UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form 10-Q/A
(Amendment
Number 1.)
(Mark
One)
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þ
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QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For
the quarterly period ended March 31, 2009
or
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|
o
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For
the transition period from ___ to ___
Commission
File Number 1-11048
DGSE
Companies, Inc.
(
Exact name of registrant as
specified in its charter
)
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Nevada
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88-0097334
|
(State
or other jurisdiction of
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(I.R.S.
Employer
|
incorporation
or organization)
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Identification
No.)
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11311
Reeder Road
Dallas,
Texas 75229
(972) 484-3662
(Address,
including zip code, and telephone
number,
including area code, of registrant’s
principal
executive offices)
NONE
(Former
name, former address and former
fiscal
year, if changed since last report)
Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES
þ
NO
o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large
accelerated filer
¨
|
Accelerated
filer
¨
|
Non-accelerated
filer
¨
|
Smaller
reporting company
þ
|
(Do not
check if a smaller reporting company)
Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
YES
o
NO
þ
Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of May 12, 2009:
Class
|
|
Outstanding
|
Common
stock, $.01 par value per share
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|
9,833,635
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TABLE OF
CONTENTS
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Page No.
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PART
I.
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FINANCIAL
INFORMATION
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Item
1.
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Consolidated
Financial Statements.
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Consolidated
Balance Sheets as of March 31, 2009 and December 31, 2008
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1
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Consolidated
Statements of Operations for the three months ended March 31, 2009 and
2008
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2
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Consolidated
Statements of Cash Flows for the three months ended March 31, 2009 and
2008
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3
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Notes
to Consolidated Financial Statements
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4
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Item
2.
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Management’s
Discussion and Analysis of Financial Condition and Results of
Operations.
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9
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Item
3
.
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Quantitative
and Qualitative Disclosures About Market Risk.
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16
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Item
4
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Controls
and Procedures.
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17
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PART
II.
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OTHER
INFORMATION
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Item
3
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Legal
Proceedings.
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18
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Item
5.
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Other
Information.
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18
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Item
6.
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Exhibits.
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18
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SIGNATURES
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DGSE
Companies, Inc. and Subsidiaries
PART
I. FINANCIAL INFORMATION
Item
1. Consolidated Financial Statements.
CONSOLIDATED
BALANCE SHEETS
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March 31,
2009
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December 31,
2008
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Unaudited
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ASSETS
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Current
Assets:
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Cash
and cash equivalents
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$
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919,313
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$
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244,429
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|
Trade
receivables
|
|
|
1,805,638
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|
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2,326,337
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Inventories
|
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16,697,062
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|
|
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16,052,833
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Prepaid
expenses
|
|
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530,481
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|
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533,318
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Prepaid
federal income tax
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639,372
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639,372
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Current
assets of discontinued operations
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506,283
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900,306
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Total
current assets
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21,098,149
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20,696,595
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Property
and equipment, net
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4,913,704
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4,868,306
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Deferred
income taxes
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1,857,901
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1,908,032
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Goodwill
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837,117
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837,117
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Intangible
assets
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2,464,006
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2,492,673
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Other
assets
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186,684
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235,917
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Non-current
assets of discontinued operations
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305,275
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305,275
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$
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31,662,836
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$
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31,343,915
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LIABILITIES
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Current
Liabilities:
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Notes
payable
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$
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57,471
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$
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191,078
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Current
maturities of long-term debt
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399,992
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599,972
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Line
of credit
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3,595,000
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3,595,000
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Accounts
payable – trade
|
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413,128
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734,906
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Accrued
expenses
|
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491,069
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647,536
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Customer
deposits
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2,017,638
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1,230,991
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Current
liabilities of discontinued operations
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67,354
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33,144
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Total
current liabilities
|
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7,041,652
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7,032,627
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Long-term
debt, less current maturities
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11,796,147
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11,715,765
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18,837,799
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18,748,392
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STOCKHOLDERS’
EQUITY
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Common
stock, $.01 par value; 30,000,000 shares authorized; 9,833,635 and
9,833,635 shares issued and outstanding at the end of each period in 2009
and 2008, respectively
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98,337
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98,337
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Additional
paid-in capital
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18,541,662
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18,541,662
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Retained
deficit
|
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(5,814,962
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)
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(6,044,476
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)
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12,825,037
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12,595,523
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$
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31,662,836
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|
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$
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31,343,915
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|
The
accompanying notes are an integral part of these consolidated financial
statements
DGSE
Companies, Inc. and Subsidiaries
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
Three months ended March 31,
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2009
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2008
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Unaudited
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Revenue
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Sales
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$
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25,740,439
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$
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32,049,884
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Consumer
loan service charges
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159,049
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124,320
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25,899,488
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32,174,204
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Costs
and expenses
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Cost
of goods sold
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22,462,329
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28,420,016
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Selling,
general and administrative expenses
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2,533,767
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2,635,212
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Depreciation
and amortization
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59,351
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96,033
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25,055,447
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31,151,261
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Operating
income
|
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844,041
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|
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1,022,943
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|
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Other
expense (income)
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Other
income
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—
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(2
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)
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Interest
expense
|
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147,084
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|
170,439
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Earnings
before income taxes
|
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|
696,957
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852,506
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Income
tax expense
|
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61,119
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303,563
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|
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Net
earnings from continuing operations
|
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635,838
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548,943
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Discontinued
operations:
|
|
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|
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|
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Loss
from discontinued operations (less applicable income tax benefit of
$39,271 and $36,930, respectively)
|
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406,322
|
|
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|
71,688
|
|
|
|
|
|
|
|
|
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Net
earnings
|
|
$
|
229,516
|
|
|
$
|
477,255
|
|
|
|
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Earnings
per common share
|
|
|
|
|
|
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Basic
|
|
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|
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|
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From
continuing operations
|
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$
|
0.06
|
|
|
$
|
0.06
|
|
From
discontinued operations
|
|
$
|
(0.04
|
)
|
|
$
|
(0.01
|
)
|
Net
earnings per common share
|
|
$
|
0.02
|
|
|
$
|
0.05
|
|
|
|
|
|
|
|
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Diluted
|
|
|
|
|
|
|
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From
continuing operations
|
|
$
|
0.06
|
|
|
$
|
0.06
|
|
From
discontinued operations
|
|
$
|
(0.04
|
)
|
|
$
|
(0.01
|
)
|
Net
earnings per common share
|
|
$
|
0.02
|
|
|
$
|
0.05
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares
|
|
|
|
|
|
|
|
|
Basic
|
|
|
9,833,635
|
|
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9,498,729
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Diluted
|
|
|
9,833,635
|
|
|
|
10,344,363
|
|
The
accompanying notes are an integral part of these consolidated financial
statements
DGSE
COMPANIES, Inc. and Subsidiaries
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
Three months ended March 31,
|
|
|
|
2009
|
|
|
2008
|
|
Cash
flows from operating activities
|
|
Unaudited
|
|
|
|
|
|
|
|
|
Net
earnings
|
|
$
|
229,516
|
|
|
$
|
477,255
|
|
Adjustments
to reconcile net earnings to net cash provided by operating
activities
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
59,351
|
|
|
|
109,836
|
|
Deferred
income taxes
|
|
|
50,131
|
|
|
|
43,289
|
|
Gain
on marketable securities
|
|
|
—
|
|
|
|
(15,300
|
)
|
(Increase)
decrease in operating assets and liabilities
|
|
|
|
|
|
|
|
|
Trade
receivables
|
|
|
924,861
|
|
|
|
1,266,568
|
|
Inventories
|
|
|
(644,229
|
)
|
|
|
(2,608,389
|
)
|
Prepaid
expenses and other current assets
|
|
|
2,837
|
|
|
|
(198,117
|
)
|
Accounts
payable and accrued expenses
|
|
|
(548,977
|
)
|
|
|
(628,160
|
)
|
Customer
deposits
|
|
|
786,647
|
|
|
|
1,643,247
|
|
Federal
income taxes payable
|
|
|
—
|
|
|
|
228,546
|
|
Other
assets
|
|
|
49,233
|
|
|
|
17,822
|
|
Net
cash provided by operating activities
|
|
|
909,370
|
|
|
|
336,597
|
|
Cash
flows from investing activities
|
|
|
|
|
|
|
|
|
Pawn
loans made
|
|
|
(348,699
|
)
|
|
|
(317,580
|
)
|
Pawn
loans repaid
|
|
|
189,649
|
|
|
|
160,906
|
|
Recovery
of pawn loan principal through sale of forfeited
collateral
|
|
|
148,911
|
|
|
|
168,888
|
|
Purchase
of property and equipment
|
|
|
(104,749
|
)
|
|
|
(285,888
|
)
|
Net
cash used in investing activities
|
|
|
(114,888
|
)
|
|
|
(273,674
|
)
|
Cash
flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from line of credit
|
|
|
—
|
|
|
|
750,000
|
|
Payments
of capital lease
|
|
|
—
|
|
|
|
(1,986
|
)
|
Repayments
of notes payable
|
|
|
(119,598
|
)
|
|
|
(635,210
|
)
|
Net
cash provided by (used in) financing activities
|
|
|
(119,598
|
)
|
|
|
112,804
|
|
|
|
|
|
|
|
|
|
|
NET
INCREASE IN CASH AND
CASH EQUIVALENTS
|
|
|
674,884
|
|
|
|
175,727
|
|
Cash
and cash equivalents at beginning of period
|
|
|
244,429
|
|
|
|
536,548
|
|
Cash
and cash equivalents at end of period
|
|
$
|
919,313
|
|
|
$
|
712,275
|
|
Supplemental
disclosures:
Interest
paid for the three months ended March 31, 2009 and 2008 was $147,084 and
$174,449, respectively.
