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REVENUE RECOGNITION | 6 Months Ended
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Jun. 30, 2023
REVENUE RECOGNITION |
REVENUE RECOGNITION | NOTE 10 — REVENUE RECOGNITION 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 a 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 is to recognize revenue as each performance obligation is satisfied. The following disaggregation of total revenue is listed by sales category and segment for the three months ended June 30, 2023 and 2022:
CONSOLIDATED |  | Three Months Ended June 30, |
|  | 2023 |  |  | 2022 |
|  | Revenues |  |  | Gross Profit |  |  | Margin |  |  | Revenues |  |  | Gross Profit |  |  | Margin |
Consumer |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Resale |  | $ | 36,645,641 |  |  | $ | 3,353,835 |  |  |  | 9.2 | % |  | $ | 28,165,026 |  |  | $ | 3,719,954 |  |  |  | 13.2 | %
Recycled |  |  | 2,995,793 |  |  |  | 740,807 |  |  |  | 24.7 | % |  |  | 2,174,101 |  |  |  | 468,630 |  |  |  | 21.6 | %
Subtotal |  |  | 39,641,434 |  |  |  | 4,094,642 |  |  |  | 10.3 | % |  |  | 30,339,127 |  |  |  | 4,188,584 |  |  |  | 13.8 | %
Commercial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Resale |  |  | 7,566,236 |  |  |  | 5,051,337 |  |  |  | 66.8 | % |  |  | 9,102,001 |  |  |  | 5,566,507 |  |  |  | 61.2 | %
Recycled |  |  | 3,095,857 |  |  |  | 1,616,068 |  |  |  | 52.2 | % |  |  | 3,198,590 |  |  |  | 1,722,909 |  |  |  | 53.9 | %
Subtotal |  |  | 10,662,093 |  |  |  | 6,667,405 |  |  |  | 62.5 | % |  |  | 12,300,591 |  |  |  | 7,289,416 |  |  |  | 59.3 | %
|  | $ | 50,303,527 |  |  | $ | 10,762,047 |  |  |  | 21.4 | % |  | $ | 42,639,718 |  |  | $ | 11,478,000 |  |  |  | 26.9 | %
The following disaggregation of total revenue is listed by sales category and segment for the six months ended June 30, 2023 and 2022:
CONSOLIDATED |  | Six Months Ended June 30, |
|  | 2023 |  |  | 2022 |
|  | Revenues |  |  | Gross Profit |  |  | Margin |  |  | Revenues |  |  | Gross Profit |  |  | Margin |
Consumer |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Resale |  | $ | 70,365,601 |  |  | $ | 6,658,767 |  |  |  | 9.5 | % |  | $ | 61,842,159 |  |  | $ | 7,462,806 |  |  |  | 12.1 | %
Recycled |  |  | 5,980,230 |  |  |  | 1,420,843 |  |  |  | 23.8 | % |  |  | 4,279,840 |  |  |  | 949,240 |  |  |  | 22.2 | %
Subtotal |  |  | 76,345,831 |  |  |  | 8,079,610 |  |  |  | 10.6 | % |  |  | 66,121,999 |  |  |  | 8,412,046 |  |  |  | 12.7 | %
Commercial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Resale |  |  | 16,124,326 |  |  |  | 10,850,463 |  |  |  | 67.3 | % |  |  | 18,681,858 |  |  |  | 10,140,775 |  |  |  | 54.3 | %
Recycled |  |  | 6,222,410 |  |  |  | 3,241,876 |  |  |  | 52.1 | % |  |  | 5,250,959 |  |  |  | 2,636,213 |  |  |  | 50.2 | %
Subtotal |  |  | 22,346,736 |  |  |  | 14,092,339 |  |  |  | 63.1 | % |  |  | 23,932,817 |  |  |  | 12,776,988 |  |  |  | 53.4 | %
|  | $ | 98,692,567 |  |  | $ | 22,171,949 |  |  |  | 22.5 | % |  | $ | 90,054,816 |  |  | $ | 21,189,034 |  |  |  | 23.5 | %
For the consumer segment, revenue for monetary transactions (i.e., cash and receivables) with wholesale dealers and the retail public 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 over-the-counter retail stores. Revenue is recognized 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. Shipping and handling costs are accounted for as fulfillment costs after the customer obtains control of the goods. Crafted-precious-metal items at the end of their useful lives are sold for its precious metal contained. The metal is assayed to determine the precious metal content, a price is agreed upon and payment is made usually within two days. Revenue is recognized from the sale once the performance obligation is satisfied. In limited circumstances, merchandise is exchanged for similar merchandise and/or monetary consideration with both dealers and retail customers, for which revenue is recognized in accordance with ASC 845, Nonmonetary Transactions. When merchandise is exchanged for similar merchandise and there is no monetary component to the exchange, there is no revenue recognized. 