchandise, while maintaining a robust and diverse inventory across all
jewelry categories and providing critical services such as watch and jewelry
repair. The locations that have historically been primarily scrap buying centers
are once again flourishing with the increased price of gold. In recent years,
DGSE has had many smaller locations spread across the Dallas-Ft Worth area in
order to provide multiple scrap collection sites. We are now focusing on
developing larger, full-service stores, with broad inventory offerings across
all categories, while also providing value-added services that help drive retail
traffic. We will continue to focus on evolving our business across all of our
markets, in an effort to drive efficiency across our geographical footprint

and
maximize profitability.



As stated earlier in the first paragraph in the overview, the Echo Transaction
allows us to play a larger role in environmental sustainability. It is our
mission to solve problems for our clients and leave the planet a better place
than we found it. The world is quickly shifting its priorities to better manage
our global resources and it is our drive to work with our customers to design a
flexible, convenient, hassle-free program that accommodates their specific
needs. We provide transportation, product tracking and comprehensive end-of-life
recycling for their individual commodity components. Recycling electronics is
good for business and good for the planet. Of the top twenty-five recycling
countries in the world, the U.S. is twenty-fifth, according to a 2017 report
developed by the environmental consultancy Eunomia.



Echo Environmental buys all forms electronic components from businesses and
other organizations such as school districts for end-of-life processing. The
components are sorted, stripped of precious metals, and processed further for
our customers downstream. We sell to downstream recycling companies who further
process our material for insertion back into our world as recycled products or
material used in roads or other building projects.



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ITAD USA provides secure collection, transportation, refurbishment, repair and
data destruction for companies seeking to replace and remarket their IT
equipment. Electronic devices with remaining value are scrubbed of data that
remain on the devise then refurbished and sold thereby extending the remaining
life and value. Our customers include domestic- and international-based
companies and organizations.

Critical Accounting Policies and Estimates





Our significant accounting policies are disclosed in Note 1 of our consolidated
financial statements. The following discussion addresses our most critical
accounting policies, which are those that are both important to the portrayal of
our financial condition and results of operations and that require significant
judgment or use of complex estimates.



Inventories: DGSE inventory is valued at the lower of cost or net realizable
value. We acquire a majority of our inventory from individual customers,
including pre-owned jewelry, watches, bullion, rare coins and collectibles. We
acquire these items based on our own internal estimate of the fair market value
of the items at the time of purchase. We consider factors such as the current
spot market price of precious metals and current market demand for the items
being purchased. We supplement these purchases from individual customers with
inventory purchased from wholesale vendors. These wholesale purchases can take
the form of full asset purchases, or consigned inventory. Consigned inventory is
accounted for on our balance sheet with a fully offsetting contra account so
that consigned inventory has a net zero balance. The majority of our inventory
has some component of its value that is based on the spot market price of
precious metals. Because the overall market value for precious metals regularly
fluctuates, these fluctuations could have either a positive or negative impact
on the value of our inventory and could positively or negatively impact our
profitability. We monitor these fluctuations to evaluate any necessary
impairment to inventory.



The Echo inventory principally includes processed and unprocessed electronic
scrap materials. The value of the material is derived from recycling the
precious and other scrap metals included in the scrap. The processed and
unprocessed materials are carried at the lower of the average cost of the
material during the month of purchase or NRV. The in-transit material is carried
at lower of cost or market using the retail method. Under the retail method the
valuation of the inventory at cost and the resulting gross margins are
calculated by applying a cost to retail ratio to the retail value of the
inventory.



Impairment of Long-Lived and Amortized Intangible Assets: We perform impairment
evaluations of our long-lived assets, including property, plant and equipment
and intangible assets with finite lives whenever business conditions or events
indicate that those assets may be impaired. When the estimated future
undiscounted cash flows to be generated by the assets are less than the carrying
value of the long-lived assets, the assets are written down to fair market value
and a charge is recorded to current operations. Based on our evaluations, no
impairment was required as of December 31, 2019 or 2018.



Revenue Recognition: In May 2014, the Financial Accounting Standards Board
(FASB) issued Accounting Standards update (ASU) No. 2014-09, Revenue from
Contracts with Customers (Topic 606), which superseded revenue recognition
requirements in Topic 605, Revenue Recognition. The ASU is based on the
principle that revenue is recognized to depict the transfer of goods or services
to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services. The ASU also
requires additional disclosure about the nature, amount, timing, and uncertainty
of revenue and cash flows arising from customer contracts, including significant
judgements and changes in judgements and assets recognized from cost incurred to
obtain or fulfill a contract.