Income
taxes paid for the three months ended March 31, 2009 and 2008 was $0 and $0,
respectively.
The
accompanying notes are an integral part of these consolidated financial
statements.
DGSE
COMPANIES, Inc. and Subsidiaries
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis
of Presentation.
The
accompanying unaudited condensed consolidated financial statements of DGSE
Companies, Inc. and Subsidiaries include the financial statements of DGSE
Companies, Inc. and its wholly-owned subsidiaries, DGSE Corporation, National
Jewelry Exchange, Inc., Charleston Gold and Diamond Exchange, Inc., Superior
Galleries, Inc. Superior Precious Metals, Inc., American Gold and Diamond
Exchange, Inc, and Superior Estate Buyers, Inc... In the opinion of
management, all adjustments consisting of normal recurring accruals considered
necessary for a fair presentation have been included.
The
interim financial statements of DGSE Companies, Inc. included herein have been
prepared by us pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted pursuant to the Commission's rules and regulations,
although we believe that the disclosures are adequate to make the information
presented not misleading. We suggest that these financial statements
be read in conjunction with the financial statements and notes included in our
Annual Report on Form 10-K for the year ended December 31, 2008. In
our opinion, the accompanying unaudited interim financial statements contain all
adjustments, consisting only of those of a normal recurring nature, necessary to
present fairly its results of operations and cash flows for the periods
presented. The results of operations for the periods presented are not
necessarily indicative of the results to be expected for the full
year. Certain reclassifications were made to the prior year's
consolidated financial statements to conform to the current year
presentation.
In
December 2008, we decided to discontinue the live auction segment of
our business activities. This decision was based on the substantial
losses being incurred by this operating segment during 2008. As a
result, certain sections of the Consolidated Financial Statements and related
notes have been reclassified to present the results of the auction segment
activities as discontinued operations.
(2) Inventory.
A summary
of inventories is as follows:
|
|
March 31, 2009
|
|
|
December 31, 2008
|
|
Jewelry
|
|
$
|
9,419,846
|
|
|
$
|
10,925,247
|
|
Rare
coins
|
|
|
2,278,368
|
|
|
|
1,827,294
|
|
Bullion
|
|
|
3,686,379
|
|
|
|
1,931,925
|
|
Scrap
gold
|
|
|
849,891
|
|
|
|
636,843
|
|
Other
|
|
|
462,578
|
|
|
|
731,524
|
|
Total
|
|
$
|
16,697,062
|
|
|
$
|
16,052,833
|
|
(3) Trade
Receivables.
Pawn
loans receivable in the amount of $316,109 and $306,620 as of March 31, 2009 and
December 31, 2008, respectively, are included in the Consolidated Balance Sheets
caption trade receivables as of these respective dates. The related pawn service
charges receivable in the amount of $100,935 and $89,235 as of March 31, 2009
and December 31, 2008, respectively, are also included in the Consolidated
Balance Sheets caption trade receivables as of these respective
dates.
(4) Goodwill.
During
the fourth quarter of 2008, we reflected $8,185,443 of goodwill relating to the
acquisition of Superior Galleries. Inc. in May 2007. Under SFAS No. 142, we are
required to undertake an annual impairment test at our year end or when there is
a triggering event. In addition to the annual impairment review, there were a
number of triggering events in the fourth quarter due to the significant
operating losses of Superior and the impact of the economic downturn on
Superior’s operations and the decline in the Company’s share price resulting in
a substantial discount of the market capitalization to tangible net asset value.
An evaluation of the recorded goodwill was undertaken, which considered two
methodologies to determine the fair-value of the entity:
·
A
market capitalization approach, which measure market capitalization at the
measurement date.
·
A
discounted cash flow approach, which entails determining fair value using a
discounted cash flow methodology. This method requires significant
judgment to estimate the future cash flow and to determine the appropriate
discount rates, growth rates, and other assumptions.
DGSE
Companies, Inc. and Subsidiaries
Each of
these methodologies we believe has merit, and resulted in the determination that
goodwill was impaired. Accordingly, to reflect the impairment, we recorded a
non-cash charge of $8,185,443, which eliminated the value of the goodwill
related to Superior.
(5) Earnings
per share.
A
reconciliation of the earnings and shares of the basic earnings per common share
and diluted earnings per common share for the periods ended March 31, 2009 and
2008 is as follows:
|
|
2009
|
|
|
2008
|
|
|
|
Three months ended March 31,
|
|
|
Three months ended March 31,
|
|
|
|
Net Earnings
|
|
|
Shares
|
|
|
Per share
|
|
|
Net Earnings
|
|
|
Shares
|
|
|
Per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per common share
|
|
$
|
229,516
|
|
|
|
9,833,635
|
|
|
$
|
0.02
|
|
|
$
|
477,255
|
|
|
|
9,498,729
|
|
|
$
|
0.05
|
|
Effect
of dilutive stock options
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
845,634
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per common share
|
|
$
|
229,516
|
|
|
|
9,833,635
|
|
|
$
|
0.02
|
|
|
$
|
477,255
|
|
|
|
10,344,363
|
|
|
$
|
0.05
|
|
For
the three months ended March 31, 2009 1.4 million
shares related to employee stock options were not added to the
denominator because inclusion of such shares would be antidilutive. For the
three months ended March31, 2008 438,672 related to
warrants issued in conjunction with an acquisition were
not added to the denominator because inclusion of such shares would be
antidilutive
The
following table sets forth outstanding shares of common stock issued in the form
of stock purchase warrants and employee stock options as of June 30
:
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
issued in conjunction with financing
|
|
|
-
|
|
|
|
3,982
|
|
|
|
|
Warrants
issued in conjunction with acquisitions
|
|
|
438,672
|
|
|
|
370,928
|
|
|
|
|
Common
stock options
|
|
|
1,423,134
|
|
|
|
1,393,134
|
|
|
|
-
|
|
The
warrants issued in conjunction with financing were issued to expire on July 5,
2008 and were issued at an exercise price of $3.10. The warrants
issued in conjunction with acquisitions were issued to expire on May 29, 2014 at
an exercise price of $1.89.
DGSE
Companies, Inc. and Subsidiaries
(6) Business
segment information.
