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 September 30, 2009


or


 ̈
            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.
      Employerincorporation
      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.


YESþ NO ̈





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  ̈
              Accelerated
      filer  ̈Non-accelerated
      filer  ̈
              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 ̈ NOþ





Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of August 10, 2009:





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











TABLE OF
CONTENTS





Page No.PART I.
                                      
                                      FINANCIAL INFORMATIONItem
    1.
                                      
                                      Consolidated
      Financial Statements.
                                      
                                      1Consolidated
      Balance Sheets as of September 30, 2009 and December 31,
    2008
                                      
                                      1Consolidated
      Statements of Operations for the nine months ended
                                      
                                      2September,
      30, 2009 and 2008Consolidate
      Statements of Operations for the three months endedSeptember
      30, 2009 and 2008
                                      
                                      3Consolidated
      Statements of Cash Flows for the nine months ended
                                      
                                      4September
      30, 2009 and 2008Notes
      to Consolidated Financial Statements
                                      
                                      5Item
    2.
                                      
                                      Management’s
      Discussion and Analysis of Financial Condition
                                      
                                      11and
      Results of Operations.Item
      3.
                                      
                                      Quantitative
      and Qualitative Disclosures About Market Risk.
                                      
                                      18Item
      4.
                                      
                                      Controls
      and Procedures.
                                      
                                      18PART
      II.
                                      
                                      OTHER
      INFORMATIONItem
      3.
                                      
                                      Legal
      Proceedings.
                                      
                                      19Item
    5.
                                      
                                      Other
      Information.
                                      
                                      19Item
    6.
                                      
                                      Exhibits.
                                      
                                      19SIGNATURES





i





DGSE
Companies, Inc. and Subsidiaries





PART
I.   FINANCIAL INFORMATION





Item
1. Consolidated Financial Statements.





CONSOLIDATED
BALANCE SHEETS





September
                  
                  
                  December 31,2009
                  
                  
                  2008UnauditedASSETSCurrent
      Assets:Cash
      and cash equivalents
                  
                  $
                  1,186,204
                  
                  
                  $
                  244,429Trade
      receivables
                  
                  
                  1,409,770
                  
                  
                  
                  2,326,337Inventories
                  
                  
                  15,603,916
                  
                  
                  
                  16,052,833Prepaid
      expenses
                  
                  
                  561,838
                  
                  
                  
                  533,318Prepaid
      federal income tax
                  
                  
                  544,769
                  
                  
                  
                  639,372Current
      assets of discontinued operations
                  
                  
                  —0—
                  
                  
                  
                  900,306Total
      current assets
                  
                  
                  19,306,497
                  
                  
                  
                  20,696,595Property
      and equipment, net
                  
                  
                  4,920,153
                  
                  
                  
                  4,868,306Deferred
      income taxes
                  
                  
                  1,887,994
                  
                  
                  
                  1,908,032Goodwill
                  
                  
                  837,117
                  
                  
                  
                  837,117Intangible
      assets
                  
                  
                  2,464,006
                  
                  
                  
                  2,492,673Other
      assets
                  
                  
                  285,093
                  
                  
                  
                  235,917Non-current
      assets of discontinued operations
                  
                  
                  305,275
                  
                  
                  
                  305,275$
                  30,006,135
                  
                  
                  $
                  31,343,915LIABILITIESCurrent
      Liabilities:Notes
      payable
                  
                  $
                  44,971
                  
                  
                  $
                  191,078Current
      maturities of long-term debt
                  
                  
                  328,162
                  
                  
                  
                  599,972Line
      of credit
                  
                  
                  3,195,000
                  
                  
                  
                  3,595,000Accounts
      payable – trade
                  
                  
                  252,879
                  
                  
                  
                  734,906Accrued
      expenses
                  
                  
                  239,846
                  
                  
                  
                  647,536Customer
      deposits
                  
                  
                  461,456
                  
                  
                  
                  1,230,991Current
      liabilities of discontinued operations
                  
                  
                  —0—
                  
                  
                  
                  33,144Total
      current liabilities
                  
                  
                  4,522,314
                  
                  
                  
                  7,032,627Long-term
      debt, less current maturities
                  
                  
                  11,651,387
                  
                  
                  
                  11,715,76516,173,701
                  
                  
                  
                  18,748,392STOCKHOLDERS’
      EQUITYCommon
      stock, $.01 par value; 30,000,000 shares authorized; 9,833,635 and
      9,833,635 shares issued and outstanding at the end of each period in 2009
      and 2008, respectively
                  
                  
                  98,337
                  
                  
                  
                  98,337Additional
      paid-in capital
                  
                  
                  18,589,812
                  
                  
                  
                  18,541,662Retained
      deficit
                  
                  
                  (4,855,715
                  )
                  
                  
                  (6,044,476
                  )13,832,434
                  
                  
                  
                  12,595,523$
                  30,006,135
                  
                  
                  $
                  31,343,915





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





1





DGSE
Companies, Inc. and Subsidiaries


CONSOLIDATED
STATEMENTS OF OPERATIONS


Nine months ended September 30,2009
                  
                  
                  2008UnauditedRevenueSales
                  
                  $
                  63,254,038
                  
                  
                  $
                  80,249,402Costs
      and expensesCost
      of goods sold
                  
                  
                  53,677,847
                  
                  
                  
                  70,461,581Selling,
      general and administrative expenses
                  
                  
                  6,770,875
                  
                  
                  
                  7,509,506Depreciation
      and amortization
                  
                  
                  196,145
                  
                  
                  
                  197,44560,644,867
                  
                  
                  
                  78,168,532Operating
      income
                  
                  
                  2,609,171
                  
                  
                  
                  2,080,870Other
      expense (income)Other
      income
                  
                  
                  —
                  
                  
                  
                  (11,635
                  )Interest
      expense
                  
                  
                  608,241
                  
                  
                  
                  511,127Earnings
      before income taxes
                  
                  
                  2,000,930
                  
                  
                  
                  1,581,378Income
      tax expense
                  
                  
                  430,385
                  
                  
                  
                  444,346Net
      earnings from continuing operations
                  
                  
                  1,570,545
                  
                  
                  
                  1,137,032Discontinued
      operations:Loss
      from discontinued operations (less applicable income tax (benefit) of
      ($201,241) and ($2,095)
                  
                  
                  (381,784
                  )
                  
                  
                  (4,067
                  )Net
      earnings
                  
                  $
                  1,188,761
                  
                  
                  
                  1,132,965Earnings
      per common share – basicFrom
      continuing operations
                  
                  $
                  0.16
                  
                  
                  $
                  0.12From
      discontinued operations
                  
                  $
                  (0.04
                  )
                  
