Edgar Filing: DGSE COMPANIES INC

Unassociated Document

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2008


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___ to ___

Commission File Number 1-11048

DGSE Companies, Inc.

(Exact name of registrant as specified in its charter)


Nevada		88-0097334
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

11311 Reeder Road

Dallas, Texas 75229

(972) 484-3662

(Address, including zip code, and telephone

number, including area code, of registrant’s

principal executive offices)

NONE

(Former name, former address and former

fiscal year, if changed since last report)

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 þ NO o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o	Smaller reporting company þ

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES o NO þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of August 1, 2008:


Class		Outstanding
Common stock, $.01 par value per share		9,833,635

TABLE OF CONTENTS

PART I.	FINANCIAL INFORMATION	Page No.

Item 1.	Consolidated Financial Statements.

	Consolidated Balance Sheets as of June 30, 2008 and December 31, 2007	1

	Consolidated Statements of Operations for the three months ended	2
	June 30, 2008 and 2007

	Consolidated Statements of Operations for the six months ended	3
	June 30, 2008 and 2007

	Consolidated Statements of Cash Flows for the six months ended	4
	June 30, 2008 and 2007

	Notes to Consolidated Financial Statements	5

Item 2.	Management’s Discussion and Analysis of Financial Condition
	and Results of Operations.

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	16

Item 4.	Controls and Procedures.	16

PART II.	OTHER INFORMATION

Item 3.	Legal Proceedings.	17

Item 5.	Other Information.	17

Item 6.	Exhibits.	18

SIGNATURES

DGSE Companies, Inc. and Subsidiaries

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements.

CONSOLIDATED BALANCE SHEETS

	June 30, 2008			December 31, 2007
	Unaudited
ASSETS
Current Assets:
Cash and cash equivalents	$	934,051		$	536,548
Trade receivables		5,052,894			3,792,474
Auction advances		1,002,157			747,000
Inventories		15,046,163			12,975,782
Prepaid expenses		713,736			459,486
Prepaid federal income tax		—			59,341
Total current assets		22,749,001			18,570,631

Marketable securities - available for sale		20,532			61,769
Property and equipment, net		4,645,462			4,193,869
Deferred income taxes		1,717,131			1,805,205
Goodwill		9,013,880			8,952,181
Intangible assets		2,521,340			2,521,340
Other long-term receivable		465,971			444,383
Other assets		228,247			309,836
	$	41,361,564		$	36,859,214

LIABILITIES
Current Liabilities:
Notes payable	$	187,463		$	187,467
Current maturities of long-term debt		501,631			501,631
Accounts payable - trade		3,657,565			1,069,194
Federal income tax payable		195,469			—
Accrued expenses		444,669			1,018,003
Customer deposits		1,191,634			315,437
Total current liabilities		6,178,431			3,091,732

Long-term debt, less current maturities		13,924,797			13,489,901
		20,103,228			16,581,633

STOCKHOLDERS’ EQUITY
Common stock, $.01 par value; 30,000,000 shares authorized; 9,833,635 and 9,490,357 shares issued and outstanding at the end of each period in 2008 and 2007, respectively		98,337			94,904
Additional paid-in capital		18,503,353			18,473,234
Accumulated other comprehensive loss		(117,264	)		(97,288	)
Retained earnings		2,773,910			1,806,731
		21,258,336			20,277,581

	$	41,361,564		$	36,859,214

The accompanying notes are an integral part of these consolidated financial statements

DGSE Companies, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS

	Three months ended June 30,
	2008			2007
	Unaudited
Revenue
Sales	$	26,244,397		$	12,351,892
Consumer loan service charges		130,849			61,410
Management fees		—			100,000
		26,375,246			12,513,302

Costs and expenses
Cost of goods sold		22,211,744			10,232,710
Selling, general and administrative expenses		3,320,037			1,644,766
Depreciation and amortization		83,396			60,851
		25,615,177			11,938,327

Operating income		760,069			574,975

Other expense (income)
Other income		(12,125	)		(2,251	)
Interest expense		189,961			137,896

Earnings before income taxes		582,233			439,330

Income tax expense		92,309			149,369

Net earnings from continuing operations		489,924			289,961

Discontinued operations:
Loss from discontinued operations (less applicable income tax benefit of $0 and $6,247, respectively)		—			12,128

Net earnings	$	489,924		$	277,833

Earnings per common share - basic	$	0.05		$	0.04

Earnings per common share - diluted	$	0.05		$	0.04

Weighted average number of common shares:
Basic		9,666,182			5,320,964
Diluted		10,344,363			6,731,618

The accompanying notes are an integral part of these consolidated financial statements

DGSE Companies, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS

	Six months ended June 30,
	2008			2007
	Unaudited
Revenue
Sales	$	58,847,619		$	22,328,270
Consumer loan service charges		255,169			109,300
Management fees		—			250,000
		59,102,788			22,687,570

Costs and expenses
Cost of goods sold		50,631,760			18,626,943
Selling, general and administrative expenses		6,601,849			2,971,185
Depreciation and amortization		193,232			99,543
		57,426,841			21,697,671

Operating income		1,675,947			989,899

Other expense (income)
Other income		(25,341	)		(2,251	)
Interest expense		375,167			245,136

Earnings before income taxes		1,326,121			747,014

Income tax expense		358,942			253,985

Net earnings from continuing operations		967,179			493,029

Discontinued operations:
Loss from discontinued operations (less applicable income tax benefit of $0 and $16,892, respectively)		—			32,781

Net earnings	$	967,179		$	460,248

Earnings per common share - basic	$	0.10		$	0.09

Earnings per common share - diluted	$	0.09		$	0.08

Weighted average number of common shares:
Basic		9,582,456			5,117,127
Diluted		10,344,363			5,876,827

The accompanying notes are an integral part of these consolidated financial statements

DGSE COMPANIES, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Six months ended June 30,
	2008			2007
Cash flows from operating activities	Unaudited