Management
identifies reportable segments by product or service offered. Each
segment is managed separately. Corporate and other includes certain general and
administrative expenses not allocated to segments and pawn operations. The
Company had no significant non cash items other than depreciation and
amortization. Our operations by segment for the three months ended March 31 were
as follows:
(In thousands)
|
|
Retail
Jewelry
|
|
|
Wholesale
Jewelry
|
|
|
Precious
Metals
|
|
|
Rare
Coins
|
|
|
Discontinued
Operations
|
|
|
Corporate
and Other
|
|
|
Consolidated
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
$
|
6,550
|
|
|
$
|
953
|
|
|
$
|
13,694
|
|
|
$
|
4,142
|
|
|
$
|
—
|
|
|
$
|
560
|
|
|
$
|
25,899
|
|
2008
|
|
|
6,514
|
|
|
|
1,358
|
|
|
|
16,434
|
|
|
|
7,306
|
|
|
|
—
|
|
|
|
562
|
|
|
|
32,174
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
161
|
|
|
|
(51
|
)
|
|
|
340
|
|
|
|
166
|
|
|
|
(406
|
)
|
|
|
20
|
|
|
|
230
|
|
2008
|
|
|
208
|
|
|
|
33
|
|
|
|
404
|
|
|
|
(70
|
)
|
|
|
(70
|
)
|
|
|
(28
|
)
|
|
|
477
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Identifiable
assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
20,880
|
|
|
|
1,719
|
|
|
|
3,710
|
|
|
|
2,278
|
|
|
|
812
|
|
|
|
2,264
|
|
|
|
31,663
|
|
2008
|
|
|
21,056
|
|
|
|
2,074
|
|
|
|
1,383
|
|
|
|
4,544
|
|
|
|
1,147
|
|
|
|
8,430
|
|
|
|
38,634
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
—
|
|
|
|
837
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
837
|
|
2008
|
|
|
—
|
|
|
|
837
|
|
|
|
—
|
|
|
|
7,337
|
|
|
|
778
|
|
|
|
—
|
|
|
|
8,952
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
Expenditures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
105
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
105
|
|
2008
|
|
|
272
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
14
|
|
|
|
—
|
|
|
|
286
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
26
|
|
|
|
—
|
|
|
|
12
|
|
|
|
12
|
|
|
|
—
|
|
|
|
9
|
|
|
|
59
|
|
2008
|
|
|
38
|
|
|
|
—
|
|
|
|
14
|
|
|
|
14
|
|
|
|
—
|
|
|
|
30
|
|
|
|
96
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
117
|
|
|
|
—
|
|
|
|
15
|
|
|
|
15
|
|
|
|
—
|
|
|
|
—
|
|
|
|
147
|
|
2008
|
|
|
140
|
|
|
|
—
|
|
|
|
15
|
|
|
|
15
|
|
|
|
—
|
|
|
|
—
|
|
|
|
170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
19
|
|
|
|
(5
|
)
|
|
|
33
|
|
|
|
16
|
|
|
|
—
|
|
|
|
(2
|
)
|
|
|
61
|
|
2008
|
|
|
117
|
|
|
|
18
|
|
|
|
184
|
|
|
|
(11
|
)
|
|
|
—
|
|
|
|
(4
|
)
|
|
|
304
|
|
DGSE
Companies, Inc. and Subsidiaries
(7) Stock-based
Compensation.
Effective
January 1, 2006, we adopted the fair value recognition provisions of SFAS No.
123(R) for all share based payment awards to employees and directors including
employee stock options granted under our employee stock option
plan. In addition, we have applied the provisions of Staff Accounting
Bulletin No. 107 (SAB No. 107), issued by the Securities and Exchange
Commission, in our adoption of SFAS No. 123(R).
Stock-based
compensation expense under SFAS No. 123(R) for the months ended March 31, 2009
and 2008, respectively, was $0 and $15,200, relating to employee and director
stock options and our employee stock purchase plan.
Stock-based
compensation expense recognized each period is based on the value of the portion
of share-based payment awards that is ultimately expected to vest during the
period. SFAS No. 123(R) requires forfeitures to be estimated at the
time of grant and revised, if necessary, in subsequent periods if actual
forfeitures differ from those estimates.
Upon
adoption of SFAS No. 123(R), we elected to use the Black-Scholes-Merton
option-pricing formula to value share-based payments granted to employees
subsequent to January 1, 2006 and elected to attribute the value of stock-based
compensation to expense using the straight-line single option
method.
On
November 10, 2005, the Financial Accounting Standards Board (FASB) issued FASB
Staff Position No. FAS 123(R)-3, “Transition Election Related to Accounting for
Tax Effects of Share-Based Payment Awards”, which detailed an alternative
transition method for calculating the tax effects of stock-based compensation
pursuant to SFAS No. 123(R). This alternative transition method included
simplified methods to establish the beginning balance of the additional paid-in
capital pool (APIC pool) related to the tax effects of employee stock-based
compensation and to determine the subsequent impact on the APIC pool and
Consolidated Statement of Cash Flows of the tax effects of employee stock-based
compensation awards that are outstanding upon adoption of SFAS No.
123(R). As of March 31, 2009, we have not recorded the tax effects of
employee stock-based compensation and have made no adjustments to the APIC
pool.
SFAS No.
123(R) requires the cash flows resulting from the tax benefits resulting from
tax deductions in excess of the compensation cost recognized for those options
(excess tax benefits) to be classified as financing cash flows. As there have
been no stock options exercised, we have not reported these excess tax benefits
as of March 31, 2009.
(8) Discontinued
Operations.
In
November 2008 we decided to discontinue the live auction segment of the
Company’s business activities. This decision was based on the substantial losses
being incurred by this operating segment during 2008. As a result, the operating
results of the auction segment have been reclassified to discontinued operations
for both 2008 and 2009. During the first quarter of 2009 and 2008 the
auction segment incurred pretax losses of $445,593 and $108,618,
respectively.
The
following summarizes the carrying amount of assets and liabilities of the
auction segment as of March 31, 2009:
Assets
|
|
|
|
Accounts
receivable
|
|
$
|
506,283
|
|
Current
assets
|
|
$
|
506,283
|
|
Long-term
receivable
|
|
$
|
305,275
|
|
Total
assets
|
|
$
|
811,558
|
|
Liabilities
|
|
|
|
|
Auctions
payable
|
|
$
|
67,354
|
|
As a
result, operating results from the auction segment have been reclassified to
discontinued operations for all periods presented. As of March 31,
2009, there were no operating assets to be disposed of or liabilities to be paid
in completing the disposition of these operations.
DGSE
Companies, Inc. and Subsidiaries
|
(9)
|
New
Accounting Pronouncements.
|
In April
2008, the FASB issued FASB Staff Position No. 142-3, “Determination of the
Useful Life of Intangible Assets” (“FSP No. 142-3”), which amends the factors
that should be considered when developing renewal or extension assumptions used
to determine the useful life of an intangible asset under Statement of Financial
Accounting Standards No. 142 (“SFAS No. 142”), “Goodwill and Other Intangible
Assets”, in order to improve consistency between SFAS No. 142 and the period of
expected cash flows to measure the fair value of the asset under Statement of
Financial Accounting Standards No. 141 (revised 2007), “Business Combinations”
and other U.S. generally accepted accounting practices. Effective
January 1, 2009, we adopted FSP No. 142-3. The adoption of FSP No. 142-3 has not
had and is not expected to have a material impact our results of operations
and financial position.
In March
2008, the FASB issued Statement No. 161, “Disclosures about Derivative
Instruments and Hedging Activities – an amendment of FASB Statement No. 133”
(“SFAS 161”). SFAS 161 requires entities to proved enhanced
disclosures about (a) how and why an entity uses derivative instruments and that
the objectives for using derivative instruments be disclosed in terms of
underlying risk and accounting designation, (b) how derivative instruments and
related hedged items are accounted for under SFAS 133, “Accounting for
Derivative Instruments and Hedging Activities” and its related interpretations,
including a tabular format disclosure of the fair values of derivative
instruments and their gains and losses and (c) how derivative instruments and
related hedged items affect an entity’s financial position, financial
performance and cash flows. SFAS 161 is effective for financial
statements issued for fiscal years and interim periods beginning after November
15, 2008, with early application encouraged. SFAS 161 encourages, but
does not require, comparative disclosures for earlier periods at initial
adoption. We adopted SFAS 161 on January 1, 2009 and it did not have
an impact on our consolidated financial statements.
In
December 2007, the FASB issued SFAS No. 141 (revised 2007),
“
Business Combinations”
(“SFAS No. 141(R)”), which establishes principles for how the acquirer
recognizes and measures in the financial statements the identifiable assets
acquired, the liabilities assumed, and any non-controlling interest in the
acquiree. This statement also provides guidance for recognizing and measuring
the goodwill acquired in the business combination and determines what
information to disclose to enable users of the financial statements to evaluate
the nature and financial effects of the business combination. Effective
January 1, 2009, we adopted SFAS No. 141(R). No
business combinations were completed in the first quarter of 2009. However, to
the extent that future business combinations are material, our adoption of
SFAS No. 141(R) will significantly impact our accounting and reporting
for future acquisitions, principally as a result of (i) expanded
requirements to value acquired assets, liabilities and contingencies at their
fair values; and (ii) the requirement that acquisition-related transaction
and restructuring costs be expensed as incurred rather than capitalized as a
part of the cost of the acquisition.