ASC 606 provides guidance to identify performance obligations for
revenue-generating transactions. The initial step is to identify the contract
with a customer created with the sales invoice or repair ticket. Secondly, to
identify the performance obligations in the contract as we promise to deliver
the purchased item or promised repairs in return for payment or future payment
as a receivable. The third step is determining the transaction price of the
contract obligation as in the full ticket price, negotiated price or a repair
price. The next step is to allocate the transaction price to the performance
obligations as we designate a separate price for each item. The final step in
the guidance of ASC 606 is to recognize revenue as each performance obligation
is satisfied.



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Our over-the-counter sales with the retail public and wholesale dealers are
recognized when the merchandise is delivered, and payment has been made either
by immediate payment or through a receivable obligation at one of our retail
locations. We also recognize revenue upon the shipment of goods when retail and
wholesale customers have fulfilled their obligation to pay, or promise to pay,
through e-commerce or phone sales. We have elected to account for shipping and
handling costs as fulfillment costs after the customer obtains control of the
goods. Our scrap is sold to a local refiner Elemetal, who was a related party
until May 20, 2019. Since Elemetal is located in the Dallas/Ft Worth area we
deliver the scrap to the refiner. The metal is assayed, price is determined from
the assay and payment is made usually in a day or two. Revenue is recognized
from the sale once payment is received.



We also offer a structured layaway plan. When a retail customer utilizes the
layaway plan, we collect a minimum payment of 25% of the sales price, establish
a payment schedule for the remaining balance and hold the merchandise as
collateral as security against the customer's deposit until all amounts due are
paid in full. Revenue for layaway sales is recognized when the merchandise is
paid in full and delivered to the retail customer. Layaway revenue is also
recognized when a customer fails to pay in accordance with the sales contract
and the sales item is returned to inventory with the forfeit of deposited funds,
typically after 90 days.



In limited circumstances, we exchange merchandise for similar merchandise and/or
monetary consideration with both dealers and retail customers, for which we
recognize revenue in accordance with Accounting Standards Codification ("ASC")
845, Nonmonetary Transactions. When we exchange merchandise for similar
merchandise and there is no monetary component to the exchange, we do not
recognize any revenue. Instead, the basis of the merchandise relinquished
becomes the basis of the merchandise received, less any indicated impairment of
value of the merchandise relinquished. When we exchange merchandise for similar
merchandise and there is a monetary component to the exchange, we recognize
revenue to the extent of the monetary assets received and determines the cost of
sale based on the ratio of monetary assets received to monetary and non-monetary
assets received multiplied by the cost of the assets surrendered.



The Company offers the option of third-party financing for customers wishing to
borrow money for the purchase. The customer applies on-line with the financing
company and upon going through the credit check will be approved or denied. If
accepted, the customer is allowed to purchase according to the limits set by the
financing company. Once the customer does purchase merchandise, based on their
financing agreement, we record and recognize the sale at that point, based on
the promise to pay by the finance company up to the customer's approved limit.



We have a return policy (money-back guarantee). The policy covers retail
transactions involving jewelry, graded rare coins and currency only. Customers
may return jewelry, graded rare coins and currency purchased within 30 days of
the receipt of the items for a full refund as long as the items are returned in
exactly the same condition as they were delivered. In the case of jewelry,
graded rare coins and currency sales on account, customers may cancel the sale
within 30 days of making a commitment to purchase the items. The receipt of a
deposit and a signed purchase order evidences the commitment. Any customer may
return a jewelry item or graded rare coins and currency if they can demonstrate
that the item is not authentic, or there was an error in the description of a
graded coin or currency piece. Returns are accounted for as a reversal of the
original transaction, with the effect of reducing revenues, and cost of sales,
and returning the merchandise to inventory. We have established an allowance for
estimated returns related to Fiscal 2019 and Fiscal 2018 sales, which is based
on our review of historical returns experience and reduces our reported revenues
and cost of sales accordingly. As of December 31, 2019, and 2018, our allowance
for returns remained the same at approximately $28,000 for both years.



The Echo Entities have several revenue streams and recognize revenue according
to ASC 606 at an amount that reflects the consideration to which the entities
expect to be entitled in exchange for transferring goods or services to the
customer. The revenue streams are as follows.



