<PAGE> 1
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 June 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
-------------------------------------------------------
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 July 15, 1996
- ---------------------------- --------------------------------
Common Stock, $.01 per value 5,796,349
<PAGE> 2
PART I. FINANCIAL INFORMATION
DALLAS GOLD AND SILVER EXCHANGE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 1996 1995
---------- ------------
<S> <C> <C>
Current assets:
Cash $ 266,220 $ 417,076
Marketable securities - trading 627,517 481,950
Trade receivables 80,698 149,656
Loans 32,554 31,152
Other receivables
Inventory 991,886 892,203
Prepaid expenses 39,538 18,876
---------- ----------
Total current assets 2,038,413 1,990,913
Investments in marketable securities 1,350,000 748,744
Property and equipment 1,164,450 1,151,094
Other assets 34,055 35,388
---------- ----------
Total assets $4,586,918 $3,926,139
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $ 473,668 $ 266,210
Accounts payable 149,520 254,233
Accrued expenses 125,221 212,291
Customer deposits 38,886 38,814
Current maturities of long-term
debt and lease obligations 43,163 40,780
---------- ----------
Total current liabilities 830,458 812,328
Long-term debt and capital lease
obligations, less current
maturities 1,034,044 1,339,341
---------- ----------
Total liabilities 1,864,502 2,151,669
---------- ----------
Shareholders' equity:
Common stock, $.01 par value;
authorized 10,000,000 shares;
issued and outstanding 5,796,349
shares at June 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 (3,327,385) (3,419,299)
---------- ----------
1,902,096 1,831,310
Unrealized gain (loss) on securities 820,320 ( 56,840)
---------- ----------
Total shareholders' equity 2,722,416 1,774,470
---------- ----------
Total liabilities and shareholders'
equity $4,586,918 $3,926,139
========== ==========
</TABLE>
2
<PAGE> 3
DALLAS GOLD AND SILVER EXCHANGE, INC. AND
SUBSIDIARIES CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
1996 1995
--------------------------
<S> <C> <C>
Revenues:
Sales $2,858,906 $2,889,120
Pawn service fees 12,680 14,100
Travel agency income 352,076 418,930
Consulting service income -0- 30,325
Interest income -0- 12
Realized gain on marketable securities 231,058 -0-
Unrealized gain on trading securities (18,403) 106,095
Other income 24,048 -0-
---------- ----------
3,460,365 3,458,582
Costs and expenses:
Cost of sales (exclusive of
items shown separately below) 2,462,744 2,430,053
Travel agency costs 342,411 408,088
Consulting service costs 23,333 62,083
General and administrative
expenses 419,761 436,824
Depreciation and amortization 20,751 20,166
Interest expense 40,425 40,426
---------- ----------
Total costs and expenses 3,309,425 3,397,640
---------- ----------
Net income $ 150,940 $ 60,942
========== ==========
Income per share of common stock $ .03 $ .01
========== ==========
</TABLE>
3
<PAGE> 4
DALLAS GOLD AND SILVER EXCHANGE, INC. AND
SUBSIDIARIES CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1996 1995
-------------------------
<S> <C> <C>
Revenues:
Sales $5,515,901 $5,357,701
Pawn service fees 22,800 28,886
Travel agency income 696,014 702,916
Consulting service income -0- 247,427
Interest income -0- 12
Realized gain on marketable securities 232,699 63,516
Unrealized gain on trading securities (18,403) 142,375
Other income 49,022 -0-
---------- ----------
6,498,033 6,542,813
Costs and expenses:
Cost of sales (exclusive of
items shown separately below) 4,744,429 4,454,376
Travel agency costs 675,155 683,536
Consulting service costs 38,828 122,000
General and administrative
expenses 825,730 883,339
Depreciation and amortization 41,102 39,661
Interest expense 80,875 80,326
---------- ----------
Total costs and expenses 6,406,119 6,263,238
---------- ----------
Net income $ 91,914 $ 279,575
---------- ----------
Income per share of common stock $ .02 $ .05
========== ==========
</TABLE>
4
<PAGE> 5
DALLAS GOLD AND SILVER EXCHANGE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1996 1995
------------------------
<S> <C> <C>
Cash used for operating activities $ (323,047) $ (306,529)
Cash flows from investing activities:
(Increase) Decrease in loans, net (1,402) 3,506
Purchase of property, plant and
equipment (54,458) (51,938)
Sale of marketable securities 354,284 126,792
Purchase of marketable securities (9,024) (23,800)
----------- ----------
Net cash provided by (used
for investing activities 289,400 54,560
----------- ----------