We
adopted FIN 48, “Accounting for Uncertainty in Incomes Taxes – An Interpretation
of FASB Statement No. 109” (“FIN48”) on January 1, 2007. FIN 48
clarifies the accounting for uncertainty in tax positions by prescribing the
recognition threshold a tax position is required to meet before being recognized
in the financial statements. It also provides guidance on
derecognition, classification, interest and penalties, accounting in interim
periods, disclosure, and transition. We had no unrecognized tax
benefits and no accrued interest or penalties recognized as of the date of our
adoption of FIN 48. During the three and six months ended June 30,
2009, there were no changes in our unrecognized tax benefits, and we had no
accrued interest or penalties as of June 30, 2009.
In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities – including an amendment of FASB
Statement No. 115” (SFAS No. 159). SFAS No. 159 permits entities to choose to
measure many financial assets and financial liabilities at fair value.
Unrealized gains and losses on items for which the fair value option has been
elected will be reported in earnings. SFAS No. 159 is effective for fiscal years
beginning after November 15, 2007. Effective January 1, 2008, we
adopted the provisions of SFAS 159 except as it applies to those nonfinancial
assets and nonfinancial liabilities. Due to the fact that management
has not elected to use the fair value option for eligible items, the adoption
has not resulted in any financial impact on our results of operations and
financial position.
In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measures” (“SFAS No.
157”). SFAS No. 157 defines fair value, establishes a framework for measuring
fair value and enhances disclosures about fair value
measurements. SFAS No. 157 is effective for fiscal years beginning
after November 15, 2007 and interim periods within those fiscal
years. On February 12, 2008, the FASB issued FASB Staff Position FAS
157-2, which delayed the effective date of SFAS 157 for nonfinancial assets and
nonfinancial liabilities, except for those that are recognized or disclosed at
fair value in the financial statements on a recurring basis (at least annually),
to fiscal years beginning after November 15, 2008 and interim periods within
those fiscal years. We adopted the provisions of SFAS 157 partially
on January 1, 2008 and on January 1, 2009 relating to nonfinancial assets and
nonfinancial liabilities and it did not have a significant impact on our results
of operations or financial position.
DGSE
Companies, Inc. and Subsidiaries
Item
2. Management’s Discussion and Analysis of Financial Condition and
Results of Operations.
Forward-Looking
Statements
The
statements, other than statements of historical facts, included in this report
are forward-looking statements. 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 believe that the
expectations reflected in such forward-looking statements are
accurate. However, we cannot assure you that these expectations will
occur. Our actual future performance could differ materially from such
statements. Factors that could cause or contribute to these
differences include, but are not limited to:
·
uncertainties
regarding price fluctuations in the price of gold and other precious
metals;
·
our
ability to manage inventory fluctuations and sales;
·
changes
in governmental rules and regulations applicable to the specialty financial
services industry;
·
the
results of any unfavorable litigation;
·
interest
rates;
·
economic
pressures affecting the disposable income available to our
customers;
·
our
ability to maintain an effective system of internal controls;
·
the
other risks detailed from time to time in our SEC reports.
Additional
important factors that could cause our actual results to differ materially from
our expectations are discussed under “Risk Factors” in our Annual Report on Form
10-K for our fiscal year ended December 31, 2008. You should not
unduly rely on these forward-looking statements, which speak only as of the date
of this report. Except as required by law, we are not obligated to publicly
release any revisions to these forward-looking statements to reflect events or
circumstances occurring after the date of this report or to reflect the
occurrence of unanticipated events.
Our
Business
We buy
and sell jewelry, bullion products and rare coins. Our customers include
individual consumer, dealers and institutions throughout the United States. In
addition, we make collateralized loans to individuals in the State of Texas. Our
products and services are marketed through our facilities in Dallas and Euless,
Texas; Mt. Pleasant, South Carolina; Woodland Hills, California and through our
internet web sites DGSE.com; CGDEinc.com; SGBH.com; SuperiorPreciousMetals.com;
SuperiorEstateBuyers.com; USBullionExchange.com;
Americangoldandsilverexchange.com; and FairchildWatches.com.
We
operate eight primary internet sites and over 900 related landing sites on the
World Wide Web. Through the various sites we operate a virtual store, real-time
auction of rare coin and jewelry products, free quotations of current prices on
all commonly traded precious metal and related products, trading in precious
metals, a mechanism for selling unwanted jewelry, rare coins and precious metals
and wholesale prices and information exclusively for dealers on pre-owned fine
watches. Over 7,500 items are available for sale on our internet sites including
$2,000,000 in diamonds.
Our
wholly-owned subsidiary, National Jewelry Exchange, Inc, (dba National Pawn),
operates two pawn shops in Dallas, Texas. We have focused the subsidiary’s
operations on sales and pawn loans of jewelry products.
In June
2008, we moved Superior Galleries’ operations from Beverly Hills to Woodland
Hills, California. Superior’s principal line of business is the sale of rare
coins on a retail and wholesale basis. Superior’s retail and wholesale
operations are conducted in virtually every state in the United States. Superior
also conducted live and internet auctions for customers seeking to sell their
own coins prior to management’s decision to discontinue the live auction
operations. Superior markets its services nationwide through broadcast and print
media and independent sales agents, as well as on the internet through third
party websites, and through its own website at SGBH.com.
DGSE
Companies, Inc. and Subsidiaries
Americangoldandsilverexchange.com,
the over 900 proprietary Internet sites related to the home page of
Americangoldandsilverexchange.com along with our existing locations in Texas,
California and South Carolina, provide customers from all over the United States
with a seamless and secure way to value and sell gold, silver, rare coins,
jewelry, diamonds and watches.
Superior
Estate Buyers brings our unique expertise in the purchase of gold, silver,
diamonds, rare coins and other collectibles to local markets with a team of
traveling professionals for short-term buying events. During 2008 Superior
Estate Buyers held approximately 24 such buying events. It is our
expectation that, over time, this activity will be expanded significantly with
the objective of having teams conducting events on a continuous
basis.
Superior
Precious Metals is the retail precious metals arm of DGSE. Professional account
managers provide a convenient way for individuals and companies to buy and sell
precious metals and rare coins. This activity is supported by the internally
developed account management and trading platform created as part of DGSE’s
USBullionExchange.com precious metals system.
Critical Accounting Policies and
Estimates
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.
Jewelry and other inventories are valued at the lower
of cost or market. Bullion is valued at the lower-of-cost-or-market
(average cost). See also “Critical Accounting
Estimates”.
Impairment of
Long-Lived and Amortized Intangible Assets.
The Company performs
impairment evaluations of its long-lived assets, including property, plant and
equipment and intangible assets with finite lives, including the customer base
acquired in the Superior acquisition, 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, 2008.
Impairment of
Goodwill and Indefinite-Lived Intangible Assets
.
Goodwill and
indefinite-lived intangible assets are tested for impairment annually, or more
frequently if events or changes in circumstances indicate that the assets might
be impaired. The Company performs its annual review at the beginning of
the fourth quarter of each fiscal year.
The
Company evaluates the recoverability of goodwill by estimating the future
discounted cash flows of the businesses to which the goodwill relates.
Estimated cash flows and related goodwill are grouped at the reporting unit
level. A reporting unit is an operating segment or, under certain
circumstances, a component of an operating segment that constitutes a
business. When estimated future discounted cash flows are less than the
carrying value of the net assets and related goodwill, an impairment test is
performed to measure and recognize the amount of the impairment loss, if
any. Impairment losses, limited to the carrying value of goodwill,
represent the excess of the carrying amount of a reporting unit’s goodwill over
the implied fair value of that goodwill. In determining the estimated
future cash flows, the Company considers current and projected future levels of
income as well as business trends, prospects and market and economic
conditions.
The
Company cannot predict the occurrence of certain events that might adversely
affect the carrying value of goodwill and indefinite-lived intangible assets.
Such events may include, but are not limited to, the impact of the economic
environment, a material negative change in relationships with significant
customers, or strategic decisions made in response to economic and competitive
conditions. See “Critical Accounting Estimates.”
Revenue
Recognition.
Revenue is generated from wholesale
and retail sales of rare coins, precious metals, bullion and second-hand
jewelry. The recognition of revenue varies for wholesale and retail transactions
and is, in large part, dependent on the type of payment arrangements made
between the parties. The Company recognizes sales on an F.O.B. shipping point
basis.
The
Company sells rare coins to other wholesalers/dealers within its industry on
credit, generally for terms of 14 to 60 days, but in no event greater than one
year. The Company grants credit to new dealers based on extensive
credit evaluations and for existing dealers based on established business
relationships and payment histories. The Company generally does not obtain
collateral with which to secure its accounts receivable when the sale is made to
a dealer. The Company maintains reserves for potential credit losses
based on an evaluation of specific receivables and its historical experience
related to credit losses. See “Critical Accounting
Estimates”.