Outright sales are recorded when product is shipped. Once the price is
established and the terms are agreed to and the product is shipped, the revenue
is recognized. The Echo Entities have fulfilled their performance obligation
with an agreed upon transaction price, payment terms and shipping the product.



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                                     Item 7



Echo recognizes refining revenue when our inventory arrives at the destination
port and the performance obligation is satisfied by transferring the control of
the promised goods that are identified in the customer contract. Ninety percent
(90%) of our refining revenue is generated from one refining customer, Hanwa
American Corp., that has a refining facility in Japan. Hanwa pays us sixty
percent (60%) of an Invoice within five working days upon the receipt of the
Ocean Bill of Lading issued by the Ocean Carrier. Our initial Invoice is
recognized in full when our performance obligation is satisfied, as stated in
the first sentence. Under the guidance of ASC 606, an estimate of the variable
consideration that we expect to be entitled is included in the transaction price
stated at the current precious metal spot price and weight of the precious
metal. An adjustment to revenue is made in the period once the underlying weight
and any precious metal spot price movement is resolved, which is usually around
six (6) weeks once our performance obligation is met. Any adjustment from the
resolution of the underlying uncertainty is netted with the remaining forty
percent (40%) due from the original contract.



Hard drive sales by the Echo Entities are limited to customers who are required
to prepay shipments. Once the commodity price is established and agreed upon by
both parties, customers send payment in advance. The Company releases the
shipment on the same day when payment receipt is confirmed, and revenue is
recognized on day of shipment. If payment is received on the last day of the
month and shipment goes out the following day the payment received is deferred
revenue and recognized the following month when the shipment is made.



The Echo Entities also provide recycling services according to a Scope of Work
and services are recognized when promised services are rendered. We have
recycling services conducted at the Echo facility and another type of service is
conducted at the client's facility. The Scope of Work will determine the charges
and whether it is completed on campus or off campus. Payment terms are also
dictated in the Scope of Work.



Accounts Receivable: We record trade receivables when revenue is recognized.
When appropriate, we will record an allowance for doubtful accounts, which is
primarily determined by an analysis of our trade receivables aging. The
allowance is determined based on historical experience of collecting past due
amounts, based on the degree of their aging. In addition, specific accounts that
are doubtful of collection are included in the allowance. These provisions are
reviewed to determine the adequacy of the allowance for doubtful accounts. Trade
receivables are charged off when there is certainty as to their being
uncollectible. Trade receivables are considered delinquent when payment has not
been made within contract terms. DGSE had no allowance for doubtful accounts
balance for the years ending December 31, 2019 and December 31, 2018. The Echo
Entities also had no allowance for doubtful accounts balance at December 31,
2019.




Income Taxes: Income taxes are accounted for under the asset and liability
method prescribed by ASC 740, Income Taxes. Deferred tax assets and liabilities
are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date. A valuation allowance is
recorded to reduce the carrying amounts of deferred tax assets unless it is more
likely than not such assets will be realized.



We account for our position in tax uncertainties in accordance with ASC 740,
Income Taxes. The guidance establishes standards for accounting for uncertainty
in income taxes. The guidance provides several clarifications related to
uncertain tax positions. Most notably, a "more likely-than-not" standard for
initial recognition of tax positions, a presumption of audit detection and a
measurement of recognized tax benefits based on the largest amount that has a
greater than 50 percent likelihood of realization. The guidance applies a
two-step process to determine the amount of tax benefit to be recognized in the
financial statements. First, we must determine whether any amount of the tax
benefit may be recognized. Second, we determine how much of the tax benefit
should be recognized (this would only apply to tax positions that qualify for
recognition.) No additional liabilities have been recognized as a result of the
implementation. We have not taken a tax position that, if challenged, would have
a material effect on the financial statements or the effective tax rate during
Fiscal 2019 and Fiscal 2018, respectively.



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                                     Item 7



Results of Operations

Year Ended December 31, 2019 Compared to Year Ended December 31, 2018





Revenues: DGSE's Revenue from continuing operations increased by $13,463,811 or
24.9% in Fiscal 2019, to $67,520,154 compared to $54,056,343 in the prior year.
Jewelry sales decreased 4.3% compared to Fiscal 2018. Bullion/Rare Coin sales
increased approximately 36.5% compared to Fiscal 2018. Scrap sales increased
44.6% compared to Fiscal 2018. Other sales, which includes jewelry and watch
repair increased 72.7%. The increase in revenue from Fiscal 2018 to Fiscal 2019
is primarily due to the increase and stabilization of gold prices increasing 19%
in value during Fiscal 2019 compared to a decrease of 5% during Fiscal 2018.



