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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 March 31, 1996
-------------------------------------------------
( ) Transition Report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from to
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Commission File Number 1-11048
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Dallas Gold and Silver Exchange, Inc.
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(Name of small business issuer)
<TABLE>
<S> <C>
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)
</TABLE>
(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.
<TABLE>
<S> <C>
Class Outstanding at April 26, 1996
- ---------------------------- ---------------------------------
Common Stock, $.01 per value 5,820,849
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PART I. FINANCIAL INFORMATION
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DALLAS GOLD AND SILVER EXCHANGE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1996 1995
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<S> <C> <C>
Current assets:
Cash $ 79,257 $ 417,076
Marketable securities - trading 482,861 481,950
Trade receivables 110,961 149,656
Loans 33,152 31,152
Other receivables
Inventory 1,009,339 892,203
Prepaid expenses 54,447 18,876
--------- ----------
Total current assets 1,770,017 1,990,913
Investments in marketable securities 749,372 748,744
Property and equipment 1,160,618 1,151,094
Other assets 34,721 35,388
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Total assets $3,714,728 $3,926,139
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $ 500,654 $ 266,210
Accounts payable 245,643 254,233
Accrued expenses 113,122 212,291
Customer deposits 50,566 38,814
Current maturities of long-term
debt and lease obligations 41,730 40,780
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Total current liabilities 951,715 812,328
Long-term debt and capital lease
obligations, less current
maturities 1,047,569 1,339,341
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Total liabilities 1,999,284 2,151,669
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Shareholders' equity:
Common stock, $.01 par value;
authorized 10,000,000 shares;
issued and outstanding 5,820,849
shares at March 31, 1996 and
December 31, 1995 58,209 58,209
Additional paid-in capital 5,192,400 5,192,400
Accumulated deficit (3,478,325) (3,419,299)
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1,772,284 1,831,310
Unrealized gain (loss) on securities (56,840) ( 56,840)
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Total shareholders' equity 1,715,444 1,774,470
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Total liabilities and shareholders'
equity $3,714,728 $3,926,139
========= =========
</TABLE>
2
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DALLAS GOLD AND SILVER EXCHANGE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
-------------------------
<S> <C> <C>
Revenues:
Sales $2,656,995 $2,468,581
Pawn service fees 10,120 14,766
Travel agency income 343,938 283,986
Consulting service income -0- 217,102
Interest income -0- -0-
Realized gain on marketable securities 1,641 63,516
Unrealized gain on trading securities -0- 36,280
Other income 24,974 -0-
--------- ---------
3,037,668 3,084,231
Costs and expenses:
Cost of sales (exclusive of
items shown separately below) 2,281,685 2,024,323
Travel agency costs 332,744 275,448
Consulting service costs 15,495 59,917
General and administrative
expenses 405,969 446,515
Depreciation and amortization 20,351 19,495
Interest expense 40,450 39,900
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Total costs and expenses 3,096,694 2,865,598
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Net income (loss) (59,026) 218,633
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Income (loss) per share of common stock $ (.01) $ .04
========= =========
</TABLE>
3
<PAGE> 4
DALLAS GOLD AND SILVER EXCHANGE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
--------------------
<S> <C> <C>
Cash used for operating activities $ (243,559) $ (311,367)
Cash flows from investing activities:
(Increase) Decrease in loans, net (2,000) 2,854
Purchase of property, plant and
equipment (29,875) (39,865)
Sale of marketable securities 1,641 126,792
Purchase of marketable securities (4,648) (23,800)
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Net cash provided by (used
for investing activities (34,882) 65,981
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Cash flows from financing activities:
Purchase of common stock
Principal payments on notes payable (5,979)
Principal payments on long-term
debt and capital lease obligations (59,378) (54,120)
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Net cash used for financing
activities (59,378) (60,099)
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Decrease in cash and cash equivalents $ (337,819) $ (305,485)
========== ==========
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4
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DALLAS GOLD AND SILVER EXCHANGE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENT
March 31, 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 three month period ended
March 31, 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.
5
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MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Results of Operations
Quarter ended March 31, 1996 vs 1995:
Sales for the first quarter of 1996 increased $188,414 or 7.6% when compared to
the corresponding quarter of 1995. The increase was primarily the result of an
increase in precious metals sales in the amount of $124,457. Travel agency
income increased by $59,952 or 21.1% due to an increase in business related
travel. Consulting service income decreased by $217,102 due to a $225,000
consulting fee earned during 1995 relating to the recapitalization of an
existing client. During the first quarter of 1995 the Company sold $126,792 of
marketable securities realizing a gain of $63,516. Unrealized gains on trading
securities in the amount of $36,516 in 1995 was the result of an increase in
the market value of the Company's investment in Naturade, Inc. Other income in
the amount of $24,974 during 1996 was the result of lease income received. Cost
of sales increased by $257,362 primarily due to the increase in sales. Travel
agency costs increased by $57,296 due to the 21.1% increase in income.
Consulting service cost decreased by $44,442 during the first quarter of 1996
due to the decrease in revenues from consulting activities.
General and administration expenses decreased by $40,546 primarily due to cost
savings resulting from the closure of the Company's second jewelry store in
November 1995.
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 quarter of 1996,
cash and cash equivalents decreased by $337,819 primarily as a result of
increases in inventory ($117,136), a decrease in accrued expenses ($99,169) and
principal payments on long-term debt ($59,378).
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.
6
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Management of the Company expects capital expenditures to total approximately
$50,000 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
7
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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: May 10, 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: May 10, 1996
-------------------------
L. S. Smith
Chairman of the Board,
Chief Executive Officer and
Secretary
By: /s/ W. H. Oyster Dated: May 10, 1996
-------------------------
W. H. Oyster
Director, President and
Chief Operating Officer
By: /s/ John Benson Dated: May 10, 1996
-------------------------
John Benson
Chief Financial Officer
(Principal Accounting Officer)
8
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EXHIBIT
INDEX
-----
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 79
<SECURITIES> 483
<RECEIVABLES> 144
<ALLOWANCES> 0
<INVENTORY> 1,009
<CURRENT-ASSETS> 1,770
<PP&E> 1,670
<DEPRECIATION> 509
<TOTAL-ASSETS> 3,715
<CURRENT-LIABILITIES> 951
<BONDS> 1,048
<COMMON> 58
0
0
<OTHER-SE> 1,657
<TOTAL-LIABILITY-AND-EQUITY> 3,715
<SALES> 2,657
<TOTAL-REVENUES> 3,038
<CGS> 2,282
<TOTAL-COSTS> 3,057
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 40
<INCOME-PRETAX> (59)
<INCOME-TAX> 0
<INCOME-CONTINUING> (59)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (59)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