DGSE
Companies, Inc. and Subsidiaries
Revenues
for monetary transactions (i.e., cash and receivables) with dealers are
recognized when the merchandise is shipped to the related dealer.
The
Company also sells rare coins to retail customers on credit, generally for terms
of 30 to 60 days, but in no event greater than one year. The Company
grants credit to new retail customers based on extensive credit evaluations and
for existing retail customers based on established business relationships and
payment histories. When a retail customer is granted credit, the Company
generally collects a payment of 25% of the sales price, establishes a payment
schedule for the remaining balance and holds the merchandise as collateral as
security against the customer’s receivable until all amounts due under the
credit arrangement are paid in full. If the customer defaults in the
payment of any amount when due, the Company may declare the customer’s
obligation in default, liquidate the collateral in a commercially reasonable
manner using such proceeds to extinguish the remaining balance and disburse any
amount in excess of the remaining balance to the customer.
Under
this retail arrangement, revenues are recognized when the customer agrees to the
terms of the credit and makes the initial payment. We have a
limited-in-duration money back guaranty policy (as discussed
below).
In
limited circumstances, the Company exchanges merchandise for similar merchandise
and/or monetary consideration with both dealers and retail customers, for which
the Company recognizes revenue in accordance with SFAS 153, “
Exchanges of Nonmonetary Assets – An
Amendment of APB Opinion No. 29
.” When the Company exchanges merchandise
for similar merchandise and there is no monetary component to the exchange, the
Company does 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 the Company exchanges
merchandise for similar merchandise and there is a monetary component to the
exchange, the Company recognizes revenue to the extent of monetary assets
received and determine 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 has a return policy (money-back guarantee). The policy covers
retail transactions involving graded rare coins only. Customers may return
graded rare coins purchased within 7 days of the receipt of the rare coins for a
full refund as long as the rare coins are returned in exactly the same condition
as they were delivered. In the case of rare coin sales on account, customers may
cancel the sale within 7 days of making a commitment to purchase the rare coins.
The receipt of a deposit and a signed purchase order evidences the commitment.
Any customer may return a coin if they can demonstrate that the coin is not
authentic, or there was an error in the description of a graded coin.
Revenues
from the sale of consigned goods are recognized as commission income on such
sale if the Company is acting as an agent for the consignor. If in the process
of selling consigned goods, the Company makes an irrevocable payment to a
consignor for the full amount due on the consignment and the corresponding
receivable from the buyer(s) has not been collected by the Company at that
payment date, the Company records that payment as a purchase and the sale of the
consigned good(s) to the buyer as revenue as the Company has assumed all
collection risk.
Pawn
loans (“loans”) are made with the collateral of tangible personal property for
one month with an automatic 60-day extension period. Pawn service
charges are recorded at the time of redemption at the greater of $15 or the
actual interest accrued to date. If the loan is not repaid, the
principal amount loaned plus accrued interest (or the fair value of the
collateral, if lower) becomes the carrying value of the forfeited collateral
(“inventories”) which is recovered through sales to customers.
Income
Taxes.
Income taxes are estimated for each jurisdiction
in which we operate. This involves assessing the current tax exposure together
with temporary differences resulting from differing treatment of items for tax
and financial statement accounting purposes. Any resulting deferred tax assets
are evaluated for recoverability based on estimated future taxable income. To
the extent that recovery is deemed not likely, a valuation allowance is
recorded. See “Critical Accounting Estimates”.
Taxes
Collected From Customers
In June
of 2006, the FASB issued Emerging Issues Task Force 06-03, "How Taxes Collected
from Customers and Remitted to Governmental Authorities Should Be Presented in
the Income Statement" ("EITF 06-03"). The consensus reached in EITF 06-03 allows
companies to adopt a policy of presenting taxes in the income statement on
either a gross basis (included in revenues and costs) or net basis (excluded
from revenues). Taxes within the scope of EITF 06-03 would include taxes that
are imposed on a revenue transaction between a seller and a customer, for
example, sales taxes, use taxes, value-added taxes and some types of excise
taxes. The Company has consistently recorded all taxes within the scope of EITF
06-03 on a net basis.
DGSE
Companies, Inc. and Subsidiaries
Inventor
ies.
The
Company acquires a majority of its retail jewelry inventory from individuals
that is pre-owned. The Company acquires the jewelry based on its own
internal estimate of the fair market value of the items offered for sale
considering factors such as the current spot market prices of precious metals
and current demand for the items offered for sale. Because the
overall market value for precious metals fluctuates, these fluctuations could
have either a positive or negative impact to the profitability of the
Company. The Company monitors these fluctuations to evaluate any
impairment to its retail jewelry inventory.
Allowance
for Doubtful Accounts
.
The allowance for doubtful accounts requires management to estimate a
customer’s ability to satisfy its obligations. The estimate of the
allowance for doubtful accounts is particularly critical in the Company’s
wholesale coin segment where a significant amount of the Company’s trade
receivables are recorded. The Company evaluates the collectability of
receivables based on a combination of factors. In circumstances where the
Company is aware of a specific customer’s inability to meet its financial
obligations, a specific reserve is recorded against amounts due to reduce the
net recognized receivable to the amount reasonably expected to be
collected. Additional reserves are established based upon the Company’s
perception of the quality of the current receivables, including the length of
time the receivables are past due, past experience of collectability and
underlying economic conditions. If the financial condition of the
Company’s customers were to deteriorate resulting in an impairment of their
ability to make payments, additional reserves would be required.
Impairment of
Goodwill and Indefinite-Lived Intangible Assets.
In
evaluating the recoverability of goodwill, it is necessary to estimate the fair
value of the reporting units. The estimate of fair value of intangible
assets is generally determined on the basis of discounted future cash
flows. The estimate of fair value of the reporting units is generally
determined on the basis of discounted future cash flows supplemented by the
market approach. In estimating the fair value, management must make
assumptions and projections regarding such items as future cash flows, future
revenues, future earnings and other factors. The assumptions used in the
estimate of fair value are generally consistent with the past performance of
each reporting unit and are also consistent with the projections and assumptions
that are used in current operating plans. Such assumptions are subject to
change as a result of changing economic and competitive conditions. The
rate used to discount estimated cash flows is a rate corresponding to the
Company’s cost of capital, adjusted for risk where appropriate, and is dependent
upon interest rates at a point in time. There are inherent uncertainties
related to these factors and management’s judgment in applying them to the
analysis of goodwill impairment. It is possible that assumptions
underlying the impairment analysis will change in such a manner to cause further
impairment of goodwill, which could have a material impact on the Company’s
results of operations.
During
the 4
th
quarter
of 2008, given the sustained decline in the price of the Company’s Common Stock
during 2008 when its share price approximated book value, continued operating
losses within the auction segment, as well as further deterioration in credit
markets and the macro-economic environment, the Company determined that the
appropriate triggers had been reached to perform additional impairment testing
on goodwill and its indefinite-lived intangible assets.
To derive
the fair value of its reporting units, the Company performed extensive valuation
analyses, utilizing both income and market approaches. Under the income
approach, the Company determined fair value based on estimated future cash flows
discounted by an estimated weighted-average cost of capital, which reflects the
overall level of inherent risk of a reporting unit and the rate of return an
outside investor would expect to earn. Estimated future cash flows were
based on the Company’s internal projection models, industry projections and
other assumptions deemed reasonable by management. For the impairment
analysis, the Company used a weighted-average cost of capital of 20% and a
terminal growth rate of 3%. Under the market approach, the Company
evaluated the fair value of its reporting units based on the overall actual
market capitalization trend of the Company as compared to the net book value of
the Company. Changes in estimates or the application of alternative
assumptions could produce significantly different results.
As a
result of this analysis, $8,185,443 of goodwill was written off during the
4
th
quarter of fiscal 2008 relating to the goodwill resulting from the Superior
Galleries acquisition. The evaluation of other long-lived intangible
assets relating to the Superior Galleries acquisition, including tradenames,
were not written off due to new business generated from the Superior Galleries,
Inc.’s acquired tradenames through the establishment of two new entities,
Superior Estate Buyers and Superior Precious Metals, which attracted
approximately $9.8 million and $1.8 million, respectively, in revenues in their
first full year of operations in 2008. These charges were driven by
current projections and valuation assumptions that reflected the Company’s
belief that the Superior Galleries, Inc. wholesale auction and coin segments
would not sustain adequate growth and profitability to generate cash flow,
especially in the current downtown in the economy.