Revenue related to the Echo Entities for the period beginning May 20, 2019
through December 31, 2019 was $14,504,343. Recycled material sales of $4,441,347
accounted for 31% of the total. Reuse sales of $4,280,934 accounted for 29% of
the total. Refining revenue of $3,417,872 accounted for 24% of the total and
Services of $2,364,190 accounted for the remaining 16%.



Gross Margin: Gross margin, related to DGSE, decreased in Fiscal 2019 by
$761,899 to $8,917,824, as compared to $9,679,723 during Fiscal 2018. The
decrease in gross profit was due to a decrease in gross margin across the board,
decreasing in total from 17.9% in Fiscal 2018 to 13.2% in Fiscal 2019. Even
though there was a decrease in every margin percentage during Fiscal 2019, the
increased sales of Scrap and Other Sales helped in narrowing the overall decline
in gross margin. The decrease in the gross margin was due primarily in changing
our strategy for a higher velocity of sales.



The Echo Entities profit margin for the period beginning May 20, 2019 through
December 31, 2019 was $7,338,018 on $14,504,343 of sales, or an overall
percentage of 50.6%. Recycling's gross margin of 57.0% accounted for $2,533,416
of the total. Reuse's gross margin of 50.4% accounted for $2,158,698 of the
total. Refining's gross margin of 16% accounted for $546,860 of the total and
Services' gross margin of 88.8% accounted for $2,099,044 of the total gross

margin.



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                                     Item 7



The following table represents our historical operating revenue and gross profit
results by category:



                                                              For the Years Ended
                                      December 31, 2019                                 December 31, 2018
                           Revenues       Gross Profit       Margin         Revenues        Gross Profit       Margin
DGSE
Jewelry                  $ 17,206,586     $   4,291,487          24.9 %   $ 17,987,872     $    5,158,215          28.7 %
Bullion/Rare Coin          39,689,218         2,645,534           6.7 %     29,079,487          2,951,368          10.1 %
Scrap                       7,431,749         1,157,459          15.6 %      5,140,420            907,190          17.6 %
Other                       3,192,601           823,344          25.8 %      1,848,564            662,950          35.9 %

Subtotal                   67,520,154         8,917,824          13.2 %     54,056,343          9,679,723          17.9 %

Echo Entities
Recycle                     4,441,347         2,533,416          57.0 %              -                  -             -
Reuse                       4,280,934         2,158,698          50.4 %              -                  -             -
Refining                    3,417,872           546,860          16.0 %              -                  -             -
Services                    2,364,190         2,099,044          88.8 %              -                  -             -

Subtotal                   14,504,343         7,338,018          50.6 %              -                  -             -

                         $ 82,024,497     $  16,255,842          19.8 %   $ 54,056,343     $    9,679,723          17.9 %




Selling, General and Administrative: Selling, general and administrative
expenses for DGSE decreased $1,216,265 or 14% in Fiscal 2019, to $7,485,234
compared to $8,701,499 in the prior year. The overall decrease in SG&A was
primarily through the reduction of bad debt expense of $1,244,461 from Fiscal
2018 to Fiscal 2019. Bad debt expense in Fiscal 2018 was due primarily to the
write-off of the Larson Group note receivable and consignment write-offs.



Selling, general and administrative expenses for the Echo Entities totaled
$5,009,276 for the period beginning May 20, 2019 through December 31, 2019. The
expenses consist primarily of payroll, payroll taxes and employee benefits of
$2,786,387, rent and variable rent costs, net of sublet income, of $402,975,
warehouse and office supplies of $209,574, insurance costs of $77,053, travel
expenses of $55,277, accounting and professional fees of $155,388, Utilities of
$159,489 and other administrative expenses totaling $100,867.



Depreciation and Amortization: Depreciation and amortization for DGSE decreased
by $18,074 or 6% in Fiscal 2019 to $268,673 as compared to $286,747 in Fiscal
2018. The decrease is primarily due to assets that are being fully depreciated
but still in service.



The Depreciation and Amortization expense for the Echo Entities totaled $251,625
for the period beginning May 20, 2019 through December 31, 2019. The balance is
made up of the amortization of intangibles acquired from the Echo Transaction on
May 20, 2019.




