SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
(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, 1997
-----------------------
( ) 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.
-------------------------------------
(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) (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 July 10, 1997
- ---------------------------- -----------------------------
Common Stock, $.01 per value 4,366,544
<PAGE>
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
DALLAS GOLD AND SILVER EXCHANGE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<S> <C> <C>
June 30, December 31,
ASSETS 1997 1996
----------- ------------
Current assets:
Cash $ 474,127 $ 949,586
Marketable securities - trading 2,098,829 1,913,656
Trade receivables 113,234 147,503
Inventory 1,245,061 1,111,485
Prepaid expenses 25,921 31,637
------------ ------------
Total current assets 3,957,172 4,143,154
Investments in marketable securities 401,415
Property and equipment 1,104,971 1,123,948
Other assets 37,327 31,637
Total assets $ 5,500,885 $ 5,298,739
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $ 516,677 $ 548,012
Deferred income taxes 98,802
Accounts payable 252,257 498,181
Accrued expenses 130,415 256,645
Customer deposits 65,517 57,770
Current maturities of long-term
debt and lease obligations 47,667 45,864
------------ ------------
Total current liabilities 1,111,335 1,406,472
Long-term debt and capital lease
obligations, less current
maturities 1,745,103 1,766,342
Deferred income taxes 81,889
Shareholders' equity:
Common stock, $.01 par value;
authorized 10,000,000 shares;
issued and outstanding 4,366,544
shares at June 30, 1997 and
4,618,193 at December 31, 1996 43,665 46,182
Additional paid-in capital 3,898,322 4,126,451
Accumulated deficit (1,538,389) (2,046,708)
Unrealized gain on available for
sale securities, net of income
taxes of $ 81,889 158,960
------------
Total shareholders' equity 2,562,558 2,125,925
------------ ------------
Total liabilities and shareholders'
equity $ 5,500,885 $ 5,298,739
============ ============
</TABLE>
2
<PAGE>
DALLAS GOLD AND SILVER EXCHANGE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
June 30,
1997 1996
-------------------------
Revenues:
Sales $ 2,383,770 $ 2,858,906
Pawn service fees 6,930 12,680
Travel agency income 33,405 352,076
Consulting service income
Interest income 5,946
Realized gain on marketable securities 63,486 231,058
Unrealized gain on trading securities 447,543 (18,403)
0ther income 27,002 24,048
----------- -----------
2,968,082 3,460,365
Costs and expenses:
Cost of sales (exclusive of
items shown separately below) 2,012,639 2,462,744
Travel agency costs 32,449 342,411
Consulting service costs 93,934 23,333
General and administrative
expenses 414,944 419,761
Depreciation and amortization 16,752 20,751
Interest expense 57,750 40,425
----------- -----------
Total costs and expenses 2,628,468 3,309,425
----------- -----------
Income before income taxes 339,614 150,940
Deferred income tax expense 98,802
----------- -----------
Net income $ 240,812 $ 150,940
=========== ===========
Income per share of common stock $ .06 $ .03
=========== ===========
3
<PAGE>
DALLAS GOLD AND SILVER EXCHANGE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Six Months Ended
June 30,
1997 1996
-------------------------
Revenues:
Sales $ 5,125,619 $ 5,515,901
Pawn service fees 14,340 22,800
Travel agency income 64,338 696,014
Consulting service income 170,566
Interest income 11,392
Realized gain on marketable securities 432,223 232,699
Unrealized gain on trading securities 319,188 (18,403)
Other income 52,767 49,022
----------- -----------
6,190,433 6,498,033
Costs and expenses:
Cost of sales (exclusive of
items shown separately below) 4,370,742 4,744,429
Travel agency costs 63,536 675,155
Consulting service costs 119,616 38,828
General and administrative
expenses 867,392 825,730
Depreciation and amortization 48,176 41,102
Interest expense 113,850 80,875
----------- -----------
Total costs and expenses 5,583,312 6,406,119
----------- -----------
Income before income taxes 607,121 91,914
Deferred income tax expense 98,802
----------- -----------
Net income $ 508,319 $ 91,914
=========== ===========
Income per share of common stock $ .12 $ .02
=========== ===========
4
<PAGE>
DALLAS GOLD AND SILVER EXCHANGE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
1997 1996
-------------------------
Cash used for operating activities $ (739,983) $ (323,047)
Cash flows from investing activities:
Purchase of property, plant and
equipment (29,199) (54,458)
Sale of marketable securities 750,040 354,284
Purchase of marketable securities (174,901) (9,024)
---------- ----------
Net cash provided by (used
for investing activities 545,940 289,400
---------- ----------
Cash flows from financing activities:
Purchase of common stock (230,645) (21,753)
Increase (decrease) in notes payable (29,532) 207,458
Increase (decrease) in long-term
debt and capital lease obligations (21,239) (302,914)
---------- ----------
Net cash used for financing
activities (281,416) (117,209)
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Decrease in cash and cash equivalents $ (475,459) $ (150,856)
========== ===========
5
<PAGE>
DALLAS GOLD AND SILVER EXCHANGE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENT
June 30, 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 periods ended June 30, 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, 1997.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Results of Operations
- ---------------------
Quarter ended June 30, 1997 vs 1996:
Sales decreased by $ 475,136 (16.6%) during the three months ended June 30, 1997
due to a $ 344,508 decline in bullion sales and a $ 130,628 decline in jewelry
sales. The decline in bullion sales was the result of a world wide decline in
precious metal prices. The decline in jewelry sales was the result of a
management decision to concentrate on higher margin higher priced jewelry. As a
result, gross margins increased from 13.9% in 1996 to 15.6% in 1997. Pawn
service fees decreased by $ 5,750 (45.3%) during the second quarter of 1997 due
to a decline in loans outstanding during the period. Management is attempting to
increase pawn loan volume by directing additional advertising toward this
activity and by extending larger loans on higher value merchandise. Travel
agency income decreased by $ 318,671 due to a management decision to decrease
the amount of low margin business generated by outside sales agents. Interest
income was the result of interest earned on money market accounts during the
quarter. Realized gains and losses on marketable securities were the result of
securities sold during the quarters. Unrealized gains on trading securities
during the quarters were the result of changes in the market value of the
Company's portfolio.