                  $
                  (0.00
                  )Net
      earnings per common share
                  
                  $
                  0.12
                  
                  
                  $
                  0.12Earnings
      per common share – dilutedFrom
      continuing operations
                  
                  $
                  0.16
                  
                  
                  $
                  0.11From
      discontinued operations
                  
                  $
                  (0.04
                  )
                  
                  $
                  (0.00
                  )Net
      earnings per common share
                  
                  $
                  0.12
                  
                  
                  $
                  0.11Weighted
      average number of common sharesBasic
                  
                  
                  9,833,635
                  
                  
                  
                  9,498,729Diluted
                  
                  
                  9,833,635
                  
                  
                  
                  10,344,363





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





2





DGSE Companies,
Inc. and Subsidiaries





CONSOLIDATED
STATEMENTS OF OPERATIONS





Three months ended September2009
                  
                  
                  2008UnauditedRevenueSales
                  
                  
                  16,280,397
                  
                  
                  
                  23,491,94616,280,397
                  
                  
                  
                  23,491,946Costs
      and expensesCost
      of goods sold
                  
                  
                  13,286,097
                  
                  
                  
                  20,417,850Selling,
      general and administrative expenses
                  
                  
                  2,185,049
                  
                  
                  
                  2,530,171Depreciation
      and amortization
                  
                  
                  78,463
                  
                  
                  
                  65,81215,549,609
                  
                  
                  
                  23,013,833Operating
      income
                  
                  
                  730,788
                  
                  
                  
                  478,113Other
      expense (income)Other
      income
                  
                  
                  —
                  
                  
                  
                  —Interest
      expense
                  
                  
                  223,685
                  
                  
                  
                  165,491Earnings
      before income taxes
                  
                  
                  507,103
                  
                  
                  
                  312,622Income
      tax expense
                  
                  
                  197,202
                  
                  
                  
                  111,229Net
      earnings from continuing operations
                  
                  
                  309,901
                  
                  
                  
                  201,393Discontinued
      operations:Loss from
      discontinued operations (less applicable income tax benefit of
      ($13,647) and ($36,930), respectively)
                  
                  
                  (40,160
                  )
                  
                  
                  (35,607
                  )Net
      earnings
                  
                  $
                  269,741
                  
                  
                  $
                  165,786Earnings
      per common share – basic and dilutedFrom
      continuing operations
                  
                  $
                  0.03
                  
                  
                  $
                  0.02From
      discontinued operations
                  
                  $
                  0.00
                  
                  
                  $
                  0.02Net
      earnings per common share
                  
                  $
                  0.03
                  
                  
                  $
                  0.02Weighted
      average number of common sharesBasic
                  
                  
                  9,833,635
                  
                  
                  
                  9,498,729Diluted
                  
                  
                  9,833,635
                  
                  
                  
                  10,344,363





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





3




DGSE COMPANIES,
Inc. and Subsidiaries


CONSOLIDATED
STATEMENTS OF CASH FLOWS





Nine months ended September2009
                                              
                                              
                                              2008UnauditedCash
      flows from operating activitiesNet
      earnings
                                              
                                              $
                                              1,188,761
                                              
                                              
                                              $
                                              1,132,965Adjustments
      to reconcile net earnings to net cash provided by operating
      activitiesDepreciation
      and amortization
                                              
                                              
                                              196,145
                                              
                                              
                                              
                                              281,654Deferred
      income taxes
                                              
                                              
                                              20,038
                                              
                                              
                                              
                                              88,074Gain
      on marketable securities
                                              
                                              
                                              —
                                              
                                              
                                              
                                              41,237Loss
      on discontinued operations
                                              
                                              
                                              (381,784
                                              )
                                              
                                              
                                              —(Increase)
      decrease in operating assets and liabilitiesTrade
      receivables
                                              
                                              
                                              916,567
                                              
                                              
                                              
                                              253,500Inventories
                                              
                                              
                                              448,917
                                              
                                              
                                              
                                              (2,123,751
                                              )Prepaid
      expenses and other current assets
                                              
                                              
                                              (
      28,520
                                              )
                                              
                                              
                                              (263,925
                                              )Accounts
      payable and accrued expenses
                                              
                                              
                                              (992,151
                                              )
                                              
                                              
                                              799,884Customer
      deposits
                                              
                                              
                                              (769,535
                                              )
                                              
                                              
                                              552,151Federal
      income taxes payable
                                              
                                              
                                              94,603
                                              
                                              
                                              
                                              258,895Other
      assets
                                              
                                              
                                              (49,176
                                              )
                                              
                                              
                                              116,133Net
      cash provided by operating activities
                                              
                                              
                                              643,865
                                              
                                              
                                              
                                              1,136,814Cash
      flows from investing activitiesPawn
      loans made
                                              
                                              
                                              —
                                              
                                              
                                              
                                              (954,746
                                              )Pawn
      loans repaid
                                              
                                              
                                              —
                                              
                                              
                                              
                                              463,188Recovery
      of pawn loan principal through sale of forfeited
collateral
                                              
                                              
                                              —
                                              
                                              
                                              
                                              471,701Proceeds
      from sale of discontinued operations
                                              
                                              
                                              1,324,450
                                              
                                              
                                              
                                              —Purchase
      of property and equipment
                                              
                                              
                                              (290,352
                                              )
                                              
                                              
                                              (901,871
                                              )Merger
      cost paid
                                              
                                              
                                              
                                              
                                              
                                              
                                              (61,699
                                              )Net
      cash provided by (used in) investing activities
                                              
                                              
                                              1,034,098
                                              
                                              
                                              
                                              (983,497
                                              )Cash
      flows from financing activitiesProceeds
      from line of credit
                                              
                                              
                                              —
                                              
                                              
                                              
                                              2,150,000Repayments
      of notes payable
                                              
                                              
                                              (736,188
                                              )
                                              
                                              
                                              (905,352
                                              )Net
      cash provided by (used in) financing activities
                                              
                                              
                                              (736,188
                                              )
                                              
                                              
                                              1,244,648NET
      INCREASE IN CASH AND
    CASH    EQUIVALENTS
                                              
                                              
                                              941,775
                                              
                                              
                                              
                                              1,397,965Cash
      and cash equivalents at beginning of period
                                              
                                              
                                              244,429
                                              
                                              
                                              
                                              536,548Cash
      and cash equivalents at end of period
                                              
                                              $
                                              1,186,204
                                              
                                              
                                              $
                                              1,943,513





Supplemental
disclosures:





Interest
paid for the nine months ended September 30, 2009 and 2008 was $608,241 and
$511,127, respectively.


Income
taxes paid for the nine months ended September 30, 2009 and 2008 was $0 and $0,
respectively.





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





4




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
Jewelry Exchange, Inc., Charleston Gold and Diamond Exchange, Inc., Superior
Galleries, Inc. Superior Precious Metals, Inc., American Gold and Diamond
Exchange, Inc, and Superior Estate Buyers, 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, 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.





