XML 21 R9.htm IDEA: XBRL DOCUMENT
v3.24.3

ACCOUNTING POLICIES AND ESTIMATES | 9 Months Ended
--- | ---
Sep. 30, 2024
ACCOUNTING POLICIES AND ESTIMATES |
ACCOUNTING POLICIES AND ESTIMATES | NOTE 3 — ACCOUNTING POLICIES AND ESTIMATES Financial Instruments The carrying amounts reported in the condensed consolidated balance sheets for cash and cash equivalents, accounts receivable, prepaid expenses, other current assets, accounts payable, accrued expenses, and other current liabilities approximate fair value because of the immediate or short-term nature of these financial instruments. Notes payable approximate fair value due to the market interest rate charged. Use of Estimates The preparation of interim condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. Examples of estimates and assumptions include revenue recognition, determining the nature and timing of satisfaction of performance obligations, variable consideration, and other obligations such as product returns and refunds; loss contingencies; the fair value of and/or potential impairment of goodwill and intangible assets for the reporting units; useful lives of our tangible and intangible assets; allowances for credit losses; the market value of, and demand for, our inventory and the potential outcome of uncertain tax positions that have been recognized on our consolidated financial statements or tax returns. Actual results could differ from those estimates and assumptions. Revenue Recognition Accounting Standards Codification (“ASC”) 606, Revenue Recognition provides guidance to identify performance obligations for revenue-generating transactions. The Company applies a five-step approach in determining the amount and timing of revenue to be recognized: (1) identifying the contract with a customer; (2) identifying the performance obligations in the contract; (3) determining the transaction price; (4) allocating the transaction price to the performance obligations in the contract; and (5) recognizing revenue when the corresponding performance obligation is satisfied. Consumer Segment For the consumer segment, revenue from monetary transactions (i.e., cash and accounts receivable) with wholesale customers is recognized when the merchandise is delivered or at the point of sale for retail customers, and consideration for the transaction has been made either by immediate payment or through a receivable obligation. For e-commerce, revenue is recognized when the customer has fulfilled their obligation to pay or promise to pay and goods have been shipped. Revenue on precious metals requiring an assay is recognized upon transfer of title, based on the determination of the underlying weight and price of the associated metals. The Company offers third-party financing for retail customers. Revenue is recognized upon transfer of title, with the promise of the third-party financing company to pay. Commercial Segment The commercial segment recognizes revenue at an amount that reflects the consideration to which we expect to be entitled to in exchange for transferring goods or services to the customer. The commercial segment 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. The initial invoice is recognized in full when our performance obligation is satisfied. Under the guidance of ASC 606, an estimate of the variable consideration that we are expected to be entitled to 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 once the underlying weight and any precious metal spot price movement is resolved, which is usually around six 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”). Revenue from recycling services is recognized upon completion of the SOW at a predetermined amount based on the number of units processed and a preset price per unit or weight measurement. The commercial segment provides freight arrangement services related to inbound asset or material movements to our facilities. Revenue from freight arrangement services is recognized at settlement with our inbound customers which occurs when the SOW has been completed. Under the guidance of ASC 606, the Company is deemed to be a principal and as such records freight arrangement services as a component of revenue, and the associated expense is recorded as a component of cost of goods sold. The commercial segment recognizes revenue on outright sales when terms and transaction price are agreed to, product is shipped, and title is transferred. See Note 10 – Revenue for further details. Sales Returns and Allowances Sales are recorded, net of expected returns. In some cases, the consumer and commercial segment’s customers may return a product purchased within 30 days of receipt. Our allowance for estimated returns is based on our review of historical returns experience and reduces our reported revenues accordingly. As of September 30, 2024, and December 31, 2023, the consumer segment’s allowance for returns was $69,372 and $28,402, respectively. As of September 30, 2024, and December 31, 2023, the commercial segment’s allowance for returns was $55,501 and $0, respectively. Concentrations and Credit Risk The Company is potentially subject to concentrations of counterparty credit risk. The concentrations described herein pertain to certain domestic precious metals transactions requiring an assay which are of short duration and settled on comparable terms. Overall customer concentrations as a percentage of sales may vary as a result of the mix of product being sold within each comparative period. Individual customer concentrations are also impacted by each customer’s production schedule and as such the Company identifies the most appropriate sales outlet to ensure a timely transaction settlement. For the nine months ended September 30, 2024, two customers aggregated 40.0% of our sales and represented 0.0% of our accounts receivable balance. For the nine months ended September 30, 2023, three customers aggregated 38.5% of our sales and represented 0.0% of our accounts receivable balance. The Company believes that no single customer is critical to its business as a result of having