Net earnings	$	967,179		$	460,248
Adjustments to reconcile net earnings to net cash provided by operating activities
Depreciation and amortization		193,232			121,719
Deferred income taxes		88,074			—
Loss on marketable securities		41,237			—
(Increase) decrease in operating assets and liabilities
Trade receivables		(1,526,674	)		(787,467	)
Inventories		(2,070,381	)		151,724
Prepaid expenses and other current assets		(254,250	)		(470,052	)
Accounts payable and accrued expenses		2,028,613			(209,052	)
Customer deposits		876,197			261,929
Federal income taxes payable		254,810			200,401
Other assets		81,589			(6,574	)
Net cash provided by (used in) operating activities		679,626			(288,754	)
Cash flows from investing activities
Pawn loans made		(617,382	)		(340,725	)
Pawn loans repaid		291,528			215,453
Recovery of pawn loan principal through sale of forfeited collateral		315,363			58,887
Pay day loans made		—			(155,451	)
Pay day loans repaid		—			120,335
Purchase of property and equipment		(644,825	)		(103,529	)
Acquisition of Euless Gold & Silver		—			(600,000	)
Merger costs paid		(61,699	)		(395,280	)
Net cash used in investing activities		(717,015	)		(1,200,310	)
Cash flows from financing activities
Proceeds from line of credit		1,250,000			1,359,077
Payments of capital lease		(3,972	)		—
Conversion of warrants		—			78,363
Repayments of notes payable		(811,136	)		(140,529	)
Net cash provided by (used in) financing activities		434,892			1,296,911

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVILANTS EQUIVALENTS		397,503			(192,153	)
Cash and cash equivalents at beginning of period		536,548			1,210,282
Cash and cash equivalents at end of period	$	934,051		$	1,018,129

Supplemental disclosures:

Interest paid for the three months ended June 30, 2008 and 2007 was $174,230 and $110,219, respectively.

Income taxes paid for the three months ended June 30, 2008 and 2007 was $0 and $0, respectively.

Interest paid for the six months ended June 30, 2008 and 2007 was $348,679 and $209,238, respectively.

Income taxes paid for the six months ended June 30, 2008 and 2007 was $0 and $50,000, respectively.

The accompanying notes are an integral part of these consolidated financial statements.

DGSE COMPANIES, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) Basis of Presentation.

The accompanying unaudited condensed consolidated financial statements of DGSE Companies, Inc. and Subsidiaries include the financial statements of DGSE Companies, Inc. and its wholly-owned subsidiaries, DGSE Corporation, National Pawn, Inc., Charleston Gold and Diamond Exchange, Inc., Superior Galleries, Inc. and American Pay Day Centers, Inc. In the opinion of management, all adjustments consisting of normal recurring accruals considered necessary for a fair presentation have been included.

The interim financial statements of DGSE Companies, Inc. included herein have been prepared by us pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the Commission's rules and regulations, although we believe that the disclosures are adequate to make the information presented not misleading. We suggest that these financial statements be read in conjunction with the financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2007 and our quarterly report on Form 10Q for the three months ended March 31, 2008. In our opinion, the accompanying unaudited interim financial statements contain all adjustments, consisting only of those of a normal recurring nature, necessary to present fairly its results of operations and cash flows for the periods presented. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year. Certain reclassifications were made to the prior year's consolidated financial statements to conform to the current year presentation.

On July 13, 2007, we sold the loan balances from our American Pay Day Center locations and discontinued operations in those locations. See Note 7, “Acquisitions and Discontinued Operations.” As a result of this disposition, certain sections of the Consolidated Financial Statements and related notes have been reclassified to present the results of the American Pay Day Center locations as discontinued operations.

(2) Inventory.

A summary of inventories is as follows:

	June 30, 2008		December 31, 2007
Jewelry	$	9,903,708	$	8,118,454
Rare coins		2,937,412		3,482,248
Bullion		1,175,176		486,991
Scrap gold		399,720		414,099
Other		630,147		473,990
Total	$	15,046,163	$	12,975,782

(3) Trade Receivables.

Pawn loans receivable in the amount of $283,499 and $263,856 as of June 30, 2008 and December 31, 2007, respectively, are included in the Consolidated Balance Sheets caption trade receivables as of these respective dates. The related pawn service charges receivable in the amount of $79,721 and $63,532 as of June 30, 2008 and December 31, 2007, respectively, are also included in the Consolidated Balance Sheets caption trade receivables as of these respective dates.

DGSE COMPANIES, Inc. and Subsidiaries

(4) Earnings per share.

A reconciliation of the earnings and shares of the basic earnings per common share and diluted earnings per common share for the periods ended June 30, 2008 and 2007 is as follows:

	2008						2007
	Three months ended June 30,						Three months ended June 30,
	Net Earnings		Shares		Per share		Net Earnings		Shares		Per share

Basic earnings per common share	$	489,924		9,666,182	$	0.05	$	277,833		5,320,964	$	0.05
Effect of dilutive stock options		—		678,181		—		—		1,410,654		(0.01	)

Diluted earnings per common share	$	489,924		10,344,363	$	0.05	$	277,833		6,731,618	$	0.04

	2008							2007
	Six months ended June 30,							Six months ended June 30,
	Net Earnings		Shares		Per share			Net Earnings		Shares		Per share

Basic earnings per common share	$	967,179		9,582,456	$	0.10		$	460,248		5,117,127	$	0.09
Effect of dilutive stock options		—		761,907		(0.01	)		—		759,700		(0.01	)

Diluted earnings per common share	$	967,179		10,344,363	$	0.09		$	460,248		5,876,827	$	0.08

(5) Business segment information.

Management identifies reportable segments by product or service offered. Each segment is managed separately. Corporate and other includes certain general and administrative expenses not allocated to segments and pawn operations. Our operations by segment for the six months ended June 30 were as follows:

*(In thousands)*	Retail Jewelry		Wholesale Jewelry		Precious Metals		Rare Coins		Auctions		Corporate and Other			Consolidated
Revenues
2008	$	14,271	$	2,497	$	26,874	$	13,115	$	1,214	$	1,132		$	59,103
2007		8,056		2,843		6,287		4,622		326		554			22,688

Net earnings (loss)
2008		606		47		372		12		46		(116	)		967
2007		93		66		69		30		147		55			460

Identifiable assets
2008		20,478		1,280		1,180		3,790		3,966		1,654			32,348
2007		11,141		1,204		344		3,568		941		984			18,182

Goodwill
2008		—		837		—		—		—		8,167			9,014
2007		—		837		—		—		—		12,374			13,211

Capital Expenditures
2008		520		—		—		—		125		—			645
2007		93		—		—		—		—		11			104

Depreciation and amortization
2008		76		—		28		27		28		34			193
2007		53		—		5		5		5		54			122

DGSE COMPANIES, Inc. and Subsidiaries

Our operations by segment for the three months ended June 30 were as follows:

*(In thousands)*	Retail Jewelry		Wholesale Jewelry		Precious Metals		Rare Coins		Auctions		Corporate and Other			Consolidated
Revenues
2008	$	7,757	$	1,139	$	10,440	$	5,809	$	661	$	569		$	26,375
2007		4,105		1,507		2,944		3,336		326		295			12,513

Net earnings (loss)
2008		398		14		37		12		116		(87	)		490
2007		31		23		16		21		147		40			278

Identifiable assets
2008		20,478		1,280		1,180		3,790		3,966		1,654			32,348
2007		11,141		1,204		344		3,568		941		984			18,182

Goodwill
2008		—		837		—		—		—		8,167			9,014
2007		—		837		—		—		—		12,374			13,211

Capital Expenditures
2008		248		—		—		—		111		—			359
2007		22		—		—		—		—		8			30

Depreciation and amortization
2008		38		—		14		13		14		4			83
2007		29		—		5		5		5		28			72

(6) Stock-based Compensation.