Other Income/Expense: Other income for DGSE decreased by $161,081 in Fiscal
2019, to $55,384 compared to $216,465 in Fiscal 2018. Fiscal 2019, other income
of $55,384, was primarily the write up of a small plot of land owned by the
Company for many years. Fiscal 2018, other income of $216,465, was primarily
writing off old store credits and enforcing our lay-a-way policy to return
unclaimed lay-a-ways back to inventory after ninety days when payments are

forfeited.



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                                     Item 7

Other expense for the Echo Entities totaled $5,628 for the period beginning May 20, 2019 through December 31, 2019. The other expense amount of $5,628 is combined with other income from DGSE of $55,384 netting to $49,756 as other income, net on the Consolidated Income Statements.





Interest Expense: Interest expense for DGSE increased by $12,701 or 8% in Fiscal
2019, to $162,241 compared to $149,540 in Fiscal 2018. The slight increase is
due from the promissory note issued by John R. Loftus to pay off an accounts
payable - related party balance on May 20, 2019, that has a slightly higher
interest rate than the accounts payable - related party had as an imputed rate.



The interest expense for the Echo Entities was $252,720 for the period beginning
May 20, 2019 through, December 31, 2019. The interest is related to the note
payable, related party, with an outstanding balance of $6,689,507 as of December
31, 2019.

Income Tax Expense: Income tax expense for DGSE increased $17,625 or 29% in Fiscal 2019, to $78,297 compared to $60,672 in Fiscal 2018. The increase is primarily due to state and local income taxes from an increase in revenue. See Note 14 for Federal Income Taxes.


Net Income: We recorded a net income of $2,780,713 in Fiscal 2019, compared to a
net income of $657,685 in Fiscal 2018, an increase in net income of $2,123,028
is due primarily to the purchase of the Echo Entities adding $1,801,950 in
Fiscal 2019 and the bad debt write off of $1,241,919 in Fiscal 2018.



Earnings Per Share: Our net income per basic and diluted shares attributable to
common stockholders was $0.10, for Fiscal 2019, compared to $0.02 per basic and
diluted shares for Fiscal 2018, an increase of $0.08 per share. The increase is
due to the addition of the Echo Entities net income of $0.06 per basic and
diluted shares for the period May 20, 2019 through December 31, 2019, and an
additional $0.02 income per basic and diluted shares from DGSE for Fiscal 2019
over Fiscal 2018.



Liquidity and Capital Resources: During Fiscal 2019, cash flows used in
operating activities totaled $542,828 compared to cash flows provided in
operating activities totaling $375,217 in Fiscal 2018, an increased cash flows
used in operating activities of $918,045. Cash used in operating activities for
the year ended December 31, 2019, was primarily driven by the increase in trade
accounts receivable of $1,877,783, the reduction of accounts payable and accrued
accounts payable of $492,952, the reduction of the accounts payable - related
party of $3,074,021. Offset by the reduction of inventories of $1,464,843, the
increase in operating leases of 124,713 and net income, with depreciation and
amortization of $3,301,011. Cash provided by operating activities for the year
ended December 31, 2018, was driven largely by a decrease in net trade
receivables and net trade receivables, related party of $115,025, a decrease in
prepaid expenses of $100,297 and net income of $2,226,396 before non-cash
expenses of bad debt expense, depreciation and amortization and loss on disposal
of equipment. Offset by cash used in operating activities with an increase in
inventories of $1,167,404, a decrease in accounts payable and accrued expenses
of $163,660 and a decrease in accounts payable, related party of $813,320



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                                     Item 7



During Fiscal 2019 and Fiscal 2018, cash used in investing activities totaled
$6,039,505 and $191,132, respectively, an increase of $5,848,373. The cash used
in investing for 2019, was the combination of property and equipment purchases
of $102,989, the continual upgrading our point-of-sale system in the amount of
$60,000 and acquisition of the Echo Entities, net of cash acquired, in the
amount of $5,876,516. The cash used in the amount of $191,132 for 2018, was the
combination of equipment purchases and the continued building of our new
point-of-sale system.



During Fiscal 2019, cash provided by financing activities totaled $9,639,052,
and Fiscal 2018, cash used in financing activities totaled $2,352, an increase
in cash provided by financing activities of $9,641,404. The increase in cash
provided by financing activities during 2019 is the funds provided to purchase
the Echo Entities through a promissory note from John R. Loftus dated May 20,
2019 for $6,925,979. Additionally, funds provided to pay off an accounts payable
- related party balance of $3,074,021, evidenced by a promissory note dated May
20, 2019 by John R. Loftus and the drawing on a short-term line of credit from
Texas Bank and Trust of $150,000. Offset by principal payments made against the
two promissory notes From Mr. Loftus in the amount of $360,948 and the pay down
of the short-term line of credit from Texas Bank and Trust for $150,000.