diverse revenue streams and the optionality of sales outlets primarily associated with base and precious metals. Shipping and Handling Costs Within the consumer and commercial segments, outbound shipping and handling costs are accounted for as fulfillment costs within cost of goods sold. For the three months ended September 30, 2024 and 2023, the consumer segment’s outbound shipping and handling costs were $17,223 and $3,846, respectively. For the three months ended September 30, 2024 and 2023, the commercial segment’s outbound shipping and handling costs were $1,128,553 and $1,096,423, respectively. For the nine months ended September 30, 2024 and 2023, the consumer segment’s outbound shipping and handling costs were $67,013 and $9,083, respectively. For the nine months ended September 30, 2024 and 2023, the commercial segment’s outbound shipping and handling costs were $3,716,832 and $4,308,906, respectively. Advertising Costs The consumer and commercial segment’s advertising costs are expensed as incurred. For the three months ended September 30, 2024 and 2023, the consumer segment’s advertising costs were $357,151 and $162,713, respectively. For the three months ended September 30, 2024 and 2023, the commercial segment’s advertising costs were $59,714 and $10,803, respectively. For the nine months ended September 30, 2024 and 2023, the consumer segment’s advertising costs were $930,132 and $713,840, respectively. For the nine months ended September 30, 2024 and 2023, the commercial segment’s advertising costs were $192,691 and $32,042, respectively. Leases We determine if an arrangement is a lease at inception. We do not separate non-lease components from lease components to which they relate and have accounted for the combined lease and non-lease components as a single lease component. Many of our lease agreements contain renewal options; however, we do not recognize right-of-use assets or lease liabilities for renewal periods unless it is determined that we are reasonably certain of renewing the lease at inception or when a triggering event occurs. In determining our right-of-use assets and lease liabilities, we apply a discount rate to the minimum lease payments within each lease agreement. ASC 842, Leases requires us to use the interest rate that a lessee would have to pay to borrow on a collateralized basis over a similar term in an amount equal to the lease payments in a similar economic environment. If we cannot readily determine the discount rate implicit in lease agreements, we utilize our incremental borrowing rate. For leases one-year or less the Company has elected not to record lease liabilities and right-of use assets and instead recognize the expense associated with the lease payments using the straight-line basis. Income Taxes Income taxes are accounted for under the asset and liability method prescribed by ASC 740, Income Taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to be applicable to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation of Deferred Tax Assets The Company’s deferred tax assets include certain future tax benefits. The Company records a valuation allowance against any portion of those deferred income tax assets when it believes, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax asset will not be realized. The Company reviews the likelihood that the benefit of the deferred tax assets will be realized and the need for valuation allowances on a quarterly basis, or more frequently if events indicate that a review is required. We have not taken a tax position that, if challenged, would have a material effect on the consolidated financial statements or the effective tax rate for the three and nine months ended September 30, 2024 and 2023. The Company did not have a deferred tax asset as of September 30, 2024, or December 31, 2023, and as such, there was no valuation allowance. As of September 30, 2024, the Company had a deferred tax liability of $34,187. As of December 31, 2023, the Company had a deferred tax liability of $38,668. Segment Information The accounting standards for reporting information about operating segments define an operating segment as a component of an enterprise that engages in business activities from which it may earn revenues and incur expenses for which discrete financial information is available that is evaluated regularly by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources and in assessing performance. The Company allocates its corporate expenses to its operating segments, including selling, general and administrative expenses, depreciation and amortization, other income, interest expense, and income tax expense. See Note 2 – Principles of Consolidation and Nature of Operations for further details. Earnings Per Share Basic earnings per share of our common stock, par value $0.01 per share (our “Common Stock”), is computed by dividing net earnings available to holders of the Company’s Common Stock by the weighted average number of shares of Common Stock outstanding for the reporting period. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts requiring the Company to issue Common Stock were exercised or converted into Common Stock. For the calculation of diluted earnings per share, the basic weighted average number of shares is increased by the dilutive effect of stock options and warrants outstanding determined using the treasury stock method. Stock-Based Compensation The Company accounts for stock-based compensation by measuring the cost of employee services received in exchange for an award of equity instruments, including grants of stock options, based on the fair value of the award at the date of the grant. In addition, to the extent that the Company receives an excess tax benefit upon exercise of an award, such benefit is reflected as cash flow from financing activities in the consolidated statement of cash flows. See Note 15 – Stock-Based Compensation for further details. Taxes Collected from Customers The Company’s policy is to present taxes collected from customers and remitted to governmental