SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
( X ) Quarterly Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 1996
------------------
( ) Transition Report under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from ____________________ to _______________
Commission File Number 1-11048
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Dallas Gold and Silver Exchange, Inc.
- --------------------------------------------------------------------------------
(Name of small business issuer)
Nevada 88-0097334
- -------------------------------- ----------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or
organization)
2817 Forest Lane, Dallas, Texas 75234
- -------------------------------------------- ---------------------------------
(Address of principal executive offices) (Zip Code)
(Issuer's telephone number, including area code) (214) 484-3662
-----------------
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 X No
---- ----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at October 14, 1996
- ---------------------------- -------------------------------
Common Stock, $.01 per value 5,796,349
<PAGE>
PART I. FINANCIAL INFORMATION
- -------------------------------
DALLAS GOLD AND SILVER EXCHANGE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30, December 31,
ASSETS 1996 1995
------------- ------------
Current assets:
Cash $ 358,326 $ 417,076
Marketable securities - trading 770,962 481,950
Trade receivables 98,182 149,656
Loans 36,480 1,152
Other receivables
Inventory 1,161,342 892,203
Prepaid expenses 44,119 18,876
--------- ---------
Total current assets 2,469,411 1,990,913
Investments in marketable securities 1,011,750 748,744
Property and equipment 1,151,535 1,151,094
Other assets 33,388 35,388
--------- ---------
Total assets $4,666,084 $3,926,139
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $ 477,350 $ 266,210
Accounts payable 160,040 254,233
Accrued expenses 117,656 212,291
Customer deposits 75,106 38,814
Current maturities of long-term
debt and lease obligations 44,907 40,780
--------- ---------
Total current liabilities 875,059 812,328
Long-term debt and capital lease
obligations, less current
maturities 965,200 1,339,341
--------- ---------
Total liabilities 1,840,259 2,151,669
--------- ---------
Shareholders' equity:
Common stock, $.01 par value;
authorized 10,000,000 shares;0
issued and outstanding 5,796,349
shares at September 30, 1996 and
5,820,849 at December 31, 1995 57,964 58,209
Additional paid-in capital 5,171,517 5,192,400
Accumulated deficit (3,029,415) (3,419,299)
--------- ---------
2,200,066 1,831,310
Unrealized gain (loss) on securities 625,759 ( 56,840)
Total shareholders' equity 2,825,825 1,774,470
Total liabilities and shareholders'
equity $4,666,084 $3,926,139
========= =========
2
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DALLAS GOLD AND SILVER EXCHANGE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
September 30,
1996 1995
----------------
Revenues:
Sales $2,436,379 $2,428,080
Pawn service fees 11,550 13,475
Travel agency income 245,871 348,268
Consulting service income 25,000 19,812
Interest income 89 15
Realized gain on marketable securities 226,820 154
Unrealized gain on trading securities 75,916 84,331
Other income 24,026 -0-
--------- -------
3,045,651 2,894,135
Costs and expenses:
Cost of sales (exclusive of
items shown separately below) 2,050,548 1,947,358
Travel agency costs 235,599 340,661
Consulting service costs 44,590 76,274
General and administrative
expenses 357,565 459,892
Depreciation and amortization 18,954 18,551
Interest expense 40,425 41,124
--------- ---------
Total costs and expenses 2,747,681 2,883,860
--------- ---------
Net income $ 297,970 $ 10,275
========= =========
Income per share of common stock $ .05 $ -0-
========= =========
3
<PAGE>
DALLAS GOLD AND SILVER EXCHANGE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Nine Months Ended
September 30,
1996 1995
----------------
Revenues:
Sales $7,952,280 $7,785,781
Pawn service fees 34,350 42,341
Travel agency income 941,885 1,051,184
Consulting service income 25,000 267,239
Interest income 89 27
Realized gain on marketable securities 459,519 63,670
Unrealized gain on trading securities 57,513 226,706
Other income 73,048 -0-
--------- -------
9,543,684 9,436,948
Costs and expenses:
Cost of sales (exclusive of
items shown separately below) 6,794,977 6,401,734
Travel agency costs 910,754 1,024,197
Consulting service costs 83,418 198,274
General and administrative
expenses 1,183,295 1,343,230
Depreciation and amortization 60,056 58,212
Interest expense 121,300 121,450
--------- ---------
Total costs and expenses 9,153,800 9,147,097
--------- ---------
Net income $ 389,884 $ 289,851
========= =========
Income per share of common stock $ .07 $ .05
========= =========
4
<PAGE>
DALLAS GOLD AND SILVER EXCHANGE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30,
1996 1995
---- ----
Cash used for operating activities $ (455,786) $ (333,790)
Cash flows from investing activities:
(Increase) decrease in loans, net (5,328) 5,916
Purchase of property, plant and
equipment (60,497) (76,470)
Sale of marketable securities 724,319 126,792
Purchase of marketable securities (76,704) (23,800)
Net cash provided by (used
for investing activities 581,790 32,438
----------- --------
Cash flows from financing activities:
Proceeds from loans 71,566
Purchase of common stock (21,753) (86,678)
Increase (decrease) in notes payable 211,140 (45,670)
Increase (decrease) in long-term
debt and capital lease obligations (374,141) (34,403)
----------- ---------
Net cash used for financing
activities (184,754) (95,185)
----------- --------
Decrease in cash and cash equivalents $ (58,750) $ (396,537)
=========== ==========
5
<PAGE>
DALLAS GOLD AND SILVER EXCHANGE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENT
September 30, 1996
(1) Basis of Presentation:
The accompanying unaudited condensed consolidated financial statements
of Dallas Gold and Silver Exchange, Inc. and Subsidiaries include the
financial statements of Dallas Gold and Silver Exchange, Inc. and its
wholly-owned subsidiaries, DGSE Corporation, Dallas Global Travel, Inc.
and DLS Financial Services, Inc.. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included.