On May 17, 2019, the Company secured a Line of Credit from Texas Bank and Trust
for $1,000,000. The Line of Credit is to fund any cash shortfalls that we may
have from time-to-time during the next twelve months. We don't anticipate the
need of those funds for operations. Also, from time to time, we have adjusted
our inventory levels to meet seasonal demand or in order to meet working capital
requirements. Management believes we have enough capital resources to meet
working capital requirements. If additional working capital is required,
additional loans can be obtained from individuals or from other commercial
banks. If necessary, inventory levels may be adjusted in order to meet
unforeseen working-capital requirements.



We expect our capital expenditures to total approximately $150,000 during the
next twelve months. These expenditures will be largely driven by the purchase of
miscellaneous pieces of equipment and the continued additions to our
point-of-sale system. As of December 31, 2019, there were no commitments
outstanding for capital expenditures.



In the event of significant growth in retail and wholesale jewelry sales and
recycling demand, whether purchases or services, our demand for additional
working capital will increase due to a related need to stock additional jewelry
inventory, increases in wholesale accounts receivable and the purchasing of
recycled material. Historically we have funded these activities.

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.





On May 20, 2019, we entered into two (2) loan agreements with John R. Loftus,
the Company's CEO, President and Chairman of the Board. The first note of
$6,925,979, pursuant to the Echo Entities purchase agreement, is a 5-year
promissory note amortized over 20 years at 6% annual interest rate. The second
note of $3,074,021 paid off the accounts payable - related party balance to
Elemetal on May 20, 2019. The promissory note is a 5-year note amortized over 20
years at 6% annual interest rate. Both notes are being serviced by operational
cash flow.



The Texas Comptroller conducted a sales and use tax audit of our Texas
operations with respect to the period July 1, 2013 through December 31, 2016.
The audit was finalized, and a determination was made on April 2, 2018, that we
owed a total of $17,294, which included interest and penalties. An initial
reserve of $70,000 was established at December 31, 2017 to cover any liability.
That reserve was reduced to the amount owed of $17,294 for the accompanying
consolidated balance sheet as of March 31, 2018. The balance due of $17,294 was
paid in full on April 4, 2018.



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                                     Item 7



The Company leases certain of its facilities under operating leases. The minimum
rental commitments under non-cancellable operating leases as of December 31,
2019 are as follows:



Operating Leases                      Total           2020           2021          2022          2023         Thereafter

DGSE                               $ 1,747,505     $   519,828     $ 479,168     $ 235,677     $ 212,855     $    299,977

Echo Entities                          794,863         691,003       103,860             -             -                -

Total                              $ 2,542,368     $ 1,210,831     $ 583,028     $ 235,677     $ 212,855     $    299,977

Off-Balance Sheet Arrangements.





We do not have any 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 is material to our stockholders.

STATEMENT OF MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS

Management is responsible for the preparation of the consolidated financial statements and related information that are presented in this report. The consolidated financial statements, which include amounts based on management's estimates and judgments, have been prepared in conformity with accounting principles generally accepted in the United States of America.





The Company designs and maintains accounting and internal control systems to
provide reasonable assurance at reasonable cost that assets are safeguarded
against loss from unauthorized use or disposition, and that the financial
records are reliable for preparing consolidated financial statements and
maintaining accountability for assets. These systems are augmented by written
policies, an organizational structure providing division of responsibilities and
careful selection and training of qualified personnel.



The Company engaged Whitley Penn LLP, an independent registered public
accounting firm, to audit and render an opinion on the consolidated financial
statements in accordance with the standards of the Public Accounting Oversight
Board (United States). Management's report was not subject to attestation by our
independent registered public accounting firm pursuant to rules of the SEC that
permit the company to provide only management's report in this annual report.



The Board of Directors, through its Audit Committee, consisting solely of
independent directors of the Company, meets periodically with management and our
independent registered public accounting firm to ensure that the Company is
meeting its responsibilities and to discuss matters concerning internal controls
and financial reporting. Whitley Penn LLP and the internal auditors each have
full and free access to the Audit Committee.



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                                    PART II

                                    Item 7A

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