Effective January 1, 2006, we adopted the fair value recognition provisions of SFAS No. 123(R) for all share based payment awards to employees and directors including employee stock options granted under our employee stock option plan. In addition, we have applied the provisions of Staff Accounting Bulletin No. 107 (SAB No. 107), issued by the Securities and Exchange Commission, in our adoption of SFAS No. 123(R).

Stock-based compensation expense under SFAS No. 123(R) for the six months ended June 30, 2008 and 2007, respectively, was $30,400 and $0, relating to employee and director stock options and our employee stock purchase plan.

Stock-based compensation expense recognized each period is based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period. SFAS No. 123(R) requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

Upon adoption of SFAS No. 123(R), we elected to use the Black-Scholes-Merton option-pricing formula to value share-based payments granted to employees subsequent to January 1, 2006 and elected to attribute the value of stock-based compensation to expense using the straight-line single option method.

On November 10, 2005, the Financial Accounting Standards Board (FASB) issued FASB Staff Position No. FAS 123(R)-3, “Transition Election Related to Accounting for Tax Effects of Share-Based Payment Awards”, which detailed an alternative transition method for calculating the tax effects of stock-based compensation pursuant to SFAS No. 123(R). This alternative transition method included simplified methods to establish the beginning balance of the additional paid-in capital pool (APIC pool) related to the tax effects of employee stock-based compensation and to determine the subsequent impact on the APIC pool and Consolidated Statement of Cash Flows of the tax effects of employee stock-based compensation awards that are outstanding upon adoption of SFAS No. 123(R). As of June 30, 2008, we have not recorded the tax effects of employee stock-based compensation and have made no adjustments to the APIC pool.

DGSE COMPANIES, Inc. and Subsidiaries

SFAS No. 123(R) requires the cash flows resulting from the tax benefits resulting from tax deductions in excess of the compensation cost recognized for those options (excess tax benefits) to be classified as financing cash flows. As there have been no stock options exercised, we have not reported these excess tax benefits as of June 30, 2008.

(7) Acquisitions

Superior Galleries, Inc. On May 30, 2007, we completed our acquisition of Superior Galleries, Inc., which we refer to as Superior, pursuant to an amended and restated agreement and plan of merger and reorganization dated as of January 6, 2007, which we refer to as the merger agreement, with Superior and Stanford International Bank Ltd., then Superior’s largest stockholder and its principal lender, which we refer to as Stanford, as stockholder agent for the Superior stockholders, whereby Superior became a wholly owned subsidiary of DGSE Companies, Inc. Superior’s principal line of business is the sale of rare coins on a retail, wholesale, and auction basis. Superior operates a store in Beverly Hills, CA. The total purchase price of approximately $13.8 million was broken down as follows:


	Shares		Stock Price			Extended Price
Common stock		3,669,067	$	2.55		$	9,356,121
A warrants		845,634		1.27⁽¹	⁾		1,073,955
B warrants		863,000		2.55			2,200,650
Exercise Price B warrants		863,000	$	.001			(863	)
Direct transaction costs							1,176,290
Total purchase price						$	13,806,153

(1)	$1.27 is the fair value of the warrants calculated under the Black Sholes method as of the acquisition date.

The total purchase price has been allocated to the fair value of assets acquired and liabilities assumed as follows:

Goodwill	$	8,203,448
Intangible assets		2,521,340
Deferred tax asset		1,860,475
Property and other assets		1,068,958
Inventory		3,260,766
Liabilities assumed		(3,108,834	)

Total purchase price	$	13,806,153

In accordance with SFAS 142, the goodwill will not be amortized but instead tested for impairment in accordance with the provisions of SFAS 142 at least annually and more frequently upon the occurrence of certain events.

The operating results of Superior have been included in the consolidated financial statements since the acquisition date of May 30, 2007. The following unaudited pro forma condensed consolidated financial information reflects actual results of operations for the three and six months ended June 30, 2008 and the pro forma results of operations for the three and six months ended June 30, 2007 and as if the acquisition of Superior had occurred on January 1 of 2007 after giving effect to purchase accounting adjustments.

DGSE COMPANIES, Inc. and Subsidiaries

These pro forma results have been prepared for comparative purposes only and do not purport to be indicative of what operating results would have been had the acquisition actually taken place at the beginning of the period, and may not be indicative of future operating results (in thousands, except per share data):

	Three Months Ended June 30,
*(In thousands, except per share data)*	2008		2007
	(Unaudited)
			(Pro forma)
Total revenue	$	26,375	$	14,857
Net earnings (loss)	$	490	$	(2,433	)
Net earnings (loss) per share — basic	$	0.05	$	(0.39	)
Net earnings (loss) per share — diluted	$	0.05	$	(0.39	)
Weighted average shares — basic		9,666		6,226
Weighted average shares — diluted		10,344		6,361

	Six Months Ended June 30,
*(In thousands, except per share data)*	2008		2007
	(Unaudited)
			(Pro forma)
Total revenue	$	59,103	$	30,700
Net earnings (loss)	$	967	$	(3,386	)
Net earnings (loss) per share — basic	$	0.10	$	(0.54	)
Net earnings (loss) per share — diluted	$	0.09	$	(0.54	)
Weighted average shares — basic		9,582		6,226
Weighted average shares — diluted		10,344		6,386

In relation to the acquisition, as of June 29, 2007, Stanford and Dr. L.S. Smith, our chairman and chief executive officer, collectively had the power to vote approximately 63% of our voting securities, and beneficially owned approximately 56.4% of our voting securities on a fully-diluted basis (after giving effect to the exercise of all options and warrants held by them which are exercisable within sixty days of June 29, 2007 but not giving effect to the exercise of any other options or warrants). Consequently, these two stockholders may have sufficient voting power to control the outcome of virtually all corporate matters submitted to the vote of our common stockholders. Those matters could include the election of directors, changes in the size and composition of our board of directors, mergers and other business combinations involving us, or the liquidation of our company. In addition, Stanford and Dr. Smith have entered into a corporate governance agreement with us, which entitles Stanford and Dr. Smith to each nominate two “independent” directors to our board and entitles Dr. Smith, our chairman and chief executive officer, and William H. Oyster, our president and chief operating officer, to be nominated to our board for so long as each remains an executive officer.

