SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-Q

(Mark One)

(X)  Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934

For the quarterly period ended       June 30, 2006
                               -------------------

( )  Transition Report under 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.
                              --------------------
                                (Name of issuer)


            Nevada                                           88-0097334
---------------------------------                -------------------------------
(State or other jurisdiction                     (I.R.S. Employer Identification
of incorporation or organization)                 Number)



     2817 Forest Lane, Dallas, Texas                           75234
----------------------------------------                     ----------
(Address of principal executive offices)                     (Zip Code)

(Issuer's telephone number, including area code) (972) 484-3662
                                                 --------------


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes X  No
                                      ---   ---

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

           Class                                  Outstanding at August 10, 2006
----------------------------                      ------------------------------
Common Stock, $.01 per value                               4,913,290



<PAGE>
<TABLE>
<CAPTION>

PART I. FINANCIAL INFORMATION
        Item 1. Financial Statements

                           Consolidated Balance Sheets

                                                            (Unaudited)

ASSETS                                                        June 30,      December  31,
                                                                2006             2005
                                                           -------------    -------------
<S>                                                        <C>              <C>
CURRENT ASSETS
   Cash and cash equivalents                               $     198,467    $   1,042,834
   Trade receivables                                             963,023          688,810
   Inventories                                                 8,018,214        7,570,120
   Prepaid expenses                                              236,516          215,560
                                                           -------------    -------------
         Total current assets                                  9,416,220        9,517,324


MARKETABLE SECURITIES - AVAILABLE FOR SALE                        74,929           65,444

PROPERTY AND EQUIPMENT - AT COST, NET                          1,048,021        1,121,662

DEFERRED INCOME TAXES                                               --                779

GOODWILL                                                         837,117          837,117

OTHER ASSETS                                                     438,621          287,790
                                                           -------------    -------------


                                                           $  11,814,908    $  11,830,116
                                                           =============    =============


LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
   Notes payable                                           $     194,183    $     594,183
   Current maturities of long-term debt                          259,273          259,152
   Accounts payable - trade                                      482,470          789,724
   Accrued expenses                                              251,416          580,823
   Customer deposits                                             248,802          206,320
   Federal income taxes payable                                  154,898           13,920
                                                           -------------    -------------

         Total current liabilities                             1,591,042        2,444,122

Long-term debt, less current maturities                        3,724,801        3,314,886

Deferred income taxes                                              2,446           13,920
                                                           -------------    -------------
         Total liabilities                                     5,318,289        5,759,008

SHAREHOLDERS' EQUITY
   Common stock, $.01 par value; authorized 10,000,000
      shares; issued and outstanding 4,913,290 shares at
      The end of each period                                      49,133           49,133
   Additional paid-in capital                                  5,708,760        5,708,760
   Accumulated other comprehensive loss                         (120,992)        (127,252)
   Retained earnings                                             859,718          440,467
                                                           -------------    -------------
         Total shareholders' equity                            6,496,619        6,071,108

                                                           $  11,814,908    $  11,830,116
                                                           =============    =============
</TABLE>




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


<PAGE>

DGSE Companies, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended
(Unaudited)

                                                 June 30, 2006    June 30, 2005
                                                 -------------    -------------
Revenue
   Sales                                         $  12,444,265    $   6,708,363
   Pawn services charges                               101,788           92,047
                                                 -------------    -------------
                                                    12,546,053        6,800,410
Costs and expenses
   Cost of goods sold                               10,760,456        5,453,742
   Selling, general and administrative expenses      1,261,648        1,105,367
   Depreciation and amortization                        39,715           49,068
                                                 -------------    -------------
                                                    12,061,819        6,608,177
                                                 -------------    -------------

Operating income                                       484,234          192,233
                                                 -------------    -------------

Other expense
   Interest expense                                    (73,975)         (72,039)
                                                 -------------    -------------
         Total other expense                           (73,972)         (72,039)