The Company's operating results for the periods ended September 30,
1996, are not necessarily indicative of the results that may be
expected for the year ended December 31, 1996. For further information,
refer to the consolidated financial statements and footnotes thereto
included in the Company's annual report on Form 10-KSB for the year
ended December 31, 1995.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Results of Operations
- ---------------------
Quarter ended September 30, 1996 vs 1995:
Pawn service fees decreased by $ 1,925 (14.3%) during the three months ended
September 30, 1996 due to a lower volume of pawn loans outstanding during the
period. Travel agency income decreased by $ 102,397 (29.4%) due to a decrease in
business related travel. Consulting service income increased by $ 5,188 (26.2%)
due a new consulting clients being accepted during the quarter. In addition
during the third quarter of 1996 the Company sold $ 371,676 of marketable
securities realizing a gain of $ 226,820. Unrealized gains on trading securities
in the amount of $ 75,916 in 1996 and $ 84,331 in 1995 was the result of changes
in the market value of the Company's investments in trading securities. Other
income in the amount of $24,026 during 1996 was the result of lease income
received. Travel agency costs decreased by $ 105,062 due to the 29.4% decrease
in income. Consulting service cost decreased by $ 31,684 during the third
quarter of 1996 due a decrease in consulting travel during the period.
General and administration expenses decreased by $ 102,327 primarily due to cost
savings resulting from the closure of the Company's second jewelry store in
November 1995.
Nine months ended September 30, 1996 vs 1995:
Pawn service fees decreased by $ 7,991 (18.9%) during the nine months ended
September 30, 1996 due to a lower volume of pawn loans outstanding during the
period. Travel agency income decreased by $ 109,299 (10.4%) due to a decrease in
business related travel. Consulting service income decreased by $ 242,239. This
decrease was due to a $ 225,000 fee earned during 1995 relating to the
recapitalization of an existing client. During 1996, management has directed
most of its efforts toward existing clients in which the Company has significant
equity investments. As a result, during the nine months of 1996 the Company sold
$ 724,319 of marketable securities realizing a gain of $ 459,519. Unrealized
gains on trading securities in the amount of $ 57,513 in 1996 and $ 226,706 in
1995 was the result of changes in the market value of the Company's investments
in trading securities. Other income in the amount of $ 73,048 during 1996 was
the result of lease income received. Consulting service cost decreased by $
114,856 during the nine months of 1996 due to the decrease in revenues from
consulting activities and less consulting related travel.
General and administration expenses decreased by $ 159,935 primarily due to cost
savings resulting from the closure of the Company's second jewelry store in
November 1995.
7
<PAGE>
Liquidity and Capital Resources
- -------------------------------
Due to the somewhat seasonal nature of the Company's jewelry business, inventory
and trade receivables are at their lowest levels on December 31 of each year.
During the first half of each year jewelry inventory is replenished and trade
receivables begin to increase. During the first nine months of 1996, cash and
cash equivalents decreased by $ 58,750 primarily as a result of increases in
inventory ($ 269,139), a decrease in accounts payable and accrued expenses ($
94,193) and principal payments on notes payable and long-term debt ($ 163,001).
These cash expenditures were partially offset by the sale of marketable
securities in the amount of $ 724,319.
During, 1995 and 1994, the Company borrowed a net $331,221 primarily from
individuals. The proceeds from these loans were used to purchase additional
inventory to hold for sale to retail customers and to met other working capital
requirements. In addition, in December 1995, the Company issued a convertible
promissory note in the amount of $ 150,000. The proceeds from the note will be
used to carry inventory and for other working capital requirements.
Management of the Company expects capital expenditures to total approximately $
75,000 during 1996. It is anticipated that these expenditures will be funded
from the Company's current working capital position.
From time to time, management has adjusted the Company's 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 by
the Company, additional loans can be obtained from individuals or from
commercial banks. If necessary, inventory levels may be adjusted or a portion of
the Company's investments in marketable securities may be liquidated in order to
meet unforseen working capital requirement.
PART II. OTHER INFORMATION
- ----------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits - None
Reports on Form 8-K - None
8
<PAGE>
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.
Dallas Gold and Silver Exchange, Inc.
By: /s/ L. S. Smith Dated: October 21, 1996
-------------------------
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: October 21, 1996
-------------------------
L. S. Smith
Chairman of the Board,
Chief Executive Officer and
Secretary
By: /s/ W. H. Oyster Dated: October 21, 1996
-------------------------
W. H. Oyster
Director, President and
Chief Operating Officer
By: /s/ John Benson Dated: October 21, 1996
-------------------------
John Benson
Chief Financial Officer
(Principal Accounting Officer)
9
<PAGE>
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JUL-01-1996
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<SECURITIES> 771
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<ALLOWANCES> 0
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