Through this control of company nominations to our board of directors and through their voting power, Stanford and Dr. Smith are able to exercise substantial control over certain decisions, including decisions regarding the qualification and appointment of officers, dividend policy, access to capital (including borrowing from third-party lenders and the issuance of additional equity securities), a merger or consolidation with another company, and our acquisition or disposition of assets. Also, the concentration of voting power in the hands of Stanford and Dr. Smith could have the effect of delaying or preventing a change in control of our company, even if the change in control would benefit our other stockholders. The significant concentration of stock ownership may adversely affect the trading price of our common stock due to investors’ perception that conflicts of interest may exist or arise.

Euless Gold & Silver, Inc.

On May 9, 2007 we purchased all of the tangible assets of Euless Gold and Silver, Inc., located in Euless, Texas. The purchase price paid for these assets totaled $1,000,000 including $600,000 in cash and a two year note in the amount of $400,000. We opened a new retail store in the former Euless Gold & Silver facility and operate under the name of Dallas Gold & Silver Exchange. Of the assets received, $990,150 was inventory and the remainder was fixed assets.

We entered into these transactions seeing them as opportunistic acquisitions that would allow us to expand our operations and provide a platform for future growth.

DGSE COMPANIES, Inc. and Subsidiaries

(8) New Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measures” (“SFAS No. 157”). SFAS No. 157 defines fair value, establishes a framework for measuring fair value and enhances disclosures about fair value measures required under other accounting pronouncements, but does not change existing guidance as to whether or not an instrument is carried at fair value. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. Effective January 1, 2008, we have adopted the provisions of SFAS 157. The adoption did not have any financial impact on our results of operations and financial position.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (SFAS No. 159). SFAS No. 159 permits entities to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected will be reported in earnings. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. Effective January 1, 2008, we have adopted the provisions of SFAS 159 except as it applies to those nonfinancial assets and nonfinancial liabilities. Due to the fact that management has not elected to use the fair value option for eligible items, the adoption did not have any financial impact on our results of operations and financial position.

(9) Recent Developments

On July 2, 2008 we announced that we launched the first direct to the public website for jewelry and precious metals products acquired directly from consumers. We are one of the largest purchasers of jewelry in direct transactions with the public with purchase transactions for 2008 expected to exceed $50 million.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking Statements

The statements, other than statements of historical facts, included in this report are forward-looking statements. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "will," “would,” "expect," "intend," “could,” "estimate," “should,” "anticipate" or "believe." We believe that the expectations reflected in such forward-looking statements are accurate. However, we cannot assure you that these expectations will occur. Our actual future performance could differ materially from such statements. Factors that could cause or contribute to these differences include, but are not limited to:

· uncertainties regarding price fluctuations in the price of gold and other precious metals;

· our ability to manage inventory fluctuations and sales;

· changes in governmental rules and regulations applicable to the specialty financial services industry;

· the results of any unfavorable litigation;

· interest rates;

· economic pressures affecting the disposable income available to our customers;

· our ability to maintain an effective system of internal controls;

· the other risks detailed from time to time in our SEC reports.

Additional important factors that could cause our actual results to differ materially from our expectations are discussed under “Risk Factors” in our Annual Report on Form 10-K for our fiscal year ended December 31, 2007. You should not unduly rely on these forward-looking statements, which speak only as of the date of this report. Except as required by law, we are not obligated to publicly release any revisions to these forward-looking statements to reflect events or circumstances occurring after the date of this report or to reflect the occurrence of unanticipated events.

DGSE COMPANIES, Inc. and Subsidiaries

Our Business

We buy and sell jewelry, bullion products and rare coins. Our customers include individual consumer, dealers and institutions throughout the United States. In addition, we make collateralized loans to individuals in the State of Texas. Our products and services are marketed through our facilities in Dallas and Euless, Texas; Mt. Pleasant, South Carolina; Beverly Hills, California and through our internet web sites DGSE.com; CGDEinc.com; SGBH.com; SuperiorPreciousMetals.com; SuperiorEstateBuyers.com; USBullionExchange.com; Americangoldandsilverexchange.com; and FairchildWatches.com.

We operate eight primary internet sites and over 900 related landing sites on the World Wide Web. Through the various sites we operate a virtual store, real-time auction of rare coin and jewelry products, free quotations of current prices on all commonly traded precious metal and related products, trading in precious metals, a mechanism for selling unwanted jewelry, rare coins and precious metals and wholesale prices and information exclusively for dealers on pre-owned fine watches. Over 7,500 items are available for sale on our internet sites including $2,000,000 in diamonds.

Our wholly-owned subsidiary, National Pawn (f/k/a National Jewelry Exchange, Inc.), operates two pawn shops in Dallas, Texas. We have focused the subsidiary’s operations on sales and pawn loans of jewelry products.

On May 9, 2007 we purchased all of the tangible assets of Euless Gold and Silver, Inc., located in Euless, Texas. We opened a new retail store in the former Euless Gold & Silver facility and operate under the name of Dallas Gold & Silver Exchange.

On May 30, 2007, we completed the acquisition of Superior Galleries, Inc. located in Beverly Hills, California. Superior’s principal line of business is the sale of rare coins on a retail, wholesale, and auction basis. Superior’s retail and wholesale operations are conducted in virtually every state in the United States. Superior also conducts live and interned auctions for customers seeking to sell their own coins. Superior markets its services nationwide through broadcast and print media and independent sales agents, as well as on the internet through third party websites, and through its own website at SGBH.com.

On July 13, 2007, we sold the loan balances from our American Pay Day Center locations and discontinued operations in those locations.

On August 3, 2007 we announced the launch of Americangoldandsilverexchange.com along with the simultaneous activation of over 900 proprietary Internet sites related to the home page of Americangoldandsilverexchange.com. This site, along with our existing locations in Texas, California and South Carolina, will provide customers from all over the United States with a safe and seamless way to value and sell gold, silver, rare coins, jewelry, diamonds and watches. We anticipate that Americangoldandsilverexchange.com will contribute to our growth and profitability in future periods.

Late in 2007, Superior Estate Buyers was launched to bring our unique expertise in the purchase of gold, silver, diamonds, rare coins and other collectibles to local markets with a team of traveling professionals for short-term buying events. It is our expectation that, over time, this activity will be expanded significantly with the objective of having teams conducting events on a continuous basis.

Superior Precious Metals was also launched in late 2007 and it is the retail precious metals arm of DGSE. Professional account managers provide a convenient way for individuals and companies to buy and sell precious metals and rare coins. This activity is supported by the internally developed account management and trading platform created as part of DGSE’s USBullionExchange.com precious metals system.