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 merchandise is exchanged for similar merchandise and there is a monetary component to the exchange, revenue is recognized to the extent of the monetary assets received that 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 third party 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 finance company. Revenue is recognized from the sale upon the promise of the financing company to pay. Our return policy covers retail transactions. In some cases, customers may return a product purchased within 30 days of the receipt of the items for a full refund. Also, in some cases customers may cancel the sale within 30 days of making a commitment to purchase the items. Additionally, a customer may return an item for full refund if they can demonstrate that the item is not authentic, or there was an error in the description of the 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. The consumer segment has established an allowance for estimated returns based on our review of historical returns experience and reduces our reported revenues and cost of sales accordingly. For the three and six months ended June 30, 2023 and 2022, the allowance for returns remained the same at approximately $28,000. A significant amount of revenue stems from sales to two precious metal refining and bullion partners. One partner constitutes 24.5% and 28.9% of the revenues for the three and six months ended June 30, 2023, respectively. The second partner constitutes 23.7% and 10.4%, of the revenues for the three and six months ended June 30, 2023, respectively. However, the Company believes that the products it sells is marketable to numerous sources at competitive prices. The commercial segment has 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 and title transferred. Once the price is established and the terms are agreed to and the product is shipped and title is transferred, the revenue is recognized. The commercial segment has fulfilled its performance obligation with an agreed upon transaction price, payment terms and shipping the product. We recognize refining revenue when our inventory arrives at the destination port and the performance obligation is satisfied by transferring the control of the promised goods that are identified in the customer contract. The initial invoice is recognized in full when our performance obligation is satisfied, as stated in the first sentence. Under the guidance of ASC 606, an estimate of the variable consideration that are expected 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. Any adjustment from the resolution of the underlying uncertainty is netted with the settlement due from the original contract. The commercial segment also provides recycling services according to a Scope of Work (“SOW”). Services are recognized based on the number of units processed by a preset price per unit. Activity reports are produced weekly with the counts and revenue is recognized based on the billing from the weekly reports. Recycling services can be conducted at our facility, or the recycling services can be performed at the client’s facility. The SOW will determine the charges and whether the service will be completed at our facility or at the client’s facility. Payment terms are also dictated in the SOW. Accounts Receivable: We record trade receivables when revenue is recognized. The new accounting standard introduces a new expected credit losses methodology for estimating allowances for credit losses which is based on expected losses rather than incurred losses. We are required to use a forward-looking expected credit loss methodology for accounts receivable. This new methodology is effective for the fiscal years beginning January 1, 2023. We will record an allowance for doubtful accounts, which is primarily determined by an analysis of our trade receivables aging, using the new expected losses methodology. 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 considered and expected to be uncollectable 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. The consumer segment had no allowance for doubtful accounts balance as of June 30, 2023 and December 31, 2022. Some of commercial segment’s customers are on payment terms, and although low risk, occasionally the need may arise to record an allowance for receivables that are deemed high risk using the new expected loss methodology. The commercial segment’s allowance for doubtful accounts, as of June 30, 2023 and December 31, 2022 was $186,288 and $51,734, respectively. The increase in allowance for doubtful accounts ending June 30, 2023, as compared to December 31, 2022 is primarily due to the commercial segment and the new forward looking methodology of estimating future expected losses. 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. During fiscal 2022, management determined that it was more likely than not the tax asset would be reduced by future taxable income, therefore, the remaining valuation allowance at December 31, 2022, was released. As of June 30, 2023, we had a deferred tax asset of $612,832 with $0 offsetting valuation allowance. As of December 31, 2022, the Company had a deferred tax asset of $1,488,258 with an offsetting valuation allowance of $0. 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.) We have not taken a tax position that, if challenged, would have a material effect on the financial statements or the effective tax rate for the three and six months ended June 30, 2023 and 2022.

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