In
November 2008, we decided to discontinue the live auction segment of our
business activities.  This decision was based on the substantial
losses being incurred by this operating segment during 2008.  As a
result, certain sections of the Consolidated Financial Statements and related
notes have been reclassified to present the results of the auction segment
activities as discontinued operations.





(2)
            Goodwill.





During
the fourth quarter of 2008, we reflected $8,185,443 of goodwill relating to the
acquisition of Superior Galleries. Inc. in May 2007. Under SFAS No. 142 (ASC
350), we are required to undertake an annual impairment test at our year end or
when there is a triggering event. In addition to the annual impairment review,
there were a number of triggering events in the fourth quarter due to the
significant operating losses of Superior and the impact of the economic downturn
on Superior’s operations and the decline in the Company’s share price resulting
in a substantial discount of the market capitalization to tangible net asset
value. An evaluation of the recorded goodwill was undertaken, which considered
two methodologies to determine the fair-value of the entity:





· A market
capitalization approach, which measure market capitalization at the measurement
date.


· A
discounted cash flow approach, which entails determining fair value using a
discounted cash flow methodology.  This method requires significant
judgment to estimate the future cash flow and to determine the appropriate
discount rates, growth rates, and other assumptions.





Each of
these methodologies we believe has merit, and resulted in the determination that
goodwill was impaired. Accordingly, to reflect the impairment, we recorded a
non-cash charge of $8,185,443, which eliminated the value of the goodwill
related to Superior.





(3)
            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 September 30,
2009 and 2008 is as follows:





5




DGSE COMPANIES,
Inc. and Subsidiaries




2009
                  
                  
                  2008Three months ended September 30,
                  
                  
                  Three months ended September 30,Net Earnings
                  
                  
                  Shares
                  
                  
                  Per share
                  
                  
                  Net Earnings
                  
                  
                  Shares
                  
                  
                  Per shareBasic
      earnings per common share
                  
                  $
                  269,741
                  
                  
                  
                  9,833,635
                  
                  
                  $
                  0.03
                  
                  
                  $
                  165,786
                  
                  
                  
                  9,498,729
                  
                  
                  $
                  0.02Effect
      of dilutive stock options
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  845,634
                  
                  
                  
                  0.00Diluted
      earnings per common share
                  
                  $
                  269,741
                  
                  
                  
                  9,833,635
                  
                  
                  $
                  0.3
                  
                  
                  $
                  165,786
                  
                  
                  
                  10,344,363
                  
                  
                  $
                  0.02





Earnings per common share from
                    continuing operations:
                  
                  2009
                  
                  
                  2008Nine months ended September 30,
                  
                  
                  Nine months ended September 30,Net Earnings
                  
                  
                  Shares
                  
                  
                  Per share
                  
                  
                  Net Earnings
                  
                  
                  Shares
                  
                  
                  Per shareBasic
      earnings per common share
                  
                  $
                  1,188,761
                  
                  
                  
                  9,833,635
                  
                  
                  $
                  0.12
                  
                  
                  $
                  1,132,965
                  
                  
                  
                  9,498,729
                  
                  
                  $
                  0.12Effect
      of dilutive stock options
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  845,634
                  
                  
                  
                  —Diluted
      earnings per common share
                  
                  $
                  1,188,761
                  
                  
                  
                  9,833,635
                  
                  
                  $
                  0.12
                  
                  
                  $
                  1,132,965
                  
                  
                  
                  10,344,363
                  
                  
                  $
                  0.11
    September
      30, 2009
                  
                  
                  September
      30, 2008Warrants
      issued in conjuction with acquisition
                  
                  
                  438,672
                  
                  
                  
                  942,585Common
      stock options
                  
                  
                  1,543,134
                  
                  
                  
                  1,443,134





6


DGSE
COMPANIES, Inc. and Subsidiaries


(4)
            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 three months ended
September 30 were as follows:




(In
      thousands)
                
                Retail
                
                
                Wholesale
                
                
                Precious
                
                
                Rare
                
                
                Discontinued
                
                
                CorporateJewelry
                
                
                Jewelry
                
                
                Metals
                
                
                Coins
                
                
                Operations
                
                
                and
      Other
                
                
                ConsolidatedRevenues2009
                
                $
                5,734
                
                
                $
                872
                
                
                $
                7,203
                
                
                $
                2,471
                
                
                $
                -----
                
                
                $
                ---
                
                
                $
                16,2802008
                
                
                6,035
                
                
                
                1,148
                
                
                
                11,399
                
                
                
                4,909
                
                
                
                --
                
                
                
                ---
                
                
                
                23,491Net
      earnings (loss)2009
                
                
                207
                
                
                
                (22
                )
                
                
                61
                
                
                
                107
                
                
                
                (40
                )
                
                
                (43
                )
                
                
                2702008
                
                
                67
                
                
                
                (14
                )
                
                
                38
                
                
                
                59
                
                
                
                (36
                )
                
                
                52
                
                
                
                166Identifiable
      assets2009
                
                
                23,267
                
                
                
                1,779
                
                
                
                1,951
                
                
                
                2,386
                
                
                
                305
                
                
                
                318
                
                
                
                30,0062008
                
                
                19,315
                
                
                
                1,073
                
                
                
                1,289
                
                
                
                2,801
                
                
                
                2,973
                
                
                
                13,337
                
                
                
                40,788Goodwill2009
                
                
                --
                
                
                
                837
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                8372008
                
                
                --
                
                
                
                837
                
                
                
                --
                
                
                
                7,267
                
                
                
                848
                
                
                
                --
                
                
                
                8,952Capital
      Expenditures2009
                
                
                200
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                2002008
                
                
                234
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                22
                
                
                
                --
                
                
                
                256Depreciation
      and
                  amortization2009
                
                
                78
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                -
                
                
                
                782008
                
                
                38
                
                
                
                --
                
                
                
                14
                
                
                
                13
                
                
                
                --
                
                
                
                --
                
                
                
                65Income
      tax2009
                
                $
                169
                
                
                
                (12
                )
                
                
                (12
                )
                
                
                77
                
                
                
                (12
                )
                
                
                (13
                )
                
                
                1972008
                
                
                66
                
                
                
                1
                
                
                
                42
                
                
                
                27
                
                
                
                ( 3
                )
                
                
                (22
                )
                
                
                111Interest
      expense2009
                
                
                66
                
                
                
                26
                
                
                
                66
                
                
                
                66
                
                
                
                --
                
                
                
                --
                
                
                
                2242008
                
                
                136
                
                
                
                --
                
                
                
                29
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                165Significant
      non-cash itemsOther than
      depreciation and Amortization2009
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --2008
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --
                