Significant Accounting Policies

Inventory. Jewelry and other inventory is valued at lower-of-cost-or-market (specific identification). Bullion inventory is valued at lower-of-cost-or-market (average cost).

Accounts Receivable. We record trade receivables when revenue is recognized. No product has been consigned to customers. Our allowance for doubtful accounts is primarily determined by review of specific trade receivables. Those accounts that are doubtful of collection are included in the allowance. These provisions are reviewed to determine the adequacy of the allowance for doubtful accounts. Trade receivables are charged off when there is certainty as to their being uncollectible. Trade receivables are considered delinquent when payment has not been made within contract terms.

Auction Advances. We have established a short-term lending program advancing consignment customers cash based on consigned inventory acquired for upcoming auctions. We may advance a customer up to 70% of consigned, or assigned, rare coin(s)’ wholesale value. For auction advances, we will advance cash to a customer and take control of the inventory to be held on consignment for auction. The customer will sign a note receivable for the funds advanced to be secured by the consigned inventory. As consigned inventory is sold, the proceeds will be collected, repaying us for the auction advance and any auction fees, with the remaining amount due to the consignor.

DGSE COMPANIES, Inc. and Subsidiaries

Revenue Recognition. We generate revenue from wholesale and retail sales of rare coins, precious metals bullion and second-hand jewelry. The recognition of revenue varies for wholesale and retail transactions and is, in large part, dependent on the type of payment arrangements made between the parties. We recognize sales on an F.O.B. shipping point basis.

We sell rare coins to other wholesalers/dealers within its industry on credit, generally for terms of 14 to 60 days, but in no event greater than one year. We grant credit to new dealers based on extensive credit evaluations and for existing dealers based on established business relationships and payment histories. We generally do not obtain collateral with which to secure its accounts receivable when the sale is made to a dealer. We maintain reserves for potential credit losses based on an evaluation of specific receivables and our historical experience related to credit losses.

Revenues for monetary transactions (i.e., cash and receivables) with dealers are recognized when the merchandise is shipped to the related dealer.

We also sell rare coins to retail customers on credit, generally for terms of 30 to 60 days, but in no event greater than one year. We grant credit to retail customers based on extensive credit evaluations and for existing retail customers based on established business relationships and payment histories. When a retail customer is granted credit, we generally collect a payment of 25% of the sales price, establish a payment schedule for the remaining balance and hold the merchandise as collateral as security against the customer’s receivable until all amounts due under the credit arrangement are paid in full. If the customer defaults in the payment of any amount when due, we may declare the customer’s obligation in default, liquidate the collateral in a commercially reasonable manner using such proceeds to extinguish the remaining balance and disburse any amount in excess of the remaining balance to the customer.

Under this retail arrangement, revenues are recognized when the customer agrees to the terms of the credit and makes the initial payment. We have a limited-in-duration money back guaranty policy (as discussed below).

In limited circumstances, we exchange merchandise for similar merchandise and/or monetary consideration with both dealers and retail customers, for which we recognize revenue in accordance with SFAS 153, “Exchanges of Nonmonetary Assets - An Amendment of APB Opinion No. 29.” When we exchange merchandise for similar merchandise and there is no monetary component to the exchange, we do not recognize any revenue. Instead, the basis of the merchandise relinquished becomes the basis of the merchandise received, less any indicated impairment of value of the merchandise relinquished. When we exchange merchandise for similar merchandise and there is a monetary component to the exchange, we recognize revenue to the extent of monetary assets received and determines the cost of sale based on the ratio of monetary assets received to monetary and non-monetary assets received multiplied by the cost of the assets surrendered.

We have a return policy (money-back guarantee). The policy covers retail transactions involving graded rare coins only. Customers may return graded rare coins purchased within 7 days of the receipt of the rare coins for a full refund as long as the rare coins are returned in exactly the same condition as they were delivered. In the case of rare coin sales on account, customers may cancel the sale within 7 days of making a commitment to purchase the rare coins. The receipt of a deposit and a signed purchase order evidences the commitment. Any customer may return a coin if they can demonstrate that the coin is not authentic, or there was an error in the description of a graded coin.

Revenues from the sale of consigned goods are recognized as commission income on such sale if we are acting as an agent for the consignor. If in the process of selling consigned goods, we make an irrevocable payment to a consignor for the full amount due on the consignment and the corresponding receivable from the buyer(s) has not been collected by us at that payment date, we record that payment as a purchase and the sale of the consigned good(s) to the buyer as revenue as we have assumed all collection risk.

Our auction businesses generate revenue in the form of commissions charged to buyers and sellers of auction lots. Auction commissions include buyers’ commissions, sellers’ commissions, and buyback commissions, each of which is calculated based on a percentage of the hammer price.

Buyers’ and sellers’ commissions are recognized upon the confirmation of the identification of the winning bidders. Funds charged to winning bidders include the hammer price plus the commission. Only the commission portion of the funds received by winning bidders is recorded as revenue.

DGSE COMPANIES, Inc. and Subsidiaries

Buyback commissions represent an agreed upon rate charged by us for goods entered in the auction and not sold. Goods remain unsold when an auction lot does not meet the consignor reserve, which is the minimum sales price as determined prior to auction, and when items sold at auction are returned subsequent to the winning bidder taking possession. Buyback commission is recognized along with sellers’ commission or at the time an item is returned. Returns from winning bidders are very limited and primarily occur when a rare coin sold at auction has an error in its description in which the winner bidder relied upon to purchase the item.

Pawn loans (“loans”) are made with the collateral of tangible personal property for one month with an automatic 60-day extension period. Pawn service charges are recorded at the time of redemption at the greater of $15 or the actual interest accrued to date. If the loan is not repaid, the principal amount loaned plus accrued interest (or the fair value of the collateral, if lower) becomes the carrying value of the forfeited collateral (“inventories”) which is recovered through sales to customers.

Results of Operations

Three Months Ended June, 2008 compared to Three Months Ended June 30, 2007

Sales increased by $13,893,000 or 113%, during the three months ended June 30, 2008 as compared to 2007. This increase was primarily the result of a $7,496,000, or 255%, increase in the sale of precious metal products, a $2,473,000, or 74%, increase in rare coin sales and $3,652,000, or 89%, increase in our retail jewelry sales during the second quarter of 2008 as compared to 2007 and auction revenues of $661,000 during 2008 as compared to $325,701 in 2007. The increases in precious metals, rare coin and jewelry sales were due to an approximately 40% price increase in gold products and the acquisition of Superior Galleries and Euless Gold and Silver in May 2007. Consumer loan service fees increased $69,000, or 113%, in the second quarter of 2008 as compared to the second quarter of 2007. This increase is primarily attributable to the second pawn location we opened in November 2007 as well as increased loan activity in our initial location. Cost of goods as a percentage of sales increased from 82.9% in 2007 to 84.6 % in 2008. This increase was due to the increase in rare coin and precious metals revenue as a percentage of total sales.