The
analysis of the wholesale watch sales division resulting from the acquisition of
Fairchild with a carrying value of goodwill of $837,117 resulted in no
impairment as its estimated future discounted cash flows significantly exceeded
the net assets and related goodwill.
DGSE
Companies, Inc. and Subsidiaries
Income
Taxes
.
The Company records deferred income tax assets and liabilities for
differences between the book basis and tax basis of the related net assets. The
Company records a valuation allowance, when appropriate, to adjust deferred tax
asset balances to the amount management expects to realize. Management
considers, as applicable, the amount of taxable income available in carryback
years, future taxable income and potential tax planning strategies in assessing
the need for a valuation allowance. The Company has recorded the net present
value of the future expected benefits of the net operating loss (NOL)
carryforward related to its subsidiary Superior Galleries, Inc. due to IRS loss
limitation rules. The Company will require future taxable income to
fully realize the net deferred tax asset resulting from the NOL.
As of
January 1, 2007, the Company adopted FASB Interpretation No. 48,
Accounting for Uncertainty in Income
Taxes, an Interpretation of FASB Statement No. 109, Accounting for Income
Taxes
(“FIN 48”). The adoption did not have a material impact on the
Company’s consolidated financial statements or effective tax rate and did not
result in any unrecognized tax benefits.
Interest
costs and penalties related to income taxes are classified as interest expense
and general and administrative costs, respectively, in the Company’s
consolidated financial statements. For the years ended December 31, 2008
and 2007, the Company did not recognize any interest or penalty expense related
to income taxes. It is determined not to be reasonably likely for the amounts of
unrecognized tax benefits to significantly increase or decrease within the next
12 months. The Company is currently subject to a three year statute of
limitations by major tax jurisdictions. The Company and its subsidiaries file
income tax returns in the U.S. federal jurisdiction.
DGSE
Companies, Inc. and Subsidiaries
Results
of Operations
Three
Months Ended March 31, 2009 compared to Three Months Ended March 31,
2008
Sales
decreased by $6,275,000 or 19.5%, during the three months ended March 31, 2009
as compared to 2008. This decrease was primarily the result of a
$3,164,000, or 43.3%, decrease in rare coin sales, a $2,740,000, or 16.7%,
decrease in the sale of precious metal products, and $405,000, or 29.8%,
decrease in our wholesale jewelry sales during the first quarter of 2009 as
compared to 2008. The decreases in precious metals, rare coin and
jewelry sales were due to a less volatile market ($5,000,000) and lower gold
prices ($500,000). The decrease in wholesale jewelry sales was due to the
sluggish retail environment. Consumer loan service fees increased
$35,000, or 27.9%, in the first quarter of 2009 as compared to the first quarter
of 2008. This increase is primarily attributable to the second pawn
location we opened in November 2007 as well as increased loan activity in our
initial location. Cost of goods as a percentage of sales decreased
from 88.7% in 2008 to 87.3% in 2009. This decrease was due to the
decrease in rare coin and precious metals revenue as a percentage of total
sales.
Selling,
general and administrative expenses decreased by $101,000, or 3.8%, during the
three months ended March 31, 2009 as compared to 2008. This decrease was
primarily due to the discontinued auction operations of Superior Galleries that
occurred during the fourth quarter of 2008. Depreciation and
amortization decreased by $36,682, or 38.2%, during the first quarter of 2009
due to certain assets reaching full depreciation during 2008. The decrease in
interest expense was due to a lower prime rate.
Income
tax expense is directly affected by the levels of pretax income and
non-deductible permanent differences
Income
taxes are provided at the rate of 34.00 % and 35.61% for 2009 and 2008,
respectively.
Historically,
changes in the market prices of precious metals have had a significant impact on
both revenues and cost of sales in the rare coin and precious metals segments in
which we operate. It is expected that due to the commodity nature of these
products, future price changes for precious metals will continue to be
indicative of our performance in these business segments. Changes in sales and
cost of sales in the retail and wholesale jewelry segments are primarily
influenced by the national economic environment. It is expected that this trend
will continue in the future due to the nature of these product.
Liquidity
and Capital Resources
During
the three months ended March 31, 2009 and 2008 cash flows from operating
activities totaled $909,370 and $336,597, respectively. Cash flows from
operating activities during 2009 were primarily the result of a increase in
inventory ($644,229), a decrease in accounts payable and accrued expenses
($548,977), a increase in customer deposits $786,647 and a decrease in trade
receivables $924,861. The increase in inventory and customer deposits was due to
a late first quarter increase in demand for precious metal products. The
decrease in trade receivables was a result of a decrease in the sales of
wholesale jewelry products. During 2008 the $336,597 cash flows from operating
activities were primarily used to fund the negative cash flows from investing
activities.
During
the three months ended March 31, 2009 and 2008 cash flows from investing
activities totaled ($114,888) and ($273,674), respectively. During
2009 the primary use of cash from investing activities was the result of cash
used to purchase property and equipment ($104,749) and the increase in pawn
loans made net of pawn loans paid ($158,450). During 2008 the Company invested
$285,888 in property and equipment.
During
the three months ended March 31,, 2009 and 2008 cash flows from financing
activities totaled ($119,598) and $112,804, respectively. The use of cash during
2009 was the result of repayment of loans to Texas Capital
Bank. These sources of cash during 2008 were the result of borrowings
against the Stanford International Bank line of credit ($750,000). These funds
were used to repay notes payable.
We expect
capital expenditures to total approximately $100,000 during the next twelve
months. It is anticipated that these expenditures will be funded from
working capital. As of March 31, 2009 there were no commitments
outstanding for capital expenditures.
In the
event of significant growth in retail and or wholesale jewelry sales, the demand
for additional working capital will expand due to a related need to stock
additional jewelry inventory and increases in wholesale accounts
receivable. Historically, vendors have offered us extended payment
terms to finance the need for jewelry inventory growth and our management
believes that we will continue to do so in the future. Any
significant increase in wholesale accounts receivable will be financed under a
new bank credit facility or from short-term loans from individuals.
DGSE
Companies, Inc. and Subsidiaries
Our
ability to finance our operations and working capital needs are dependent upon
management’s ability to negotiate extended terms or refinance its
debt. 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.
From time
to time, we have adjusted our inventory levels to meet seasonal demand or in
order to meet working capital requirements. Management is of the opinion that if
additional working capital is required, additional loans can be obtained from
individuals or from commercial banks. If necessary, inventory levels
may be adjusted in order to meet unforeseen working capital
requirements.
Upon the
consummation of our acquisition of Superior, and after the exchange by Stanford
of $8.4 million of Superior debt for shares of Superior common stock, Superior
amended and restated its credit facility with Stanford. The amended and restated
commercial loan and security agreement, which we refer to as the loan agreement,
decreased the available credit line from $19.89 million to $11.5 million,
reflecting the $8.4 million debt exchange. Interest on the outstanding principal
balance will continue to accrue at the prime rate, as reported in the Wall
Street Journal or, during an event of default, at a rate 5% greater than the
prime rate as so reported.
Loan
proceeds can only be used for customer loans inventory purchases and receivables
consistent with specified loan policies and procedures and for permitted
inter-company transactions. Permitted inter-company transactions are loans or
dividends paid to us or our other subsidiaries. We guaranteed the repayment of
these permitted inter-company transactions pursuant to a secured subordinated
guaranty in favor of Stanford. In connection with the secured
guarantee, Stanford and Texas Capital Bank, N.A., our primary lender, entered
into an intercreditor agreement with us, and we entered into a subordination
agreement with Superior, both of which subordinate Stanford's security interests
and repayment rights to those of Texas Capital Bank. As of December
31, 2008, approximately $9.2 million was outstanding under this credit
facility and there were no intercompany transactions outstanding.
This
credit facility matures on May 1, 2011, provided that in case any of several
customary events of default occurs, Stanford may declare the entire principal
amount of both loans due immediately and take possession and dispose of the
collateral described below. An event of default includes, among others, the
following events: failure to make a payment when due under the loan agreement;
breach of a covenant in the loan agreement or any related agreement; a
representation or warranty made in the loan agreement or related agreements is
materially incorrect; a default in repayment of borrowed money to any person; a
material breach or default under any material contract; certain bankruptcy or
insolvency events; and a default under a third-party loan. Superior
is obligated to repay the first revolving loan from the proceeds of the
inventory or other collateral purchased with the proceeds of the
loan.