                
                
                --




7


DGSE
COMPANIES, Inc. and Subsidiaries
  Our
operations by segment for the Nine months ended September 30 were as
follows:





(In
      thousands)
                  
                  Retail
                  
                  
                  Wholesale
                  
                  
                  Precious
                  
                  
                  Rare
                  
                  
                  Discontinued
                  
                  
                  CorporateJewelry
                  
                  
                  Jewelry
                  
                  
                  Metals
                  
                  
                  Coins
                  
                  
                  Operations
                  
                  
                  and
      Other
                  
                  
                  ConsolidatedRevenues2009
                  
                  $
                  17,881
                  
                  
                  $
                  2,672
                  
                  
                  $
                  31,227
                  
                  
                  $
                  11,474
                  
                  
                  $
                  --
                  
                  
                  $
                  ---
                  
                  
                  $
                  63,2542008
                  
                  
                  20,306
                  
                  
                  
                  3,645
                  
                  
                  
                  40,256
                  
                  
                  
                  16,042
                  
                  
                  
                  --
                  
                  
                  
                  ---
                  
                  
                  
                  80,249Net
      earnings (loss)2009
                  
                  
                  689
                  
                  
                  
                  (99
                  )
                  
                  
                  481
                  
                  
                  
                  600
                  
                  
                  
                  (382
                  )
                  
                  
                  (100
                  )
                  
                  
                  1,1892008
                  
                  
                  682
                  
                  
                  
                  34
                  
                  
                  
                  410
                  
                  
                  
                  71
                  
                  
                  
                  (6
                  )
                  
                  
                  (58
                  )
                  
                  
                  1,133Identifiable
      assets2009
                  
                  
                  23,267
                  
                  
                  
                  1,779
                  
                  
                  
                  1,951
                  
                  
                  
                  2,386
                  
                  
                  
                  305
                  
                  
                  
                  318
                  
                  
                  
                  30,0062008
                  
                  
                  19,315
                  
                  
                  
                  1,073
                  
                  
                  
                  1,289
                  
                  
                  
                  2,801
                  
                  
                  
                  2,973
                  
                  
                  
                  13,337
                  
                  
                  
                  40,788Goodwill2009
                  
                  
                  --
                  
                  
                  
                  837
                  
                  
                  
                  --
                  
                  
                  
                  7,267
                  
                  
                  
                  848
                  
                  
                  
                  --
                  
                  
                  
                  8372008
                  
                  
                  --
                  
                  
                  
                  837
                  
                  
                  
                  --
                  
                  
                  
                  --
                  
                  
                  
                  --
                  
                  
                  
                  8,115
                  
                  
                  
                  8,952Capital
      Expenditures2009
                  
                  
                  290
                  
                  
                  
                  --
                  
                  
                  
                  --
                  
                  
                  
                  --
                  
                  
                  
                  --
                  
                  
                  
                  --
                  
                  
                  
                  2902008
                  
                  
                  754
                  
                  
                  
                  --
                  
                  
                  
                  --
                  
                  
                  
                  --
                  
                  
                  
                  --
                  
                  
                  
                  148
                  
                  
                  
                  902Depreciation
      andamortization2009
                  
                  
                  196
                  
                  
                  
                  --
                  
                  
                  
                  --
                  
                  
                  
                  --
                  
                  
                  
                  --
                  
                  
                  
                  -
                  
                  
                  
                  1962008
                  
                  
                  115
                  
                  
                  
                  --
                  
                  
                  
                  41
                  
                  
                  
                  41
                  
                  
                  
                  --
                  
                  
                  
                  --
                  
                  
                  
                  197Income
      tax expense (benefit)2009
                  
                  
                  421
                  
                  
                  
                  (27
                  )
                  
                  
                  132
                  
                  
                  
                  164
                  
                  
                  
                  (160
                  )
                  
                  
                  (100
                  )
                  
                  
                  4302008
                  
                  
                  428
                  
                  
                  
                  (4
                  )
                  
                  
                  23
                  
                  
                  
                  17
                  
                  
                  
                  ( 3
                  )
                  
                  
                  (17
                  )
                  
                  
                  444Interest
      expense2009
                  
                  
                  175
                  
                  
                  
                  83
                  
                  
                  
                  175
                  
                  
                  
                  175
                  
                  
                  
                  ---
                  
                  
                  
                  --
                  
                  
                  
                  6082008
                  
                  
                  422
                  
                  
                  
                  --
                  
                  
                  
                  44
                  
                  
                  
                  45
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  511Significant
      non-cash itemsOther than depreciation
      andAmortization2009
                  
                  
                  --
                  
                  
                  
                  --
                  
                  
                  
                  --
                  
                  
                  
                  --
                  
                  
                  
                  ---
                  
                  
                  
                  --
                  
                  
                  
                  --2008
                  
                  
                  --
                  
                  
                  
                  --
                  
                  
                  
                  --
                  
                  
                  
                  --
                  
                  
                  
                  ---
                  
                  
                  
                  --
                  
                  
                  
                  --





(5)
            Stock-based
      Compensation.





Effective
January 1, 2006, we adopted the fair value recognition provisions of SFAS
No. 123 (revised 2004), Share-Based Payment , (SFAS No. 123(R)) (ASC
718) for all share-based payment awards to employees and directors including
stock options related to our employee stock purchase plan. In addition, we
applied the provisions of Staff Accounting Bulletin No. 107 (SAB
No. 107), issued by the SEC, in our adoption of SFAS
No. 123(R).


We
adopted SFAS No. 123(R) )) (ASC 718) using the
modified-prospective-transition method. Under this transition method,
stock-based compensation expense recognized after the effective date includes:
(1) compensation cost for all share-based payments granted prior to, but
not yet vested as of January 1, 2006, based on the measurement date fair
value estimate in accordance with the original provisions of SFAS No. 123,
and (2) compensation cost for all share-based payments granted subsequent
to January 1, 2006, based on the measurement date fair value estimate in
accordance with the provisions of SFAS No. 123(R) )) (ASC
718).


Stock-based
compensation expense recognized each period is based on the greater of the value
of the portion of share-based payment awards under the straight-line method or
the value of the portion of share-based payment awards that is ultimately
expected to vest during the period. In accordance with SFAS No. 123(R) ))
(ASC 718), we estimate forfeitures at the time of grant and revise our
estimates, if necessary, in subsequent periods if actual forfeitures differ from
those estimates.





8




DGSE
COMPANIES,
Inc. and Subsidiaries




Upon
adoption of SFAS No. 123(R) )) (ASC 718), 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) )) (ASC 718). 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) )) (ASC 718). The tax effect of employee stock-based
compensation has no APIC pool.
 
 SFAS
No. 123(R) )) (ASC 718) 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. There has been no excess tax benefit as of December 31, 2008,
2007 and 2006.
 