Cost of sales decreased by $ 450,105 (18.3%) due to the decline in sales volume.
Travel agency costs decreased by $ 309,962 (90.5%) due to the decrease in
income. Consulting service cost increased by $ 70,601 during the first quarter
of 1997 due to cost associated with the acquisition and subsequent sale of
Performance Nutrition, Inc.. Interest expense increased $ 17,325 primarily as a
result of the $ 875,000 note issued in December 1996.
During the second quarter of 1997 the Company recorded deferred income taxes of
$ 180,691 due to utilization of net operating loss carryforwards. Of this amount
$ 98,802 is shown as deferred tax expense and $ 81,889 as a reduction of the
unrealized gain on avaiiilable for sale securities.
7
<PAGE>
Six months ended June 30, 1997 vs 1996:
Sales decreased by $ 390,282 (7.1%) during the six months ended June 30, 1997
due to a $ 290,364 decline in bullion sales and a $ 99,918 decline in jewelry
sales. The decline in bullion sales was the result of a world wide decline in
precious metal prices. The decline in jewelry sales was the result of a
management decision to concentrate on higher margin higher priced jewelry. As a
result, gross margins increased from 14.0% in 1996 to 14.9% in 1997. Pawn
service fees decreased by $ 8,460 (37.1%) during the 1997 first half of 1997 due
to a decline in loans outstanding during the period. Management is attempting to
increase pawn loan volume by directing additional advertising toward this
activity and by extending larger loans on higher value merchandise. Travel
agency income decreased by $ 631,626 due to a management decision to decrease
the amount of low margin business generated by outside sales agents. Consulting
service income increased by $ 170,566 due to a fee earned relating to the
recapitalization of a new client. Interest income was the result of interest
earned on money market accounts during the period. Realized gains and losses on
marketable securities were the result of securities sold during the periods.
Unrealized gains on trading securities during the periods were the result of
changes in the market value of the Company's portfolio.
Cost of sales decreased by $ 373,687 (7.9%) due to the decline in sales volume.
Travel agency costs decreased by $ 611,619 (90.6%) due to the decrease in
income. Consulting service cost increased by $ 80,788 during the first half of
1997 due to cost associated with the acquisition and subsequent sale of
Performance Nutrition, Inc.. Interest expense increased $ 32,975 primarily as a
result of the $ 875,000 note issued in December 1996.
During the first half of 1997 the Company recorded deferred income taxes of $
180,691 due to utilization of net operating loss carryforwards. Of this amount $
98,802 is shown as deferred tax expense and $ 81,889 as a reduction of the
unrealized gain on avaiiilable for sale securities.
8
<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 half of 1997, cash and cash
equivalents decreased by $ 475,459 primarily as a result of increases in
inventory ($ 133,576), a decrease in accounts payable and accrued expenses ($
245,924) and principal payments on long-term debt and notes payable ($ 50,771).
During the first half of 1997, the Company sold $ 750,040 of marketable
securities. These resources were used to purchase and retire common stock of the
Company in the amount of $ 230,645, purchase additional marketable securities in
the amount of $ 174,040 and for general corporate working capital.
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
9
<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: July 15, 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: July 15, 1997
-------------------------
L. S. Smith
Chairman of the Board,
Chief Executive Officer and
Secretary
By: /s/ W. H. Oyster Dated: July 15, 1997
-------------------------
W. H. Oyster
Director, President and
Chief Operating Officer
By: /s/ John Benson Dated: July 15, 1997
-------------------------
John Benson
Chief Financial Officer
(Principal Accounting Officer)
10
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 474
<SECURITIES> 2,099
<RECEIVABLES> 113
<ALLOWANCES> 0
<INVENTORY> 1,245
<CURRENT-ASSETS> 3,957
<PP&E> 1,732
<DEPRECIATION> 627
<TOTAL-ASSETS> 5,501
<CURRENT-LIABILITIES> 1,111
<BONDS> 1,745
<COMMON> 44
0
0
<OTHER-SE> 2,519
<TOTAL-LIABILITY-AND-EQUITY> 5,501
<SALES> 2,384
<TOTAL-REVENUES> 2,968
<CGS> 2,013
<TOTAL-COSTS> 2,570
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 58
<INCOME-PRETAX> 340
<INCOME-TAX> 99
<INCOME-CONTINUING> 241
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 241
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
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