Cash flows from financing activities:
Purchase of common stock (21,753) (17,570)
Increase (decrease) in notes payable 207,458 18,075
Increase (decrease) in long-term
debt and capital lease obligations (302,914) (66,873)
----------- ----------
Net cash used for financing
activities (117,209) (66,368)
----------- ----------
Decrease in cash and cash equivalents $ (150,856) $ (318,337)
=========== ==========
</TABLE>
5
<PAGE> 6
DALLAS GOLD AND SILVER EXCHANGE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENT
June 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 June 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> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Results of Operations
QUARTER ENDED JUNE 30, 1996 VS 1995:
Pawn service fees decreased by $ 1,420 (10.1%) during the three months ended
June 30, 1996 due to a lower volume of pawn loans outstanding during the
period. Travel agency income decreased by $ 66,854 (16.0%) due to a decrease
in business related travel. Consulting service income decreased by $ 30,325 due
to no new consulting clients being accepted during the quarter. Management
directed its efforts toward existing clients in which the Company has
significant equity investments. As a result, during the first quarter of 1996
the Company sold $ 352,643 of marketable securities realizing a gain of $
231,058. Unrealized losses on trading securities in the amount of $ (18,403) in
1996 and gains of $ 106,095 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 $24,048 during 1996 was the result of lease income received.
Travel agency costs decreased by $ 65,677 due to the 16.0% decrease in income.
Consulting service cost decreased by $ 38,750 during the first quarter of
1996 due to the decrease in revenues from consulting activities.
General and administration expenses decreased by $ 17,063 primarily due to cost
savings resulting from the closure of the Company's second jewelry store in
November 1995.
SIX MONTHS ENDED JUNE 30, 1996 VS 1995:
Pawn service fees decreased by $ 6,086 (21.1%) during the six months ended
June 30, 1996 due to a lower volume of pawn loans outstanding during the
period. Consulting service income decreased by $ 247,427 due to no new
consulting clients being accepted during the period. Management directed its
efforts toward existing clients in which the Company has significant equity
investments. As a result, during the first half of 1996 the Company sold $
354,284 of marketable securities realizing a gain of $ 232,699. Unrealized
losses on trading securities in the amount of $ (18,403) in 1996 and gains of $
142,375 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 $ 49,022 during 1996 was the result of lease
income received. Consulting service cost decreased by $ 83,172 during the
first half of 1996 due to the decrease in revenues from consulting activities.
General and administration expenses decreased by $ 57,609 primarily due to cost
savings resulting from the closure of the Company's second jewelry store in
November 1995.
7
<PAGE> 8
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 half of 1996, cash
and cash equivalents decreased by $ 117,209 primarily as a result of increases
in inventory ($ 99,683), a decrease in accounts payable and accrued expenses ($
191,783) and principal payments on long-term debt ($ 95,456).
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> 9
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: July 15, 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: July 15, 1996
---------------------------
L. S. Smith
Chairman of the Board,
Chief Executive Officer and
Secretary
By: /s/ W. H. Oyster Dated: July 15, 1996
---------------------------
W. H. Oyster
Director, President and
Chief Operating Officer
By: /s/ John Benson Dated: July 15, 1996
---------------------------
John Benson
Chief Financial Officer
(Principal Accounting Officer)
9
<PAGE> 10
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
-------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 266
<SECURITIES> 628
<RECEIVABLES> 814
<ALLOWANCES> 0
<INVENTORY> 992
<CURRENT-ASSETS> 2,038
<PP&E> 1,694
<DEPRECIATION> 530
<TOTAL-ASSETS> 4,587
<CURRENT-LIABILITIES> 830
<BONDS> 1,034
<COMMON> 58
0
0
<OTHER-SE> 2,664
<TOTAL-LIABILITY-AND-EQUITY> 4,587
<SALES> 2,859
<TOTAL-REVENUES> 3,460
<CGS> 2,463
<TOTAL-COSTS> 3,269
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 40
<INCOME-PRETAX> 151
<INCOME-TAX> 0
<INCOME-CONTINUING> 151
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 151
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