authorities on a net basis. The Company records the amounts collected as a current liability and relieves such liability upon remittance to the taxing authority without impacting revenue or expenses. Cash and Cash Equivalents The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. The carrying amounts reported in the condensed consolidated balance sheets approximate fair value. Accounts Receivable, Net of Allowances Accounts receivable represent amounts primarily due from customers on products and services. Our allowance for credit losses is primarily determined by an analysis of our accounts receivable aging, using the expected losses methodology. The allowance for credit losses is determined based on the 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 for credit losses. Accounts receivables are considered delinquent when payment has not been made within contract terms. Accounts receivables are written off when all efforts to collect have been exhausted and the potential for recovery is considered remote. As of September 30, 2024, and December 31, 2023, the consumer segment’s allowance for credit losses was $0 and $0, respectively. As of September 30, 2024, and December 31, 2023, the commercial segment’s allowance for credit losses was $415,593 and $260,858, respectively. Inventories Consumer Segment The consumer segment values inventory at the lower of cost or net realizable value. We acquire inventory based on our own internal estimate of the fair value of the items at the time of purchase. We consider factors such as the current spot market price of precious metals and the current market demand for the items being purchased. Consigned inventory has a net zero balance. The majority of our inventory has some component of its value that is based on the spot market price of precious metals. Because the overall market value for precious metals regularly fluctuates, we monitor these fluctuations for any adverse impact on the carrying value of our inventory. Commercial Segment Our inventory primarily includes processed and unprocessed base metals, electronic scrap materials, as well as technology assets being held for resale. The processed and unprocessed base metals and electronic scrap materials are valued utilizing the average cost method. Our technology assets are valued utilizing the retail cost method. See Note 5 – Inventories for further details. Goodwill Goodwill is not amortized but evaluated for impairment on an annual basis during the fourth quarter of our fiscal year, or earlier if events or circumstances indicate the carrying value may be impaired. There were no triggering events identified during the nine months ended September 30, 2024, requiring an interim goodwill impairment test, and the Company did not record a goodwill impairment charge in any of the periods presented. See Note 6 – Goodwill for further details. Property and Equipment, Net Property and equipment are carried at cost less accumulated depreciation and are depreciated on a straight-line basis over the estimated useful lives of the assets; except for construction in progress which has not yet been placed into service. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Expenditures for repairs and maintenance are expensed as incurred; betterments that increase the value or materially extend the life of the related assets are capitalized. See Note 7 – Property and Equipment, Net for further details. Intangible Assets, Net Finite-lived intangible assets are carried at cost less accumulated amortization and are amortized on a straight-line basis over the estimated useful lives of the assets; except for assets under development which have not yet been placed into service. Finite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. See Note 8 – Intangible Assets, Net for further details. Correction of Immaterial Error The Company’s commercial segment previously reported revenue from freight arrangement services as a component of cost of goods sold. The Company has further evaluated the nature and scope of its service offering and has determined that it meets the definition of a principal in accordance with ASC 606 and as such be reported within revenue. The following table summarizes the correction of immaterial error: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three Months Ended | ​ | ​ | ​
​ | ​ | March 31, | ​ | June 30, | ​ | September 30, | ​ | December 31, | ​ | ​ | ​
​ |  | 2023 |  | 2023 |  | 2023 |  | 2023 |  | Total
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Sales | ​ | $ | 48,389,040 | ​ | $ | 50,303,527 | ​ | $ | 36,266,271 | ​ | $ | 36,715,250 | ​ | $ | 171,674,088
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Correction of immaterial error | ​ |  | 1,420,492 | ​ |  | 792,350 | ​ |  | 610,215 | ​ |  | 766,681 | ​ |  | 3,589,738
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Sales adjusted | ​ |  | 49,809,532 | ​ |  | 51,095,877 | ​ |  | 36,876,486 | ​ |  | 37,481,931 | ​ |  | 175,263,826
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Cost of goods sold | ​ |  | 36,979,138 | ​ |  | 39,541,480 | ​ |  | 26,531,989 | ​ |  | 26,964,951 | ​ |  | 130,017,558
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Correction of immaterial error | ​ |  | 1,420,492 | ​ |  | 792,350 | ​ |  | 610,215 | ​ |  | 766,681 | ​ |  | 3,589,738
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Cost of goods sold adjusted | ​ |  | 38,399,630 | ​ |  | 40,333,830 | ​ |  | 27,142,204 | ​ |  | 27,731,632 | ​ |  | 133,607,296
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Gross margin | ​ | $ | 11,409,902 | ​ | $ | 10,762,047 | ​ | $ | 9,734,282 | ​ | $ | 9,750,299 | ​ | $ | 41,656,530