Selling, general and administrative expenses increased by $1,675,000, or 102%, during the three months ended June 30, 2008 as compared to 2007. This increase was primarily due to the acquisition of Superior Galleries and Euless Gold and Silver in May 2007. These acquisitions accounted for $1,145,000 of the increase. In addition, selling, general and administrative cost related to the new operation of Superior Precious Metals, Superior Estate Buyers, American Gold and Silver Exchange and our seconded pawn shop totaled approximately $519,000 during the second quarter of 2008. Depreciation and amortization increased by $22,545, or 31%, during the second quarter of 2008 due to additional assets being purchased through our recent acquisitions, new businesses and the purchase of our new store and headquarters facility. The increase in interest expense was due to the additional debt related to the Superior acquisition.

Income taxes are provided at the rate of 15.85% for 2008 and 34% for 2007.

Historically, changes in the market prices of precious metals have had a significant impact on both revenues and cost of sales in the rare coin and precious metals segments in which we operate. It is expected that due to the commodity nature of these products, future price changes for precious metals will continue to be indicative of our performance in these business segments. Changes in sales and cost of sales in the retail and wholesale jewelry segments are primarily influenced by the national economic environment. It is expected that this trend will continue in the future due to the nature of these products.

DGSE COMPANIES, Inc. and Subsidiaries

Six Months Ended June 30, 2008 compared to Six Months Ended June 30, 2007

Sales increased by $36,519,000 or 164%, during the six months ended June 30, 2008 as compared to 2007. This increase was primarily the result of a $20,587,000, or 327%, increase in the sale of precious metal products, a $8,493,000, or 184%, increase in rare coin sales and $6,215,000, or 77%, increase in our retail jewelry sales during the first six months of 2008 as compared to 2007 and an increase in auction revenues of $888,000, or 273%, during 2008 as compared to 2007. The increases in precious metals, rare coin and jewelry sales were due to an approximately 40% price increase in gold products and the acquisition of Superior Galleries and Euless Gold and Silver in May 2007. Consumer loan service fees increased $146,000, or 133%, in the first six months of 2008 as compared to the first six months of 2007. This increase is primarily attributable to the second pawn location we opened in November 2007 as well as increased loan activity in our initial location. Cost of goods as a percentage of sales increased from 83.5% in 2007 to 86.0 % in 2008. This increase was due to the increase in rare coin and precious metals revenue as a percentage of total sales.

Selling, general and administrative expenses increased by $3,631,000, or 122%, during the six months ended June 30, 2008 as compared to 2007. This increase was primarily due to the acquisition of Superior Galleries and Euless Gold and Silver in May 2007. These acquisitions accounted for $2,483,000 of the increase. In addition, selling, general and administrative cost related to the new operation of Superior Precious Metals, Superior Estate Buyers, American Gold and Silver Exchange and our seconded pawn shop totaled approximately $919,000 during the first six months of 2008. Depreciation and amortization increased by $93,689, or 94%, during the first six months of 2008 due to additional assets being purchased through our recent acquisitions, new businesses and the purchase of our new store and headquarters facility. The increase in interest expense was due to the additional debt related to the Superior acquisition.

Income taxes are provided at the rate of 27.07% and 34% for 2008 and 2007, respectively.

Liquidity and Capital Resources

We expect capital expenditures to total approximately $500,000 during the next twelve months. It is anticipated that these expenditures will be funded from working capital and our credit facility. As of June 30, 2008 there were no commitments outstanding for capital expenditures.

In the event of significant growth in retail and or wholesale jewelry sales, the demand for additional working capital will expand due to a related need to stock additional jewelry inventory and increases in wholesale accounts receivable. Historically, vendors have offered us extended payment terms to finance the need for jewelry inventory growth and our management believes that we will continue to do so in the future. Any significant increase in wholesale accounts receivable will be financed under our credit facility.

Our ability to finance our operations and working capital needs are dependent upon management’s ability to negotiate extended terms or refinance its debt. We have historically renewed, extended or replaced short-term debt as it matures and management believes that we will be able to continue to do so in the near future.

From time to time, we have adjusted our 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, additional loans can be obtained from individuals or from commercial banks. If necessary, inventory levels may be adjusted or a portion of our investments in marketable securities may be liquidated in order to meet unforeseen working capital requirements.

In December 2005, we entered into a revolving credit facility with Texas Capital Bank, N.A., which currently permits borrowings up to a maximum principal amount of $4,300,000. Borrowings under the revolving credit facility are collateralized by a general security interest in substantially all of our assets (other than the assets of Superior). As of June 30, 2008, approximately $4,300,000 was outstanding under the term loan and revolving credit facility. If we were to default under the terms and conditions of the revolving credit facility, Texas Capital Bank would have the right to accelerate any indebtedness outstanding and foreclose on our assets in order to satisfy our indebtedness. Such a foreclosure could have a material adverse effect on our business, liquidity, results of operations and financial position.

DGSE COMPANIES, Inc. and Subsidiaries

Upon the consummation of our acquisition of Superior, and after the exchange by Stanford of $8,400,000 of Superior debt for shares of Superior common stock, Superior amended and restated its credit facility with Stanford. The amended and restated commercial loan and security agreement, which we refer to as the loan agreement, decreased the available credit line from $19,890,000 to $11,500,000, reflecting the $8,400,000 debt exchange. Interest on the outstanding principal balance will continue to accrue at the prime rate, as reported in the Wall Street Journal or, during an event of default, at a rate 5% greater than the prime rate as so reported.

The new credit facility is split into two revolving loans of $5,000,000 and $6,500,000. Loan proceeds can only be used for customer loans consistent with specified loan policies and procedures and for permitted inter-company transactions. Permitted inter-company transactions are loans or dividends paid to us or our other subsidiaries. We guaranteed the repayment of these permitted inter-company transactions pursuant to a secured guaranty in favor of Stanford. In connection with the secured guarantee, Stanford and Texas Capital Bank, N.A., our primary lender, entered into an intercreditor agreement with us, and we entered into a subordination agreement with Superior, both of which subordinate Stanford's security interests and repayment rights to those of Texas Capital Bank.

As of June 30, 2008, approximately $3,550,000 was available under the revolving credit facility.