 (6)   Discontinued
Operations.
 
 In
November 2008 we decided to discontinue the live auction segment of the
Company’s business activities. This decision was based on the substantial losses
being incurred by this operating segment during 2008. As a result, the operating
results of the auction segment have been reclassified to discontinued operations
for both 2008 and 2009.  During the first nine months of 2009 and 2008
the auction segment incurred pretax losses of $572,985 and $19,760,
respectively.
 
 The
following summarizes the carrying amount of assets and liabilities of the
auction segment as of September 30,2009.
 
 AssetsAccounts
      receivable
              
              $
              0Current
      assets
              
              $
              0Long-term
      receivable
              
              $
              305,275Total
      assets
              
              $
              305,275LiabilitiesAuctions
      payable
              
              $
              0
 
 As a
result, operating results from the auction segment have been reclassified to
discontinued operations for all periods presented.  As of September
30, 2009, there were no operating assets to be disposed of or liabilities to be
paid in completing the disposition of these operations.
 
 In June
2009 the Company sold the assets of National Jewelry Exchange, Inc.(the
Company’s two pawn shops) to an unrelated third party for cash in the amount of
$ 1,324,450. The proceeds were used to retire $400,000 of our bank debt and the
balance was used for working capital. As a result, operating results from
National Jewelry Exchange have been reclassified to discontinued operations for
all periods presented. During the nine months ended September 30, 2009 the two
pawn shops incurred a pre tax loss of $10,040. During the nine months ended
September 30, 2008 the two pawn shops had pre tax income of
$13,598.


9




DGSE COMPANIES, Inc. and
Subsidiaries




(7)
            New
      Accounting Pronouncements.




In June
2009, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards No. 168, The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles — a
replacement of FASB Statement No. 162(The Codification). The
Codification reorganized existing U.S. accounting and reporting standards issued
by the FASB and other related private sector standard setters into a single
source of authoritative accounting principles arranged by topic.  The
Codification supersedes all existing U.S. accounting standards; all other
accounting literature not included in the Codification (other than Securities
and Exchange Commission guidance for publicly-traded companies) is considered
non-authoritative. The Codification was effective on a prospective basis for
interim and annual reporting periods ending after September 15, 2009. The
adoption of the Codification changed the Company’s references to U.S. GAAP
accounting standards but did not impact the Company’s results of operations,
financial position or liquidity.


In
December 2007, the FASB issued SFAS No. 141 (revised 2007),“Business Combinations”
(“SFAS No. 141(R)”) (ASC850), which establishes principles for how the
acquirer recognizes and measures in the financial statements the identifiable
assets acquired, the liabilities assumed, and any non-controlling interest in
the acquiree. This statement also provides guidance for recognizing and
measuring the goodwill acquired in the business combination and determines what
information to disclose to enable users of the financial statements to evaluate
the nature and financial effects of the business combination. Effective
January 1, 2009, we adopted SFAS No. 141(R)
ASC850).  No business combinations were completed in the first quarter
of 2009. However, to the extent that future business combinations are material,
our adoption of SFAS No. 141(R) ASC850)will significantly impact our
accounting and reporting for future acquisitions, principally as a result of
(i) expanded requirements to value acquired assets, liabilities and
contingencies at their fair values; and (ii) the requirement that
acquisition-related transaction and restructuring costs be expensed as incurred
rather than capitalized as a part of the cost of the
acquisition.
 
 SFAS No.
165, Subsequent Events
issued by the FASB in May 2008 [ASC 855], establishes general standards of
accounting for and disclosure of events that occur after the balance sheet date
but before the date the financial statements are issued or available to be
issued. SFAS No. 165 requires companies to reflect in their financial statements
the effects of subsequent events that provide additional evidence about
conditions at the balance sheet date. Subsequent events that provide evidence
about conditions that arose after the balance sheet date should be disclosed if
the financial statements would otherwise be misleading. Disclosures should
include the nature of the event and either an estimate of its financial effect
or a statement that an estimate cannot be made. SFAS No. 165 is effective for
interim and annual financial periods ending after June 15, 2009, and should be
applied prospectively. The requirements under this standard did not impact our
financial condition or results of operations because they are consistent with
our current practice.




(8)
            Subsequent
      Events




We
evaluated subsequent events through November 16, 2009, the dated the financial
statements were issued.


10


DGSE
COMPANIES, Inc. and Subsidiaries
  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, 2008.  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.





Our
Business





We buy
and sell jewelry, bullion products and rare coins.  Our customers
include individual consumer, dealers and institutions throughout the United
States.   Our products and services are marketed through our
facilities in Dallas and Euless, Texas; Mt. Pleasant, South Carolina; Woodland
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.




In June
2008, we moved Superior Galleries’ operations from Beverly Hills to Woodland
Hills, California.  Superior’s principal line of business is the sale
of rare coins on a retail and wholesale basis. Superior’s retail and wholesale
operations are conducted in virtually every state in the United
States.  Superior also conducted live and internet auctions for
customers seeking to sell their own coins prior to management’s decision to
discontinue the live auction operations.  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.





Americangoldandsilverexchange.com,
the over 900 proprietary Internet sites related to the home page of
Americangoldandsilverexchange.com along with our existing locations in Texas,
California and South Carolina, provide customers from all over the United States
with a seamless and secure way to value and sell gold, silver, rare coins,
jewelry, diamonds and watches.





11




DGSE
COMPANIES, Inc. and Subsidiaries


Superior
Estate Buyers brings 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. During 2008 Superior
Estate Buyers held approximately 24 such 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 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 receivablesare 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.




Impairment of
Long-Lived Assets.    Long-lived assets are
periodically reviewed for impairment by comparing the carrying value of the
assets with their estimated undiscounted future cash flows. If the evaluation
indicates that the carrying amount of the asset may not be recoverable, the
potential impairment is measured based on a projected discounted cash flow
method using a discount rate that is considered to be commensurate with the risk
inherent in our current business model. Assumptions are made with respect to
cash flows expected to be generated by the related assets based upon updated
projections. Any changes in key assumptions, particularly store performance or
market conditions, could result in an unanticipated impairment
charge.  Any impairment would be recognized in operating
results.




Goodwill.    In accordance with SFAS No. 142 (ASC350) and
Other Intangible Assets," we test goodwill for impairment annually, at the time
of a triggering event, or more frequently if events occur which indicate a
potential reduction in the fair value of a reporting unit's net assets below its
carrying value. An impairment is deemed to exist if the estimated fair value is
less than the net book value of a reporting unit.  During the 4th quarter
of 2008, there were a number of triggering events due to the significant
operating losses of Superior and the impact of the economic downturn of
Superiors’ operations and the decline in the Company’s share price resulting in
a substantial discount of the market capitalization to tangible net asset
value.