         Income before income taxes                    410,259          120,194

Income tax expense                                     139,488           40,866
                                                 -------------    -------------


       Net income                                $     270,771    $      79,328
                                                 =============    =============


Earnings per common share
   Basic and diluted                             $         .05    $         .02

   Weighted average number of common shares:
      Basic                                          4,913,290        4,913,290
      Diluted                                        5,045,242        5,069,489







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



<PAGE>

DGSE Companies, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
Six  months ended
(Unaudited)


                                                 June 30, 2006    June 30, 2005
                                                 -------------    -------------
Revenue
   Sales                                         $  22,072,918    $  13,346,277
   Pawn services charges                               194,132          171,945
                                                 -------------    -------------
                                                    22,267,050       13,518,222
Costs and expenses
   Cost of goods sold                               18,928,536       10,770,615
   Selling, general and administrative expenses      2,473,689        2,164,251
   Depreciation and amortization                        79,015           91,871
                                                 -------------    -------------
                                                    21,481,240       13,026,737

Operating income                                       785,810          491,485
                                                 -------------    -------------
Other expense
   Interest expense                                   (150,581)        (143,163)
                                                 -------------    -------------
         Total other expense                          (150,581)        (143,163)

         Income before income taxes                    635,229          348,322

Income tax expense                                     215,978          118,429
                                                 -------------    -------------


         Net income                              $     419,251    $     229,893
                                                 =============    =============

Earnings per common share
   Basic                                         $         .09    $         .05
                                                 =============    =============

   Diluted                                       $         .08    $         .05
                                                 =============    =============


   Weighted average number of common shares:
      Basic                                          4,913,290        4,913,290
      Diluted                                        4,955,530        5,069,489



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

<PAGE>
<TABLE>
<CAPTION>

DGSE COMPANIES, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

                                                                        Six Months Ended
                                                                            June 30,
                                                                      2006           2005
                                                                   -----------    -----------
<S>                                                                <C>            <C>
Cash Flows From Operations
Reconciliation of income to net cash
   used in  operating activities
      Net income                                                   $   419,251    $   229,893
      Depreciation and amortization                                     79,015         91,871
         (Increase) decrease in operating assets and liabilities
         Trade receivables                                            (225,008)        89,714
         Inventories                                                  (448,094)      (364,922)
         Prepaid expenses and other current assets                     (20,956)      (131,041)
         Accounts payable and accrued expenses                        (636,661)      (755,347)
         Change in customer deposits                                    42,482         63,554
         Federal income taxes payable                                  140,978         43,428
         Other assets                                                 (150,831)        (9,171)
                                                                   -----------    -----------
             Total net cash used in operating activities              (799,824)      (742,021)

Cash flows from investing activities
         Pawn loans made                                              (266,210)      (329,428)
         Pawn loans repaid                                             218,069        223,053
         Recovery of pawn loan principal through
            Sale of forfeited collateral                                45,543        111,522
         Pay day loans made                                           (126,770)       (51,580)
         Pay day loans repaid                                           80,163         21,138
         Purchase of property and equipment                             (5,374)      (168,287)
                                                                   -----------    -----------
            Net cash used in investing activities                      (54,579)      (193,582)

Cash flows from financing activities
         Proceeds from notes issued                                    500,000      3,181,365
        Payments on notes payable                                     (489,964)    (2,408,193)
                                                                   -----------    -----------
        Net cash provided by financing activities                       10,036        773,172
                                                                   -----------    -----------

Net decrease in cash and cash equivalents                             (844,367)      (162,431)

Cash and cash equivalents at beginning of year                       1,042,834        314,897
                                                                   -----------    -----------

Cash and cash equivalents at end of period                         $   198,467    $   152,466
                                                                   ===========    ===========
</TABLE>

Supplemental disclosures:
Interest  paid for the six months ended June 30, 2006 and 2005 was $ 148,595 and
$ 143,163,  respectively.  Income  taxes paid for the six months  ended June 30,
2006 and 2005 was $75,000 and $75,000,  respectively.  Pawn loans  forfeited and
transferred to inventory amounted to $ 45,543 and $ 184,381,  respectively,  for
the six months ended June 30, 2006 and 2005.