The new credit facility matures on May 1, 2011, provided that in case any of several customary events of default occurs, Stanford may declare the entire principal amount of both loans due immediately and take possession and dispose of the collateral described below. An event of default includes, among others, the following events: failure to make a payment when due under the loan agreement; breach of a covenant in the loan agreement or any related agreement; a representation or warranty made in the loan agreement or related agreements is materially incorrect; a default in repayment of borrowed money to any person; a material breach or default under any material contract; certain bankruptcy or insolvency events; and a default under a third-party loan. Superior is obligated to repay the first revolving loan from the proceeds of the inventory or other collateral purchased with the proceeds of the loan.

The loans are secured by a first priority security interest in substantially all of Superior’s assets, including inventory, accounts receivable, promissory notes, books and records and insurance policies, and the proceeds of the foregoing. In addition, pursuant to the secured guaranty and intercreditor arrangements described above, Stanford has a second-order security interest in all of our accounts and inventory.

The loan agreement includes a number of customary covenants applicable to Superior, including, among others: punctual payments of principal and interest under the credit facility; prompt payment of taxes, leases and other indebtedness; maintenance of corporate existence, qualifications, licenses, intellectual property rights, property and assets; maintenance of satisfactory insurance; preparation and delivery of financial statements for us and separately for Superior in accordance with generally accepted accounting principles, tax returns and other financial information; inspection of offices and collateral; notice of certain events and changes; use of proceeds; notice of governmental orders which may have a material adverse effect, SEC filings and stockholder communications; maintenance of property and collateral; and payment of Stanford expenses.

In addition, Superior has agreed to a number of negative covenants in the loan agreement, including, among others, covenants not to: create or suffer a lien or other encumbrance on any collateral, subject to customary exceptions; incur, guarantee or otherwise become liable for any indebtedness, subject to customary exceptions; acquire indebtedness of another person, subject to customary exceptions and permitted inter-company transactions; issue or acquire any shares of its capital stock; pay dividends other than permitted inter-company transactions or specified quarterly dividends, or directors’ fees; sell or abandon any collateral except in the ordinary course of business or consolidate or merge with another entity; enter into affiliate transactions other than in the ordinary course of business on fair terms or permitted inter-company transactions; create or participate in any partnership or joint venture; engage in a new line of business; pay principal or interest on subordinate debt except as authorized by the credit facility; or make capital expenditures in excess of $100,000 per fiscal year.

On October 17, 2007, we closed on the purchase of our new headquarters location. As a result, we assumed a new loan with a remaining principal balance of $2,441,922 and an interest rate of 6.70%. The loan has required monthly payments of $20,192 with the final payment due on August 1, 2016.

DGSE COMPANIES, Inc. and Subsidiaries

	Payments due by period
Contractual Cash Obligations	Total		2008		2009 - 2010		2011 - 2012		Thereafter
Notes payable	$	187,463	$	187,463	$	—	$	—	$	—
Long-term debt and capital leases		14,426,428		250,816		4,306,121		7,592,048		2,277,443
Federal income taxes		195,469		195,469		—		—		—
Operating Leases		3,331,923		248,418		950,158		808,828		103,752
Total	$	18,141,283	$	882,166	$	5,256,279	$	8,400,876	$	2,381,195

In addition, we estimate that we will pay approximately $950,000 in interest during the next twelve months.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

The following discussion about our market risk disclosures involves forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements. We are exposed to market risk related to changes in interest rates and gold values. We do not use derivative financial instruments.

Our earnings and financial position may be affected by changes in gold values and the resulting impact on pawn lending and jewelry sales. The proceeds of scrap sales and our ability to liquidate excess jewelry inventory at an acceptable margin are dependent upon gold values. The impact on our financial position and results of operations of a hypothetical change in gold values cannot be reasonably estimated.

Item 4. Controls and Procedures.

Evaluation of disclosure controls and procedures. An evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this quarterly report. Our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934, as amended, is (1) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and (2) accumulated and communicated to our management, including our Chief Executive Officer, to allow timely decisions regarding required disclosure. Based on that evaluation, our management, including our Chief Executive Officer and our Chief Financial Officer, concluded that our disclosure controls and procedures were effective.

Changes in internal controls. For the quarter ended June 30, 2008, there have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

DGSE COMPANIES, Inc. and Subsidiaries

PART II- OTHER INFORMATION

Item 3. Legal Proceedings

On June 6, 2006 Superior Galleries was sued in the U.S. District Court for Central California by Elaine and Dean Sanders in connection with a loan made to them against 32 coins placed on consignment on June 26, 2004. Fourteen of the coins were sold, and the proceeds from this sale of approximately $186,750 were insufficient to repay the remaining loan balance of $359,471 that Superior made to the Sanders. The plaintiffs subsequently paid an additional $155,000 in December 2005 with respect to the loan, but now allege that Superior violated its agreement with them relating to the sale of the coins. Superior strongly denies that it violated the agreement or that it acted improperly in any way. This litigation was settled in December 2007 with Superior agreeing to pay Elaine and Dean Sanders $30,000 in cash.

In April 2004 Superior sued its former Chief Financial Officer, Malingham Shrinivas, in Los Angeles Superior Court for breach of contract, fraud and conspiracy. In that lawsuit, Superior alleged that he fraudulently arranged to receive more salary than he was entitled to, to pay personal expenses using Superior’s funds, and to pay third party vendors with Superior’s funds for services which were not rendered. In July 2004 Mr. Shrinivas filed a counterclaim in this litigation, claiming that he was terminated without just cause and was therefore entitled to $58,250 in severance pay. Although the case had been scheduled for trial in August 2006, prior to that time the case was stayed by order of the Superior Court because the Court had been advised that criminal charges against Mr. Shrinivas related to this matter were imminent. Those criminal charges were subsequently filed and then dropped, and therefore further proceedings in connection with the civil case will continue, but a trial date has not been scheduled. Superior believes that Mr. Shrinivas was terminated with cause and that he is therefore not entitled to any severance pay. The stay of our civil case was lifted and mediation was held in November 2007 with no results. Superior intends to vigorously pursue its claims and defend Mr. Shrinivas’ claims for severance pay.

On November 7, 2006 Superior was sued in the United States District Court for the Northern District of Texas by a competitor, Heritage Numismatic Auctions, Inc. (“Heritage”). In its complaint, Heritage alleges that Superior violated Heritage’s copyright rights by copying Heritage’s catalog descriptions of certain coins and currency offered for sale by Heritage. Heritage claims that these alleged actions also violate the California Unfair Competition Act. In December 2007 this litigation was settled with Superior agreeing to pay Heritage $75,000 in cash and DGSE Companies, Inc. agreeing to issue 8,372 restricted common shares of its common stock, having a $50,000 market value when issued in January 2008.

