For the second quarter, cost of sales decreased by $2.9 million, or 11 percent, to $24.6 million, as compared to $27.5 million during the same period in 2011, driven by lower sales. Cost of goods as a percentage of sales decreased from 89.8 percent in 2011 to 86.0 percent in 2012, primarily due to the higher margins on the newly acquired SBT business.

For the three months ended June 30, 2012, SG&A expenses increased by $3.4 million, or 133 percent, to $6 million, as compared to $2.6 million during the same period in 2011. $1.8 million of this increase is due to the addition of the SBT stores, and the opening of four new non-SBT stores added $692,000 in the current period, due to increased advertising costs, salaries, payroll taxes, building rent and other costs. In addition, the Company incurred $932,000 in professional fees associated with the restatement of our financial statements, and the related SEC investigation.

In the second quarter of 2012, the discontinued operations of Superior generated a net loss of $201,000. Prior to the charge to discontinued operations the Company incurred a loss from continuing operations of $2,207,000 for the second quarter of 2012. Net loss, after discontinued operations for the quarter was $2,408,000.

Outlook

“In summary, for the first half of 2012 sales were up $7.8 million over the first half of 2011, including the addition of SBT sales,” stated Mr. Vierling . “The net loss for the period was $1.9 million but shareholders should note that this amount includes $2.0 million in discontinued operations, and one-time expenses associated with the restatement of our financial statements”.

“During the year, we took decisive measures to not only rectify our financial reporting and controls, but to also gain market share through new store openings,” stated Mr. Vierling.

“DGSE’s retail footprint has grown significantly in the last 18 months through both acquisition and the opening of additional locations. In the coming year, DGSE will continue to evaluate opportunities to expand its number of retail stores. I expect that the bulk of our growth in 2013 will come from the addition of locations in metro areas in which we already have a strong retail presence,” continued Mr. Vierling. “We are actively looking at expansion opportunities in Atlanta, Charleston, Chicago and Dallas that meet our qualifications as a premiere retail location”.

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