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



<PAGE>
<TABLE>
<CAPTION>

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. and American
Pay Day Centers, Inc. In the opinion of management,  all adjustments  consisting
of normal recurring accruals  considered  necessary for a fair presentation have
been included.

The Company's  operating  results for the periods  ended June 30, 2006,  are not
necessarily  indicative  of the results  that may be expected for the year ended
December 31, 2006. For further information,  refer to the consolidated financial
statements and footnotes thereto included in the Company's annual report on Form
10-K for the year ended December 31, 2005. Certain  reclassifications  were made
to the prior year's consolidated  financial statements to conform to the current
year presentation.

Pawn loans  receivable  in the amount of $ 113,381  and $ 132,811 as of June 30,
2006 and 2005,  respectively,  are included in the  Consolidated  Balance Sheets
caption trade  receivables.  The related pawn service charges  receivable in the
amount of $32,339 and $ 74,299 as of June 30, 2006 and 2005,  respectively,  are
also included in the Consolidated Balance Sheets caption trade receivables.  Pay
day loans  receivable in the amount of $ 61,887 as of June 30, 2006 and $ 28,142
as of June 30, 2005, respectively, are also included in the Consolidated Balance
Sheets caption trade receivables.


(2)  - Earnings per share
         A  reconciliation  of the income and shares of the basic  earnings  per
         common  share and  diluted  earnings  per common  share for the periods
         ended June 30, 2006, and 2005 is as follows:

                                                               2006                               2005
                                                            Six months                         Six months
                                                ---------------------------------   ---------------------------------
                                                                        Per-Share                           Per-Share
                                                  Income      Shares      Amount      Income      Shares      Amount
                                                ---------   ---------   ---------   ---------   ---------   ---------
         <S>                                    <C>         <C>         <C>         <C>         <C>         <C>
         Basic earnings per common share
             Income from operations allocable
               to common shareholders           $ 419,251   4,913,290   $     .09   $ 229,893   4,913,290   $     .05

         Effect of dilutive securities
             Stock options                           --        42,240         --         --       156,199         --
                                                ---------   ---------   ---------   ---------   ---------   ---------
         Diluted earnings per common share
             Income from operations available
               to common shareholders plus
               assumed conversions              $ 419,251   4,955,530   $     .08   $ 229,893   5,069,489   $     .05
                                                =========   =========   =========   =========   =========   =========

                                                              2006                                2005
                                                          Three months                        Three months
                                                ---------------------------------   ---------------------------------
                                                                        Per-Share                           Per-Share
                                                  Income      Shares      Amount      Income      Shares      Amount
                                                ---------   ---------   ---------   ---------   ---------   ---------

         Basic earnings per common share
             Income from operations allocable
               to common shareholders           $ 270,771   4,913,290   $     .05   $  79,328   4,913,290   $     .02

         Effect of dilutive securities
             Stock options                           --       131,952         --         --       156,199         --
                                                ---------   ---------   ---------   ---------   ---------   ---------

         Diluted earnings per common share
             Income from operations available
               to common shareholders plus
               assumed conversions              $ 270,771   5,045,242   $     .05   $  79,328   5,069,489   $     .02
                                                =========   =========   =========   =========   =========   =========
         </TABLE>


<PAGE>
<TABLE>
<CAPTION>

(3)  - 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.  The Company's  operations by segment for
         the six months ended June 30 were as follows:

                                                       (Amounts in thousands)