An
evaluation of the recorded goodwill was undertaken, which considered two
methodologies to determine the fair-value of the entity:




·
            A
      market capitalization approach, which measure market capitalization at the
      measurement date.




·
            A
      discounted cash flow approach, which entails determining fair value using
      a discounted cash flow methodology.  This method requires
      significant judgment to estimate the future cash flow and to determine the
      appropriate discount rates, growth rates, and other
      assumptions.




Each of
these methodologies the Company believes has merit, and resulted in the
determination that goodwill was impaired. Accordingly, to reflect the
impairment, the Company recorded a non-cash charge of $8,185,443, which
eliminated the value of the goodwill related to Superior.




Revenue
Recognition.    Revenue is generated 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. The Company recognizes sales on an F.O.B. shipping point
basis.





12






DGSE
COMPANIES, Inc. and Subsidiaries




The
Company sells 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.  The Company grants credit to new dealers based on extensive
credit evaluations and for existing dealers based on established business
relationships and payment histories. The Company generally does not obtain
collateral with which to secure its accounts receivable when the sale is made to
a dealer.  The Company maintains reserves for potential credit losses
based on an evaluation of specific receivables and its 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.




The
Company also sells rare coins to retail customers on credit, generally for terms
of 30 to 60 days, but in no event greater than one year.  The Company
grants credit to new 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, the Company
generally collects a payment of 25% of the sales price, establishes a payment
schedule for the remaining balance and holds 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, the Company 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, the Company exchanges merchandise for similar merchandise
and/or monetary consideration with both dealers and retail customers, for which
the Company recognizes revenue in accordance with SFAS 153 (ASC845) Exchanges of Nonmonetary Assets – An
Amendment of APB Opinion No. 29.” When the Company exchanges merchandise
for similar merchandise and there is no monetary component to the exchange, the
Company does 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 the Company exchanges
merchandise for similar merchandise and there is a monetary component to the
exchange, the Company recognizes revenue to the extent of monetary assets
received and determine 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.




The
Company has 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 the Company is acting as an agent for the consignor. If in the process
of selling consigned goods, the Company makes 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 the Company at that
payment date, the Company records that payment as a purchase and the sale of the
consigned good(s) to the buyer as revenue as the Company has assumed all
collection risk.




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.




Income
Taxes.   Income taxes are estimated for each jurisdiction
in which we operate. This involves assessing the current tax exposure together
with temporary differences resulting from differing treatment of items for tax
and financial statement accounting purposes. Any resulting deferred tax assets
are evaluated for recoverability based on estimated future taxable income. To
the extent that recovery is deemed not likely, a valuation allowance is
recorded.




Taxes
Collected From Customers


In June
of 2006, the FASB issued Emerging Issues Task Force 06-03, "How Taxes Collected
from Customers and Remitted to Governmental Authorities Should Be Presented in
the Income Statement" ("EITF 06-03"). The consensus reached in EITF 06-03 allows
companies to adopt a policy of presenting taxes in the income statement on
either a gross basis (included in revenues and costs) or net basis (excluded
from revenues). Taxes within the scope of EITF 06-03 would include taxes that
are imposed on a revenue transaction between a seller and a customer, for
example, sales taxes, use taxes, value-added taxes and some types of excise
taxes. The Company has consistently recorded all taxes within the scope of EITF
06-03 on a net basis.


13




DGSE
COMPANIES, Inc. and Subsidiaries





Fair Value Measures.In September
2006, the FASB issued SFAS No. 157 (ASC820), “Fair Value Measures” (“SFAS No.
157”) (ASC820). SFAS No. 157(ASC820) 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 (ASC820) is effective for fiscal years beginning after  November
15, 2007.  Effective January 1, 2008, the Company has adopted the
provisions of SFAS 157 (ASC820).




SFAS No.
157 (ASC820) emphasizes that fair value is a market-based measurement, not an
entity-specific measurement. Therefore, a fair value measurement should be
determined based on the assumptions that market participants would use in
pricing the asset or liability. As a basis for considering market participant
assumptions in fair value measurements, SFAS No. 157 (ASC820) establishes a fair
value hierarchy that distinguishes between market participant assumptions based
on market data obtained from sources independent of the reporting entity
(observable inputs that are classified within Levels 1 and 2 of the hierarchy)
and the reporting entity's own assumptions about market participant assumptions
(unobservable inputs classified within Level 3 of the hierarchy).




Level 1
inputs utilize quoted prices (unadjusted) in active markets for identical assets
or liabilities that we have the ability to access. Level 2 inputs are inputs
other than quoted prices included in Level 1 that are observable for the asset
or liability, either directly or indirectly. Level 2 inputs may include quoted
prices for similar assets and liabilities in active markets, as well as inputs
that are observable for the asset or liability (other than quoted prices), such
as interest rates, foreign exchange rates, and yield curves that are observable
at commonly quoted intervals. Level 3 inputs are unobservable inputs for the
asset or liability, which are typically based on an entity's own assumptions, as
there is little, if any, related market activity. In instances where the
determination of the fair value measurement is based on inputs from different
levels of the fair value hierarchy, the level in the fair value hierarchy within
which the entire fair value measurement falls is based on the lowest level input
that is significant to the fair value measurement in its entirety. Our
assessment of the significance of a particular input to the fair value
measurement in its entirety requires judgment, and considers factors specific to
the asset or liability. The adoption did not have any financial impact on the
Company’s results of operations and financial position.





Adoption
of Accounting Standards Codification (“ASC”)


In June
2009, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards No. 168, The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles — a
replacement of FASB Statement No. 162(The Codification). The
Codification reorganized existing U.S. accounting and reporting standards issued
by the FASB and other related private sector standard setters into a single
source of authoritative accounting principles arranged by topic.  The
Codification supersedes all existing U.S. accounting standards; all other
accounting literature not included in the Codification (other than Securities
and Exchange Commission guidance for publicly-traded companies) is considered
non-authoritative. The Codification was effective on a prospective basis for
interim and annual reporting periods ending after September 15, 2009. The
adoption of the Codification changed the Company’s references to U.S. GAAP
accounting standards but did not impact the Company’s results of operations,
financial position or liquidity.


14




DGSE
COMPANIES, Inc. and Subsidiaries





Results
of Operations





Three
Months Ended September 30, 2009 compared to Three Months Ended September 30,
2008





Sales
decreased by $7,211,000 or 31.0%, during the three months ended September 30,
2009 as compared to 2008.  This decrease was primarily the result of a
$301,000, or 5.0%, decrease in retail jewelry sales, a 4,196,000, or 36.8%,
decrease in the sale of precious metal products, a $2,438,000 or 49.7% decrease
in the sale of rare coins and a $276,000, or 24.0%. The decreases in precious
metals sales was due to a reduced availability of precious metal products and
the reduction of activity at Superior as a result of the discontinuance of the
auction business segment. The decrease in jewelry sales was due to the sluggish
retail environment.   Cost of goods as a percentage of sales
decreased from 87.0% in 2008 to 81.6% in 2009.  This decrease was due
to the decrease in precious metals revenue as a percentage of total
sales.