We may, from time to time, be involved in various claims, lawsuits, disputes with third parties, actions involving allegations of discrimination, or breach of contract actions incidental to the operation of its business. Except as set forth above, we are not currently involved in any such litigation which we believe could have a material adverse effect on our financial condition or results of operations, liquidity or cash flows.

Item 5. Other Information.

None.

DGSE COMPANIES, Inc. and Subsidiaries

Item 6. Exhibits and Reports on Form 8-K.

Exhibits:

Exhibit

Filed

Incorporated

Date Filed

Exhibit

No.

Description

Herein

by Reference

Form

with SEC

No.

2.1

Amended and Restated Agreement and Plan of Merger and Reorganization, dated as of January 6, 2007

8-K

January 9, 2007

2.1

2.2

Limited Joinder Agreement, dated as of January 6, 2007

8-K

January 9, 2007

2.9

3.1

Articles of Incorporation dated September 17, 1965

8-A12G

June 23, 1999

3.1

3.2

Certificate of Amendment to Articles of Incorporation, dated October 14, 1981

8-A12G

June 23, 1999

3.2

3.3

Certificate of Resolution, dated October 14, 1981

8-A12G

June 23, 1999

3.3

3.4

Certificate of Amendment to Articles of Incorporation , dated July 15, 1986

8-A12G

June 23, 1999

3.4

3.5

Certificate of Amendment to Articles of Incorporation, dated August 23, 1998

8-A12G

June 23, 1999

3.5

3.6

Certificate of Amendment to Articles of Incorporation, dated June 26, 1992

8-A12G

June 23, 1999

3.6

3.7

Certificate of Amendment to Articles of Incorporation, dated June 26, 2001

8-K

July 3, 2001

1.0

3.8

Certificate of Amendment to Articles of Incorporation, dated May 22, 2007

8-K

May 31, 2007

3.1

3.9

By-laws, dated March 2, 1992

8-A12G

June 23, 1999

3.7

4.1

Specimen Common Stock Certificate

S-4

January 6, 2007

4.1

DGSE COMPANIES, Inc. and Subsidiaries

10.1

Renewal, Extension And Modification Agreement dated January 28, 1994, by and among DGSE Corporation and Michael E. Hall And Marian E. Hall

10-KSB

March 1995

10.2

Lease Agreement dated June 2, 2000 by and between SND Properties and Charleston Gold and Diamond Exchange, Inc.

10-KSB

March 29, 2001

10.1

10.3

Lease agreement dated October 5, 2004 by and between Beltline Denton Road Associates and Dallas Gold & Silver Exchange

10-K

April 15, 2005

10.2

10.4

Lease agreement dated December 1, 2004 by and between Stone Lewis Properties and Dallas Gold & Silver Exchange

10-K

April 15, 2005

10.3

10.5

Lease agreement dated November 18, 2004 by and between Hinkle Income Properties LLC and American Pay Day Centers, Inc.

10-K

April 15, 2005

10.4

10.6

Lease Agreement dated January 17, 2005 by and between Belle-Hall Development Phase III Limited Partnership and DGSE Companies, Inc.

S-4

January 6, 2007

10.6

10.7

Sale agreement dated executed July 5, 2007 by and between DGSE Companies, Inc. and Texas Department of Transportation

8-K

July 11, 2007

10.1

10.8

Purchase agreement dated July 5, 2007 by and between DGSE Companies, Inc. and 11311 Reeder Road Holdings, LP

8-K

July 11, 2007

10.2

10.9

Loan Agreement, dated as of December 22, 2005, between DGSE Companies, Inc. and Texas Capital Bank, N.A.

8-K/A

August 17, 2006

10.1

10.10

Third Amendment to Loan Agreement, dated as of May 10, 2007, by and between DGSE Companies, Inc. and Texas Capital Bank, N.A.

8-K

May 9, 2007

3.0

DGSE COMPANIES, Inc. and Subsidiaries

10.11

Support Agreement, DGSE stockholders, dated as of January 6, 2007

8-K

January 9, 2007

99.1

10.12

Securities Exchange Agreement, dated as of January 6, 2007

8-K

January 9, 2007

99.2

10.13

Warrant to DiGenova, issued January 6, 2007

8-K

January 9, 2007

99.3

10.14

Support Agreement, Superior stockholders, dated as of January 6, 2007

8-K

January 9, 2007

99.5

10.15

Asset purchase agreement, dated May 9, 2007, by and between DGSE Companies, Inc. and Euless Gold & Silver, Inc.

8-K

May 9, 2007

1.0

10.16

Subordinated Promissory Note dated May 9, 2007

8-K

May 9, 2007

2.0

10.17

Registration Rights Agreement with Stanford International Bank Ltd., dated as of May 30, 2007

8-K

May 31, 2007

99.1

10.18

Corporate Governance Agreement with Dr. L.S. Smith and Stanford International Bank Ltd., dated as of May 30, 2007

8-K

May 31, 2007

99.2

10.19

Escrow Agreement with American Stock Transfer & Trust Company and Stanford International Bank Ltd., as stockholder agent, dated as of May 30, 2007

8-K

May 31, 2007

99.3

10.20

Form of Warrants

8-K

May 31, 2007

99.4

10.21

Amended and Restated Commercial Loan and Security Agreement, by and between Superior Galleries Inc. and Stanford International Bank Ltd., dated as of May 30, 2007

8-K

May 31, 2007

99.5

10.22

Employment Agreement with L.S. Smith, dated as of May 30, 2007

8-K

May 31, 2007

99.6

10.23

Employment Agreement with William H. Oyster, dated as of May 30, 2007

8-K

May 31, 2007

99.7

10.24

Employment Agreement with John Benson, dated as of May 30, 2007

8-K

May 31, 2007

99.8

DGSE COMPANIES, Inc. and Subsidiaries

31.1

Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 implementing Section 302 of the Sarbanes-Oxley Act of 2002 by Dr. L.S. Smith

31.2

Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 implementing Section 302 of the Sarbanes-Oxley Act of 2002 by John Benson

32.1

Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Dr. L.S. Smith

32.2

Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by John Benson

Reports on Form 8-K :

None.

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.

DGSE Companies, Inc.


By:	/s/ L. S. Smith	Dated: August 13, 2008
	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: August 13, 2008
	L. S. Smith Chairman of the Board, Chief Executive Officer and Secretary


By:	/s/ W. H. Oyster	Dated: August 13, 2008
	W. H. Oyster Director, President and Chief Operating Officer


By:	/s/ John Benson	Dated: August 13, 2008
	John Benson Chief Financial Officer (Principal Accounting Officer)