                   Retail       Wholesale                        Rare       Discontinued    Corporate
                  Jewelry        Jewelry        Bullion         Coins        Operations     and Other      Consolidated
                ------------   ------------   ------------   ------------   ------------   ------------    ------------
<S>             <C>            <C>            <C>            <C>            <C>            <C>             <C>
Revenues
  2006          $      7,560   $      2,303   $      9,591   $      2,518           --     $        295    $     22,267
  2005                 6,428          1,947          3,572          1,163           --              408          13,518

Net income
(loss)
  2006                   153             57            150            166           --             (107)            419
  2005                   160             98             15             88           --             (131)            230

Identifiable
Assets
  2006                 8,633          1,944            172            372           --              694          11,815
  2005                 7,781          1,735            165            174              5            776          10,636

Capital
Expenditures
  2006                     5           --             --             --             --             --                 5
  2005                   151           --             --             --             --               17             168

Depreciation and
Amortization
  2006                    48           --             --             --             --               31              79
  2005                    56             11           --             --             --               25              92


The  Company's  operations by segment for the three months ended June 30 were as
follows:

                                                       (Amounts in thousands)

                   Retail       Wholesale                        Rare       Discontinued    Corporate
                  Jewelry        Jewelry        Bullion         Coins        Operations     and Other      Consolidated
                ------------   ------------   ------------   ------------   ------------   ------------    ------------
Consolidated
Revenues
  2006          $      4,332   $      1,182   $      5,711   $      1,184           --     $        137    $     12,546
  2005                 3,408          1,007          1,579            614           --              192           6,800

Net income
(loss)
  2006                   113             33             88             98           --              (61)            271
  2005                    74             43              4             41           --              (83)             79

Identifiable
Assets
  2006                 8,633          1,944            172            372           --              694          11,815
  2005                 7,781          1,735            165            174              5            776          10,636

Capital
Expenditures
  2006                     2           --             --             --             --             --                 2
  2005                   144           --             --             --             --                4             151

Depreciation and
Amortization
  2006                    24           --             --             --             --               16              40
  2005                    28              6           --             --             --               15              49
</TABLE>




<PAGE>
<TABLE>
<CAPTION>

(4) Other Comprehensive income:

Other comprehensive income is as follows:
                                                               Tax
                                             Before Tax     (Expense)    Net-of-Tax
                                               Amount        Benefit       Amount
                                             ----------    ----------    ----------
<S>                                          <C>           <C>           <C>
Other comprehensive loss at
    December 31, 2005                        $ (162,071)   $   34,819    $ (127,252)

Unrealized gains during the period ended
   March 31, 2006                                 4,385        (1,491)        2,894
                                             ----------    ----------    ----------

Other comprehensive loss at March 31, 2006     (157,686)       33,328      (124,358)

Unrealized gains during the period ended
   June 30, 2006                                  5,100        (1,734)        3,366
                                             ----------    ----------    ----------

Other comprehensive loss at June 30, 2006    $ (152,586)   $   31,594    $ (120,992)
                                             ==========    ==========    ==========
</TABLE>




(5) Stock-based Compensation:

Prior to January 1, 2006,  we  elected  to follow  Accounting  Principles  Board
Opinion  (APB)  NO.25,  Accounting  for Stock Issued to  Employees,  and related
interpretations  to account for our  employee  and director  stock  options,  as
permitted  by  Statement  of  Financial  Accounting  Standards  (SFAS) NO.  123,
Accounting for Stock-Based  Compensation.  Effective January 1, 2006, we adopted
the fair value recognition provision of SFAS No. 123 (revised 2004), Share-Based
Payments,  (SFAS No. 123(R) for all share-based  payment awards to employees and
directors  including  employee stock options.  In addition,  we have applied the
provisions  of Staff  Accounting  Bulletin No. 107 (SAB No. 107),  issued by the
Securities and Exchange Commission, in our adoption of SFAS No. 123(R).

