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
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
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
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
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
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
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
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