The loans
are secured by a first priority security interest in substantially all of
Superior’s assets, including inventory, accounts receivable, promissory notes,
books and records and insurance policies, and the proceeds of the
foregoing. In addition, pursuant to the limited secured guaranty and
intercreditor arrangements described above, Stanford would have a second-order
security interest in all of our accounts and inventory to the extent of
intercompany transactions.
The loan
agreement includes a number of customary covenants applicable to Superior,
including, among others: punctual payments of principal and interest under the
credit facility; prompt payment of taxes, leases and other indebtedness;
maintenance of corporate existence, qualifications, licenses, intellectual
property rights, property and assets; maintenance of satisfactory insurance;
preparation and delivery of financial statements for us and separately for
Superior in accordance with generally accepted accounting principles, tax
returns and other financial information; inspection of offices and collateral;
notice of certain events and changes; use of proceeds; notice of governmental
orders which may have a material adverse effect, SEC filings and stockholder
communications; maintenance of property and collateral; and payment of Stanford
expenses.
In
addition, Superior has agreed to a number of negative covenants in the loan
agreement, including, among others, covenants not to: create or suffer a lien or
other encumbrance on any collateral, subject to customary exceptions; incur,
guarantee or otherwise become liable for any indebtedness, subject to customary
exceptions; acquire indebtedness of another person, subject to customary
exceptions and permitted inter-company transactions; issue or acquire any shares
of its capital stock; pay dividends other than permitted inter-company
transactions or specified quarterly dividends, or directors’ fees; sell or
abandon any collateral except in the ordinary course of business or consolidate
or merge with another entity; enter into affiliate transactions other than in
the ordinary course of business on fair terms or permitted inter-company
transactions; create or participate in any partnership or joint venture; engage
in a new line of business; pay principal or interest on subordinate debt except
as authorized by the credit facility; or make capital expenditures in excess of
$100,000 per fiscal year
DGSE
Companies, Inc. and Subsidiaries
We have been informed that
on February 19, 2009, a US district
court placed SIBL
under
the supervision of a receiver and that the court enjoined SIBL's creditors and
other persons from taking certain actions related to SIBL or its
assets.
In addition,
on the same date, Antiguan Financial Services Regulatory Commission appointed a
Receiver for Stanford International Bank Ltd. This action was subsequently
ratified by the High Court of Justice in Antigua and Barbuda. As a
result of SIBL's current status, we do not believe that Superior will be able
to
borrow additional
funds under either revolving loan, including any amounts Superior is obligated
to repay to SIBL pursuant to the repayment provisions applicable to the first
revolving note.
We
believe that certain terms of
agreements
entered into by us, Superior and/or
SIBL and its affiliates in connection with our acquisition of Superior
have been breached by SIBL or its
affiliates, and
we are
evaluating available remedies, including but not limited to damages from
responsible parties. While Superior does not currently require additional funds
under the SIBL credit facility, should the need arise and Superior is unable to
replace this credit facility the operations and performance of Superior could be
materially adversely affected.
On
October 17, 2007, we closed on the purchase of our new headquarters
location. As a result, we assumed a new loan with a remaining
principal balance of $2,323,484 and an interest rate of 6.70%. The
loan has required monthly payments of $20,192 with the final payment due on
August 1, 2016
In
December 2005, we entered into a revolving credit facility with Texas
Capital Bank, N.A., which currently permits borrowings up to a maximum principal
amount of $4,300,000 and has a maturity date of June 22, 2009. Borrowings
under the revolving credit facility are collateralized by a general security
interest in substantially all of our assets (other than the assets of Superior).
As of March 31, 2009, approximately $4,300,000 was outstanding under the
term loan and revolving credit facility. If we were to default under the
terms and conditions of the revolving credit facility, Texas Capital Bank would
have the right to accelerate any indebtedness outstanding and foreclose on our
assets in order to satisfy our indebtedness. Such a foreclosure could have a
material adverse effect on our business, liquidity, results of operations and
financial position.
The
covenants associated with our credit facility with Texas Capital Bank, N.A.
exclude Superior Galleries are as follows:
As
of March 31, 2009
|
|
Requirement
|
|
|
Actual calculation
|
|
Minimum
tangible net worth
|
|
|
6,500,000
|
|
|
|
12,052,694
|
|
Maximum
total liabilities to tangible net worth
|
|
Not
to exceed 1.50
|
|
|
|
.62
|
|
Minimum
debt service coverage
|
|
Must be greater than 1.35
|
|
|
|
2.30
|
|
|
|
Payments
due by period
|
|
Contractual Cash
Obligations
|
|
Total
|
|
|
2009
|
|
|
|
2010 - 2011
|
|
|
|
2012 – 2013
|
|
|
Thereafter
|
|
Notes
payable
|
|
$
|
57,471
|
|
|
$
|
57,471
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Long-term
debt and capital leases
|
|
|
15,791,139
|
|
|
|
3,994,992
|
|
|
|
9,403,271
|
|
|
|
469,381
|
|
|
|
1,923,495
|
|
Operating
Leases
|
|
|
2,492,978
|
|
|
|
498,736
|
|
|
|
1,237,026
|
|
|
|
757,216
|
|
|
|
—
|
|
Total
|
|
$
|
18,341,588
|
|
|
$
|
4,551,199
|
|
|
$
|
10,640,297
|
|
|
$
|
1,226,597
|
|
|
$
|
1,923,495
|
|
In
addition, we estimate that we will pay approximately $950,000 in interest during
the next twelve months.
Off-Balance
Sheet Arrangements.
We have
no off-balance sheet arrangements that have or are reasonably likely to have a
current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that is material to stockholders.
Item
3. Quantitative and Qualitative Disclosures About Market Risk.
The
following discussion about our market risk disclosures involves forward-looking
statements. Actual results could differ materially from those projected in the
forward-looking statements. We are exposed to market risk related to changes in
interest rates and gold values. We are also exposed to regulatory risk in
relation to its pawn loans. We do not use derivative financial
instruments.
DGSE
Companies, Inc. and Subsidiaries
Our
earnings and financial position may be affected by changes in gold values and
the resulting impact on pawn lending and jewelry sales. The proceeds of scrap
sales and our ability to liquidate excess jewelry inventory at an acceptable
margin are dependent upon gold values. The impact on our financial position and
results of operations of a hypothetical change in gold values cannot be
reasonably estimated.
Item
4. Controls and Procedures.
Evaluation of disclosure controls
and procedures
. An evaluation was performed under the
supervision and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of our disclosure controls and procedures (as defined in
Rule 13a-15(e) under the Securities Exchange Act of 1934) as of the end of the
period covered by this quarterly report. Our disclosure controls and
procedures are designed to ensure that information required to be disclosed by
us in the reports we file or submit under the Securities Exchange Act of 1934,
as amended, is (1) recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission’s rules and forms
and (2) accumulated and communicated to our management, including our Chief
Executive Officer, to allow timely decisions regarding required
disclosure. Based on that evaluation, our management, including our
Chief Executive Officer and our Chief Financial Officer, concluded that our
disclosure controls and procedures were effective.
Changes in internal
controls.
For the quarter ended March 31, 2009, there have
been no changes in our internal control over financial reporting (as defined in
Rule 13a-15(f) under the Securities Exchange Act of 1934) that have materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting.
DGSE
Companies, Inc. and Subsidiaries
PART
II- OTHER INFORMATION
Item
3. Legal Proceedings
We may,
from time to time, be involved in various claims, lawsuits, disputes with third
parties, actions involving allegations of discrimination, or breach of contract
actions incidental to the operation of its business. Except as set
forth above, we are not currently involved in any such litigation which we
believe could have a material adverse effect on our financial condition or
results of operations, liquidity or cash flows.
Item
5. Other Information.
None.
Item
6. Exhibits and Reports
on Form 8-K.