Selling,
general and administrative expenses decreased by $345,122, or 13.6%, during the
three months ended September 30, 2009 as compared to 2008. This decrease was
primarily due to an overhead cost saving program that we began in the first
quarter of 2009. The
increase in interest expense is due to renewal charges on our line of
credit.





Income
taxes are provided at the rate of 38.9 % and 35.6% for 2009 and 2008,
respectively. The increase was due to graduated rates in effect for each
period.





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 product.





Nine
Months Ended September 30, 2009 compared to Nine Months Ended September 30,
2008





Sales
decreased by $16,995,364 or 21.2%, during the nine months ended September 30,
2009 as compared to 2008.  This decrease was primarily the result of a
$2,425,000, or 11.9%, decrease in retail jewelry sales, a 9,029,000, or 22.4%,
decrease in the sale of precious metal products, a $4,568,000 or 28.5% decrease
in rare coin sales and a $973,000, or 26.7% decrease in our wholesale jewelry
sales during the first nine months of 2009 as compared to 2008.  The
decreases in precious metals and rare coin sales were due to a reduced
availability of precious metal products and the reduction of activity at
Superior as a result of the discontinuance of the auction business segment. The
decrease in jewelry sales was due to the sluggish retail
environment.   Cost of goods as a percentage of sales decreased
from 87.8% in 2008 to 84.8% in 2009.  This decrease was due to the
decrease in precious metals revenue as a percentage of total sales.





Selling,
general and administrative expenses decreased by $736,536, or 9.8%, during the
nine months ended September 30, 2009 as compared to 2008. This decrease was
primarily due to an overhead cost saving program that we began in the first
quarter of 2009. The
increase in interest expense is due to renewal charges on our line of
credit.





Income
taxes are provided at the rate of 21.5 % and 28.0% for 2009 and 2008,
respectively. The decrease was due to the impact of utilizing the NOL
carryforward for each period.





Liquidity
and Capital Resources





We expect
capital expenditures to total approximately $100,000 during the next twelve
months.  It is anticipated that these expenditures will be funded from
working capital.  As of September 30, 2009 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 from a
new facility or from short-term loans from individuals.


15




DGSE
COMPANIES, Inc. and Subsidiaries





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  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 $3,500,000 and has a maturity date of June 22, 2010.  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, 2009, approximately $3,500,000 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.





The
covenants associated with our credit facility with Texas Capital Bank, N.A.
exclude Superior Galleries are as follows:





As of September  30, 2009
                    
                    Requirement
                    
                    Actual calculationMinimum
      tangible net worth
                    
                    10,500,000
                    
                    12,995,317Maximum
      total liabilities to tangible net worth
                    
                    Not
      to exceed 1.00
                    
                    .52Minimum
      debt service coverage
                    
                    Must
      be greater than 1.40
                    
                    2.31





We have
no off-balance sheet arrangements that have or are reasonably likely to have a
current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that is material to stockholders.





Upon the
consummation of our acquisition of Superior, and after the exchange by Stanford
of $8.4 million 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 $19.89 million to $11.5 million,
reflecting the $8.4 million 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.





Loan
proceeds can only be used for customer loans inventory purchases and receivables
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 subordinated
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,
2009, approximately $9.2 million was outstanding under this credit facility
and there were no intercompany transactions outstanding.





This
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.


16




DGSE
COMPANIES, Inc. and Subsidiaries





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 limited secured guaranty and
intercreditor arrangements described above, Stanford would have a second-order
security interest in all of our accounts and inventory to the extent of
intercompany transactions.




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




We have
been informed that on February 19, 2009, a US district court placed SIBL under
the supervision of a receiver and that the court enjoined SIBL's creditors and
other persons from taking certain actions related to SIBL or its assets. 
In addition, on the same date, Antiguan Financial Services Regulatory Commission
appointed a Receiver for Stanford International Bank Ltd. This action was
subsequently ratified by the High Court of Justice in Antigua and
Barbuda.  As a result of SIBL's current status, we do not believe that
Superior will be able to borrow additional  funds under either revolving
loan, including any amounts Superior is obligated to repay to SIBL pursuant to
the repayment provisions applicable to the first revolving
note.   We believe that certain terms of agreements entered into
by us, Superior and/or SIBL and its affiliates in connection with our
acquisition of Superior have been breached by SIBL or its affiliates, and we are
evaluating available remedies, including but not limited to damages from
responsible parties. While Superior does not currently require additional funds
under the SIBL credit facility, should the need arise and Superior is unable to
replace this credit facility the operations and performance of Superior could be
materially adversely affected.





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.





Payments due by periodContractual Cash Obligations
                      
                      Total
                      
                      
                      2009
                      
                      
                      
                      2010 - 2011
                      
                      
                      
                      2012 – 2013
                      
                      
                      ThereafterNotes
      payable
                      
                      $
                      3,239,971
                      
                      
                      $
                      44,971
                      
                      
                      $
                      3,195,000
                      
                      
                      $
                      —
                      
                      
                      $
                      —Long-term
      debt and capital leases
                      
                      
                      11,979,549
                      
                      
                      
                      328,162
                      
                      
                      
                      9,403,271
                      
                      
                      
                      469,381
                      
                      
                      
                      1,778,735Operating
      Leases
                      
                      
                      2,326,732
                      
                      
                      
                      332,490
                      
                      
                      
                      1,237,026
                      
                      
                      
                      757,216
                      
                      
                      
                      —Total
                      
                      $
                      17,546,252
                      
                      
                      $
                      705,623
                      
                      
                      $
                      13,835,297
                      
                      
                      $
                      1,226,597
                      
                      
                      $
                      1,778,735





In
addition, we estimate that we will pay approximately $600,000 in interest during
the next twelve months.


17




DGSE
COMPANIES, Inc. and Subsidiaries





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 are also exposed to regulatory risk in
relation to its pawn loans.  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  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 September 30, 2009, 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.


18




DGSE
COMPANIES, Inc. and Subsidiaries




PART
II- OTHER INFORMATION





Item
3. Legal Proceedings





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.





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





Exhibits:





Exhibit
                    
                    
                    
                    Filed
                    
                    Incorporated
                    
                    
                    
                    Date
      Filed
                    
                    ExhibitNo.
                    
