According to the World Gold Council (“WGC”), the demand for gold bullion in the United States dropped by 32% on a dollar basis in 2012. Scrap purchases were impacted negatively as well, as the WGC also notes that the worldwide supply of recycled gold, excluding India, dropped by 6% in 2012. There was also much less volatility in gold pricing in 2012, which drove less press coverage and had a direct negative impact on retail level transactions.

Gross margin increased in Fiscal 2012 by $4,169,318, to $24,284,053 or 19.0% of revenue, compared to $20,114,735 or 14.5% of revenue in the prior year. This increase is due to margin increases in jewelry and scrap sales, as well as a shift in our sales mix away from the low margin bullion business.

Selling, general and administrative expenses increased $11,597,981 or 88% in Fiscal 2012, to $24,802,391 compared to $13,204,410 in the prior year. This increase was entirely driven by one-time costs, the acquisition of SBT in September of 2011, and the opening of additional non-SBT stores. $5,263,573 was incremental expense related to including SBT stores for a full year in 2012, versus a partial year in 2011 results, while $3,495,637 related to the addition of new non-SBT stores in Fiscal 2012. Additionally, the Company spent $3,176,884 in Fiscal 2012 in relation to the recent restatement and related legal matters. Excluding these expenses, the Company would have seen a slight decrease in its overall expenses for Fiscal 2012.

Depreciation and amortization increased by $390,697 or 128% in Fiscal 2012, to $696,477 compared to $305,780 in the prior year. $170,644 of this increase was driven by recognizing a full year of amortization related to the SBT intangible asset, versus a partial year in 2011. This remaining increase was driven by new assets related to store openings being placed into service, and amortization of deferred financing costs associated with the renewal of our credit facility.

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