Selling, general and administrative expenses increased $3.3 million, or 28 percent, in fiscal 2011 to $15.0 million, compared to $11.7 million in the prior year. This increase was primarily due to the addition of SBT in September of 2011 and to expenses related to opening new stores.

In fiscal 2011, the Company recorded a $4.4 million one-time non-cash loss on settlement of debt with a related party. This non-cash loss related to two separate transactions with NTR. In September of 2011, NTR forgave $2 million of payables owed by DGSE in exchange for 400,000 of our restricted shares of common stock. Based on the value of the shares at that time, the Company recorded a $1.7 million non-cash loss on settlement of this debt. In October of 2011, NTR forgave $2.5 million of additional payables in exchange for 5,000,000 options to purchase shares of our common stock at an exercise price of $15 per share. Based on the fair value of these options, estimated using the Black-Scholes model, the Company recognized an additional non-cash loss of $2.6 million. The Company had net income of $1.01 million, or $0.09 per diluted share, in fiscal 2011 compared to $10.7 million, or $0.96 per diluted share, as restated in fiscal year 2010.

First Quarter 2012 Results

In the quarter ended March 31, 2012, sales increased by $9.8 million, or 43%, to $32.8 million as compared to $23 million during the same period in 2011. This increase was primarily due to the addition of $7.8 million in sales from SBT, which was not a part of our operations until September 2011. Non-SBT sales increased by $2.1 million, or 9 percent, compared to the same period in 2011 due to an increase in jewelry, rare coins and scrap sales.

For the first quarter of 2012, cost of sales increased $5.7 million, or 28 percent, to $26.1 million compared to $20.4 million in the same period in 2011. Cost of goods as a percentage of sales decreased from 88.9 percent in 2011 to 79.5 percent in 2012, primarily due to higher margins in our newly acquired SBT business.

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