                    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
                    
                    2.12.2
                    
                    Limited
      Joinder Agreement, dated as of January 6, 2007
                    
                    
                    
                    ×
                    
                    8-K
                    
                    January 9,
      2007
                    
                    2.93.1
                    
                    Articles
      of Incorporation dated September 17, 1965
                    
                    
                    
                    ×
                    
                    8-A12G
                    
                    June 23,
      1999
                    
                    3.13.2
                    
                    Certificate
      of Amendment to Articles of Incorporation, dated October 14,
      1981
                    
                    
                    
                    ×
                    
                    8-A12G
                    
                    June 23,
      1999
                    
                    3.23.3
                    
                    Certificate
      of Resolution, dated October 14, 1981
                    
                    
                    
                    ×
                    
                    8-A12G
                    
                    June 23,
      1999
                    
                    3.33.4
                    
                    Certificate
      of Amendment to Articles of Incorporation , dated July 15,
      1986
                    
                    
                    
                    ×
                    
                    8-A12G
                    
                    June 23,
      1999
                    
                    3.43.5
                    
                    Certificate
      of Amendment to Articles of Incorporation, dated August 23,
      1998
                    
                    
                    
                    ×
                    
                    8-A12G
                    
                    June 23,
      1999
                    
                    3.53.6
                    
                    Certificate
      of Amendment to Articles of Incorporation, dated June 26,
      1992
                    
                    
                    
                    ×
                    
                    8-A12G
                    
                    June 23,
      1999
                    
                    3.6


19




DGSE COMPANIES, Inc. and
Subsidiaries




3.7
                    
                    Certificate
      of Amendment to Articles of Incorporation, dated June 26,
      2001
                    
                    
                    
                    ×
                    
                    8-K
                    
                    July 3,
      2001
                    
                    1.03.8
                    
                    Certificate
      of Amendment to Articles of Incorporation, dated May 22,
    2007
                    
                    
                    
                    x
                    
                    8-K
                    
                    May
      31, 2007
                    
                    3.13.9
                    
                    By-laws,
      dated March 2, 1992
                    
                    
                    
                    ×
                    
                    8-A12G
                    
                    June 23,
      1999
                    
                    3.74.1
                    
                    Specimen
      Common Stock Certificate
                    
                    
                    
                    ×
                    
                    S-4
                    
                    January 6,
      2007
                    
                    4.110.1
                    
                    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
                    
                    10.210.2
                    
                    Lease
      Agreement dated June 2, 2000 by and between SND Properties and
      Charleston Gold and Diamond Exchange, Inc.
                    
                    
                    
                    ×
                    
                    10-KSB
                    
                    March 29,
      2001
                    
                    10.110.3
                    
                    Lease
      agreement dated October 5, 2004 by and between Beltline Denton Road
      Associates and Dallas Gold & Silver Exchange
                    
                    
                    
                    ×
                    
                    10-K
                    
                    April 15,
      2005
                    
                    10.210.4
                    
                    Lease
      agreement dated December 1, 2004 by and between Stone Lewis Properties and
      Dallas Gold & Silver Exchange
                    
                    
                    
                    ×
                    
                    10-K
                    
                    April 15,
      2005
                    
                    10.310.5
                    
                    Lease
      agreement dated November 18, 2004 by and between Hinkle Income Properties
      LLC and American Pay Day Centers, Inc.
                    
                    
                    
                    ×
                    
                    10-K
                    
                    April 15,
      2005
                    
                    10.410.6
                    
                    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
                    
                    10.610.7
                    
                    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


20




DGSE COMPANIES, Inc. and
Subsidiaries




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
                  
                  10.210.9
                  
                  Loan
      Agreement, dated as of December 22, 2005, between DGSE Companies,
      Inc. and Texas Capital Bank, N.A.
                  
                  
                  
                  ×
                  
                  8-K/A
                  
                  August 17,
      2006
                  
                  10.110.10
                  
                  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
                  
                  3.010.11
                  
                  Support
      Agreement, DGSE stockholders, dated as of January 6,
    2007
                  
                  
                  
                  ×
                  
                  8-K
                  
                  January 9,
      2007
                  
                  99.110.12
                  
                  Securities
      Exchange Agreement, dated as of January 6, 2007
                  
                  
                  
                  ×
                  
                  8-K
                  
                  January 9,
      2007
                  
                  99.210.13
                  
                  Warrant
      to DiGenova, issued January 6, 2007
                  
                  
                  
                  ×
                  
                  8-K
                  
                  January 9,
      2007
                  
                  99.310.14
                  
                  Support
      Agreement, Superior stockholders, dated as of January 6,
      2007
                  
                  
                  
                  ×
                  
                  8-K
                  
                  January 9,
      2007
                  
                  99.510.15
                  
                  Asset
      purchase agreement, dated May 9, 2007, by  and between DGSE
      Companies, Inc. and Euless Gold & Silver, Inc.
                  
                  
                  
                  ×
                  
                  8-K
                  
                  May
      9, 2007
                  
                  1.010.16
                  
                  Subordinated
      Promissory Note dated May 9, 2007
                  
                  
                  
                  ×
                  
                  8-K
                  
                  May
      9, 2007
                  
                  2.010.17
                  
                  Registration
      Rights Agreement with Stanford International Bank Ltd., dated as of May
      30, 2007
                  
                  
                  
                  ×
                  
                  8-K
                  
                  May
      31, 2007
                  
                  99.110.18
                  
                  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


21




DGSE COMPANIES, Inc. and
Subsidiaries




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
                  
                  99.310.20
                  
                  Form
      of Warrants
                  
                  
                  
                  ×
                  
                  8-K
                  
                  May
      31, 2007
                  
                  99.410.21
                  
                  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
                  
                  99.510.22
                  
                  Employment
      Agreement with L.S. Smith, dated as of May 30, 2007
                  
                  
                  
                  ×
                  
                  8-K
                  
                  May
      31, 2007
                  
                  99.610.23
                  
                  Employment
      Agreement with William H. Oyster, dated as of May 30, 2007
                  
                  
                  
                  ×
                  
                  8-K
                  
                  May
      31, 2007
                  
                  99.710.24
                  
                  Employment
      Agreement with John Benson, dated as of May 30, 2007
                  
                  
                  
                  ×
                  
                  8-K
                  
                  May
      31, 2007
                  
                  99.831.1
                  
                  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.


22


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:
      November 16, 2009L.
      S. SmithChairman
      of the Board,Chief
      Executive Officer andSecretary





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:
      November 16, 2009L.
      S. SmithChairman
      of the Board,Chief
      Executive Officer andSecretaryBy:
              /s/ W. H. Oyster
              Dated:
      November 16, 2009W.
      H. OysterDirector,
      President andChief
      Operating OfficerBy:
              /s/ John Benson
              Dated:
      November 16, 2009John
      BensonChief
      Financial Officer(Principal
      Accounting Officer)