​ The error had no impact on gross margin, operating income, net income, and basic and diluted earnings per share nor any other financial statement amount. Further these errors had no impact on the consolidated balance sheets, statements of stockholders’ equity, and statements of cash flows. These corrections do not affect any of the metrics used to calculate and evaluate management’s compensation and have no impact on bonuses, commissions, stock-based compensation, or any other employee renumeration. Historical amounts have been corrected and are presented on a comparable basis. See Note 11 – Revenue for further details. Changes in Disclosure The Company has elected to discontinue the reporting of disaggregated of inventory and revenue by resale and recycle. The Company’s business operations continue to evolve and include fee-for-service revenue that does not always correlate to these categories and underlying inventory positions; further, our inventory positions within these disaggregated presentations can vary at any point in time as they are a diverse mix of technology assets, base and precious metals and luxury hard assets. The Company believes that its disclosure of the nature of its operations, the type of inventory held at each segment and associated risk factors provides a sufficient understanding of its impact on our business. See Note 5 – Inventories and Note 11 – Revenue for further details. Reclassifications For the Company’s 2023 Annual Report, the presentation of the operations section within its consolidated statements of cash flows was updated to present “non-cash lease expense” as a separate line item, previously included within “changes in operating assets and liabilities – operating leases.” The Company has elected to reclassify $1,418,928 from operating leases to non-cash lease expense in the condensed consolidated statements of cash flows for the nine months ended September 30, 2023. See the condensed consolidated statements of cash flows for further details. The Company has elected to reclassify $200 thousand in noncash activities associated with the acquisition of Steven Kretchmer, Inc. which were presented in the Company’s Form 10-Q for the quarterly period ended September 30, 2023, as an investing cash outflow of $300 thousand for “Acquisition of Steven Kretchmer, Inc.,” and a financing cash inflow of $200 thousand for “Proceeds from note payable, Steven Kretchmer, Inc. acquisition.” The investing outflow for the acquisition of Steven Kretchmer, Inc. was $100 thousand. The reclassification had no impact on gross margin, operating income, net income, and basic and diluted earnings per share nor any other financial statement amount. See the condensed consolidated statements of cash flows and Note 4 – Changes in Business for further details. For the Company’s 2023 Annual Report, the amount reported for other current assets within the consolidated balance sheets is related entirely to notes receivables. The Company has elected to present notes receivable as its own line item and has reclassified the historical presentation of the aforementioned as of December 31, 2023. See the condensed consolidated balance sheets for further details. The Company previously did not disclose construction in progress and intangible assets under development. The Company has determined that providing this information further enhances the understanding of the nature of our capital expenditures. The Company has elected to reclassify the historical presentation of the aforementioned as of December 31, 2023. See Note 7 – Property and Equipment, Net for further details. The Company previously reported the development of its enterprise resource planning system within property and equipment, net. The Company has further evaluated the nature of this asset under ASC 350, Intangibles – Goodwill and Other, and has determined that it is a nonmonetary asset without physical substance and was acquired separately from hardware and as such be reported within intangible assets, net. The Company has elected to reclassify the historical presentation of the aforementioned as of December 31, 2023. See Note 8 – Intangible Assets, Net for further details. Recent Accounting Pronouncements In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which will require the Company to disclose segment expenses that are significant and regularly provided to the CODM. In addition, ASU 2023-07 will require the Company to disclose the title and position of its CODM and how the CODM uses segment profit or loss information in assessing segment performance and deciding how to allocate resources. ASU 2023-07 will be effective for fiscal years beginning January 1, 2024, Form 10-K, and interim periods within fiscal years beginning on January 1, 2025. The standard will be adopted beginning January 1, 2024, for the fiscal year and adopted for the interim periods beginning January 1, 2025, by using a modified retrospective transition approach. The Company does not expect adoption to have a material impact on its consolidated financial statements. In December 2023, the FASB issued Accounting Standards Update 2023-09 (“ASU 2023-09”), Income Taxes (Topic 740): Improvement to Income Tax Disclosures, amending income tax disclosure requirements for the effective tax rate reconciliation and income taxes paid. The amendments in ASU 2023-09 will be effective for fiscal years beginning January 1, 2025. The standard will be adopted beginning January 1, 2025, for the fiscal year on a prospective basis. Early adoption and retrospective application of the amendments are permitted. The Company does not expect adoption to have a material impact on its consolidated financial statements. No other recently issued or effective ASUs had, or are expected to have, a material impact on our financial position and results of operations.

X
- References No definition available. + Details
Name: | us-gaap_AccountingPoliciesAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for all significant accounting policies of the reporting entity. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 235 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Publisher FASB -URI https://asc.fasb.org/1943274/2147483426/235-10-50-1 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 235 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/235/tableOfContent + Details
Name: | us-gaap_SignificantAccountingPoliciesTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration