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, 1997
------------------------
( ) 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 businessissuer)
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) (972) 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 April 7, 1997
- ------------------------------- ---------------------------------
Common Stock, $.01 per value 4,420,244
<PAGE>
PART I. FINANCIAL INFORMATION
- -------------------------------
DALLAS GOLD AND SILVER EXCHANGE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
March 31, December 31,
ASSETS 1997 1996
------ ------
Current assets:
Cash $ 782,024 $ 949,586
Marketable securities - trading 1,628,781 1,913,656
Trade receivables 136,753 147,503
Inventory 1,105,184 1,111,485
Prepaid expenses 42,372 20,924
Total current assets 3,695,114 4,143,154
Investments in marketable securities 642,264
Property and equipment 1,126,069 1,123,948
Other assets 39,412 31,637
Total assets $5,502,859 $5,298,739
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $ 531,579 $ 548,012
Accounts payable 213,664 498,181
Accrued expenses 160,878 256,645
Customer deposits 65,932 57,770
Current maturities of long-term
debt and lease obligations 47,446 45,864
--------- ---------
Total current liabilities 1,019,499 1,406,472
Long-term debt and capital lease
obligations, less current
maturities 1,756,702 1,766,342
--------- ---------
Total liabilities 2,776,201 3,172,814
--------- ---------
Shareholders' equity:
Common stock, $.01 par value;
authorized 10,000,000 shares;
issued and outstanding 4,420,244
shares at March 31, 1997 and
4,618,193 at December 31, 1996 44,203 46,182
Additional paid-in capital 3,979,958 4,126,451
Accumulated deficit (1,779,201) (2,046,708)
--------- ---------
2,244,960 2,125,925
Unrealized gain on securities 481,698
---------
Total shareholders' equity 2,726,658 2,125,925
Total liabilities and shareholders'
equity $5,502,859 $5,298,739
========= =========
</TABLE>
2
<PAGE>
DALLAS GOLD AND SILVER EXCHANGE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31,
1997 1996
--------------------------
Revenues:
Sales $2,741,849 $2,656,995
Pawn service fees 7,410 10,120
Travel agency income 30,933 343,938
Consulting service income 170,566
Interest income 5,446
Realized gain on marketable securities 37,158 1,641
Unrealized gain on trading securities 203,224
Other income 25,765 24,974
--------- ---------
3,222,351 3,037,668
Costs and expenses:
Cost of sales (exclusive of
items shown separately below) 2,358,103 2,281,685
Travel agency costs 31,087 332,744
Consulting service costs 25,682 15,495
General and administrative
expenses 452,448 405,969
Depreciation and amortization 31,424 20,351
Interest expense 56,100 40,450
--------- ---------
Total costs and expenses 2,954,844 3,096,694
--------- ---------
Net income (loss) $ 267,507 $ (59,026)
========= =========
Net Income (loss) per common share $ .06 $ (.01)
========= =========
3
<PAGE>
DALLAS GOLD AND SILVER EXCHANGE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
1997 1996
--------------------------
Cash used for operating activities $ (491,757) $ (243,559)
Cash flows from investing activities:
(Increase) Decrease in loans, net 3,060 (2,000)
Purchase of property, plant and
equipment (33,545) (29,875)
Sale of marketable securities 534,159 1,641
Purchase of marketable securities (6,516) (4,648)
--------- ---------
Net cash provided by (used
for investing activities 497,158 (34,882)
--------- ---------
Cash flows from financing activities:
Purchase of common stock (148,472)
Principal payments on notes payable (16,433)
Principal payments on long-term
debt and capital lease obligations (8,058) (59,378)
--------- ---------
Net cash used for financing
activities (172,963) (59,378)
--------- ---------
Decrease in cash and cash equivalents $ (167,562) $ (337,819)
========= =========
4
<PAGE>
DALLAS GOLD AND SILVER EXCHANGE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENT
March 31, 1997
(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., DLS Financial Services, Inc. and Eye Media, 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, 1997, are not necessarily indicative of the results that may be
expected for the year ended December 31, 1997. 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, 1996.
5
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Results of Operations
- ---------------------
Quarter ended March 31, 1997 vs 1996:
Sales for the first quarter of 1997 increased $84,854 or 3.2% when compared to
the corresponding quarter of 1996. The increase was primarily the result of an
increase in precious metals sales in the amount of $85,698. Pawn service fees
decreased by 26.8% due to a decline in pawn loans outstanding. Travel agency
income decreased by $313,005 due to the retirement of the Company's most
productive outside sales agent. Consulting service income increased by $170,566
due to a fee earned relating to the recapitalization of an new client. During
the first quarter of 1997 the Company sold $534,159 of marketable securities
realizing a gain of $37,158. Unrealized gains on trading securities in the
amount of $203,224 in 1997 was the result of an increase in the market value of
the Company's investment in marketable securities. Interest income in the amount
of $5,446 during 1997 was the result of interest earned on money market
accounts. Cost of sales increased by $76,418 primarily due to the increase in
sales. Travel agency costs decreased by $301,657 due to the $313,005 decrease in
income. Consulting service cost increased by $10,187 during the first quarter of
1996 due to an increase in travel cost.
General and administration expenses increased by $46,479 primarily due to cost
related to Eye Media, Inc.. Interest expense increased by $15,650 due to
interest on the $875,000 note issued in December, 1996.
6
<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 quarter of 1996, cash and cash
equivalents decreased by $167,562 primarily as a result of decreases in accounts
payable ($284,517), a decrease in accrued expenses ($95,767) and purchases of
common treasury stock ($148,472). Theses uses of cash were partially offset by
the sale of $534,1589 in marketable securities.
Management of the Company expects capital expenditures to total approximately
$75,000 during 1997. 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
<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: April 8, 1997
-------------------------
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: April 8, 1997
-------------------------
L. S. Smith
Chairman of the Board,
Chief Executive Officer and
Secretary
By: /s/ W. H. Oyster Dated: April 8, 1997
-------------------------
W. H. Oyster
Director, President and
Chief Operating Officer
By: /s/ John Benson Dated: April 8, 1997
-------------------------
John Benson
Chief Financial Officer
(Principal Accounting Officer)
8
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 782
<SECURITIES> 1,629
<RECEIVABLES> 137
<ALLOWANCES> 0
<INVENTORY> 1,105
<CURRENT-ASSETS> 3,695
<PP&E> 1,737
<DEPRECIATION> 611
<TOTAL-ASSETS> 5,503
<CURRENT-LIABILITIES> 1,019
<BONDS> 1,756
0
0
<COMMON> 44
<OTHER-SE> 2,683
<TOTAL-LIABILITY-AND-EQUITY> 5,503
<SALES> 2,742
<TOTAL-REVENUES> 3,222
<CGS> 2,358
<TOTAL-COSTS> 2,899
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 56
<INCOME-PRETAX> 266
<INCOME-TAX> 0
<INCOME-CONTINUING> 266
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 266
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