Exhibits:
Exhibit
|
|
|
|
Filed
|
|
Incorporated
|
|
|
|
Date Filed
|
|
Exhibit
|
No.
|
|
Description
|
|
Herein
|
|
by Reference
|
|
Form
|
|
with SEC
|
|
No.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.1
|
|
Amended
and Restated Agreement and Plan of Merger and Reorganization, dated as of
January 6, 2007
|
|
|
|
×
|
|
8-K
|
|
January 9,
2007
|
|
2.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.2
|
|
Limited
Joinder Agreement, dated as of January 6, 2007
|
|
|
|
×
|
|
8-K
|
|
January 9,
2007
|
|
2.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.1
|
|
Articles
of Incorporation dated September 17, 1965
|
|
|
|
×
|
|
8-A12G
|
|
June 23,
1999
|
|
3.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.2
|
|
Certificate
of Amendment to Articles of Incorporation, dated October 14,
1981
|
|
|
|
×
|
|
8-A12G
|
|
June 23,
1999
|
|
3.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.3
|
|
Certificate
of Resolution, dated October 14, 1981
|
|
|
|
×
|
|
8-A12G
|
|
June 23,
1999
|
|
3.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.4
|
|
Certificate
of Amendment to Articles of Incorporation , dated July 15,
1986
|
|
|
|
×
|
|
8-A12G
|
|
June 23,
1999
|
|
3.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.5
|
|
Certificate
of Amendment to Articles of Incorporation, dated August 23,
1998
|
|
|
|
×
|
|
8-A12G
|
|
June 23,
1999
|
|
3.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.6
|
|
Certificate
of Amendment to Articles of Incorporation, dated June 26,
1992
|
|
|
|
×
|
|
8-A12G
|
|
June 23,
1999
|
|
3.6
|
DGSE
Companies, Inc. and Subsidiaries
3.7
|
|
Certificate
of Amendment to Articles of Incorporation, dated June 26,
2001
|
|
|
|
×
|
|
8-K
|
|
July 3,
2001
|
|
1.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.8
|
|
Certificate
of Amendment to Articles of Incorporation, dated May 22,
2007
|
|
|
|
x
|
|
8-K
|
|
May
31, 2007
|
|
3.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.9
|
|
By-laws,
dated March 2, 1992
|
|
|
|
×
|
|
8-A12G
|
|
June 23,
1999
|
|
3.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.1
|
|
Specimen
Common Stock Certificate
|
|
|
|
×
|
|
S-4
|
|
January 6,
2007
|
|
4.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.1
|
|
Renewal,
Extension And Modification Agreement dated January 28, 1994, by and among
DGSE Corporation and Michael E. Hall And Marian E. Hall
|
|
|
|
×
|
|
10-KSB
|
|
March
1995
|
|
10.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.2
|
|
Lease
Agreement dated June 2, 2000 by and between SND Properties and
Charleston Gold and Diamond Exchange, Inc.
|
|
|
|
×
|
|
10-KSB
|
|
March 29,
2001
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.3
|
|
Lease
agreement dated October 5, 2004 by and between Beltline Denton Road
Associates and Dallas Gold & Silver Exchange
|
|
|
|
×
|
|
10-K
|
|
April 15,
2005
|
|
10.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.4
|
|
Lease
agreement dated December 1, 2004 by and between Stone Lewis Properties and
Dallas Gold & Silver Exchange
|
|
|
|
×
|
|
10-K
|
|
April 15,
2005
|
|
10.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.5
|
|
Lease
agreement dated November 18, 2004 by and between Hinkle Income Properties
LLC and American Pay Day Centers, Inc.
|
|
|
|
×
|
|
10-K
|
|
April 15,
2005
|
|
10.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.6
|
|
Lease
Agreement dated January 17, 2005 by and between Belle-Hall Development
Phase III Limited Partnership and DGSE Companies, Inc.
|
|
|
|
×
|
|
S-4
|
|
January 6,
2007
|
|
10.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.7
|
|
Sale
agreement dated executed July 5, 2007 by and between DGSE Companies,
Inc. and Texas Department of Transportation
|
|
|
|
×
|
|
8-K
|
|
July
11, 2007
|
|
10.1
|
DGSE
Companies, Inc. and Subsidiaries
10.8
|
|
Purchase
agreement dated July 5, 2007 by and between DGSE Companies, Inc. and
11311 Reeder Road Holdings, LP
|
|
|
|
×
|
|
8-K
|
|
July
11, 2007
|
|
10.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.9
|
|
Loan
Agreement, dated as of December 22, 2005, between DGSE Companies,
Inc. and Texas Capital Bank, N.A.
|
|
|
|
×
|
|
8-K/A
|
|
August 17,
2006
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.10
|
|
Third
Amendment to Loan Agreement, dated as of May 10, 2007, by and between DGSE
Companies, Inc. and Texas Capital Bank, N.A.
|
|
|
|
×
|
|
8-K
|
|
May
9, 2007
|
|
3.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.11
|
|
Support
Agreement, DGSE stockholders, dated as of January 6,
2007
|
|
|
|
×
|
|
8-K
|
|
January 9,
2007
|
|
99.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.12
|
|
Securities
Exchange Agreement, dated as of January 6, 2007
|
|
|
|
×
|
|
8-K
|
|
January 9,
2007
|
|
99.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.13
|
|
Warrant
to DiGenova, issued January 6, 2007
|
|
|
|
×
|
|
8-K
|
|
January 9,
2007
|
|
99.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.14
|
|
Support
Agreement, Superior stockholders, dated as of January 6,
2007
|
|
|
|
×
|
|
8-K
|
|
January 9,
2007
|
|
99.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.15
|
|
Asset
purchase agreement, dated May 9, 2007, by and between DGSE
Companies, Inc. and Euless Gold & Silver, Inc.
|
|
|
|
×
|
|
8-K
|
|
May
9, 2007
|
|
1.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.16
|
|
Subordinated
Promissory Note dated May 9, 2007
|
|
|
|
×
|
|
8-K
|
|
May
9, 2007
|
|
2.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.17
|
|
Registration
Rights Agreement with Stanford International Bank Ltd., dated as of May
30, 2007
|
|
|
|
×
|
|
8-K
|
|
May
31, 2007
|
|
99.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.18
|
|
Corporate
Governance Agreement with Dr. L.S. Smith and Stanford International Bank
Ltd., dated as of May 30, 2007
|
|
|
|
×
|
|
8-K
|
|
May
31, 2007
|
|
99.2
|
DGSE
Companies, Inc. and Subsidiaries
10.19
|
|
Escrow
Agreement with American Stock Transfer & Trust Company and Stanford
International Bank Ltd., as stockholder agent, dated as of May 30,
2007
|
|
|
|
×
|
|
8-K
|
|
May
31, 2007
|
|
99.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.20
|
|
Form
of Warrants
|
|
|
|
×
|
|
8-K
|
|
May
31, 2007
|
|
99.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.21
|
|
Amended
and Restated Commercial Loan and Security Agreement, by and between
Superior Galleries Inc. and Stanford International Bank Ltd., dated as of
May 30, 2007
|
|
|
|
×
|
|
8-K
|
|
May
31, 2007
|
|
99.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.22
|
|
Employment
Agreement with L.S. Smith, dated as of May 30, 2007
|
|
|
|
×
|
|
8-K
|
|
May
31, 2007
|
|
99.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.23
|
|
Employment
Agreement with William H. Oyster, dated as of May 30, 2007
|
|
|
|
×
|
|
8-K
|
|
May
31, 2007
|
|
99.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10.24
|
|
Employment
Agreement with John Benson, dated as of May 30, 2007
|
|
|
|
×
|
|
8-K
|
|
May
31, 2007
|
|
99.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.1
|
|
Certification
pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934
implementing Section 302 of the Sarbanes-Oxley Act of 2002 by Dr.
L.S. Smith
|
|
×
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31.2
|
|
Certification
pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934
implementing Section 302 of the Sarbanes-Oxley Act of 2002 by John
Benson
|
|
×
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32.1
|
|
Certification
pursuant to 18 U.S.C. Section 1350 as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 by Dr. L.S.
Smith
|
|
×
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32.2
|
|
Certification
pursuant to 18 U.S.C. Section 1350 as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 by John
Benson
|
|
×
|
|
|
|
|
|
|
|
|
Reports
on Form 8-K :
None.
SIGNATURES
In accordance with Section 13 and 15(d)
of the Exchange Act, the Registrant caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
DGSE
Companies, Inc.
By:
|
/s/ L. S. Smith
|
Dated:
May 14, 2009
|
|
L.
S. Smith
|
|
|
Chairman
of the Board,
|
|
|
Chief
Executive Officer and
|
|
|
Secretary
|
|
In
accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
date indicated.
By:
|
/s/ L. S. Smith
|
Dated:
May 14, 2009
|
|
L.
S. Smith
|
|
|
Chairman
of the Board,
|
|
|
Chief
Executive Officer and
|
|
|
Secretary
|
|
|
|
|
By:
|
/s/ W. H. Oyster
|
Dated:
May 14, 2009
|
|
W.
H. Oyster
|
|
|
Director,
President and
|
|
|
Chief
Operating Officer
|
|
|
|
|
By:
|
/s/ John Benson
|
Dated:
May 14, 2009
|
|
John
Benson
|
|
|
Chief
Financial Officer
|
|
|
(Principal
Accounting Officer)
|
|
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