We adopted  SFAS No.  123(R) 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 grant
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  grant-date  fair value estimate in accordance
with the  provision of SFAS No. 123.  Results  from prior  periods have not been
restated  and  do not  include  the  impact  of  SFAS  No.  123(R).  Stock-based
compensation expense under SFAS No. 123(R) for the first quarter of 2006 was $0,
relating to employee and director  stock options and our employee stock purchase
plan. Stock-based compensation expense under the provision of APB No. 25 for the
first quarter of 2005 was insignificant.

Stock-based compensation expense recognized each period is based on the value of
the portion of share-based  payment  awards that is ultimately  expected to vest
during the period.  SFAS No. 123(R) requires  forfeitures to be estimated at the
time of grant  and  revised,  if  necessary,  in  subsequent  periods  if actual
forfeitures differ from those estimates.  In our pro forma disclosures  required
under SFAS No. 123 for periods prior to 2006, we accounted  for  forfeitures  as
they occurred.

Upon  adoption of SFAS No.  123(R),  we elected to use the  Black-Scholes-Merton
option-pricing  formula  to value  share-based  payments  granted  to  employees



<PAGE>
<TABLE>
<CAPTION>

subsequent to January 1, 2006 and elected to attribute the value of  stock-based
compensation  to expense using the  straight-line  single option  method.  These
methods were previously used for our pro forma  information  required under SFAS
No. 123.

On November 10, 2005,  the Financial  Accounting  Standards  Board (FASB) issued
FASB Staff Position No. FAS 123(R)-3, "Transition Election Related to Accounting
for Tax Effects of Share-Based  Payment  Awards",  which detailed an alternative
transition  method for calculating  the tax effects of stock-based  compensation
pursuant  to SFAS No.  123( R ). This  alternative  transition  method  included
simplified  methods to establish the beginning balance of the additional paid-in
capital  pool (APIC pool)  related to the tax  effects of  employee  stock-based
compensation  and to  determine  the  subsequent  impact  on the  APIC  pool and
Consolidated  Statement of Cash Flows of the tax effects of employee stock-based
compensation  awards that are outstanding  upon adoption of SFAS No. 123 (R). As
all options  outstanding have vested prior to December 31, 2005, the Company has
not recorded the tax effects of employee  stock-based  compensation  and have no
APIC pool.

Prior to the adoption of SFAS No. 123( R )l tax benefits of deductions resulting
from the exercise of stock  options  were  required to be presented as operating
cash flows in the Consolidated Statement of Cash Flows. SFAS No. 123(R) requires
the cash flows resulting from the tax benefits  resulting from tax deductions in
excess of the  compensation  cost  recognized  for  those  options  (excess  tax
benefits) to be classified as financing cash flows.  As there have been no stock
options exercised,  the Company has not reported these excess tax benefits as of
June 30, 2006.


Effective  January 1,  2006,  the  Company  adopted  the fair value  recognition
provisions of SFAS No. 123( R ) for all share based payment  awards to employees
and  directors  including  employee  stock  options  granted under the Company's
employee  stock option  plan.  As all options  outstanding  have vested prior to
December 31, 2006, no stock based  compensation  expense has been recorded as of
June 30, 2006.

The following  table  presents the effect on net income and net income per share
compared  with pro forma  information  as if we had adopted SFAS No. 123 for the
periods ended June 30,

                                                                Three Months Ended June 30,
                                                                ---------------------------
                                                                    2006           2005
                                                                ------------   ------------
<S>                                                             <C>            <C>
Net income as reported                                          $    270,771   $     79,328
Less stock-based compensation under the fair value method               --             --
                                                                ------------   ------------
Pro forma net loss                                              $    270,771   $     79,328
                                                                ============   ============

Earnings per share:
     Basic and diluted income per common share, as reported             $.05           $.02
     Basic and diluted income per common share, including the
          Effect of stock-based compensation  expense                   $.05           $.02


                                                                Six Months Ended June 30,
                                                                ---------------------------
                                                                    2006           2005
                                                                ------------   ------------
Net income as reported                                          $    419,251   $    229,893
Less stock-based compensation under the fair value method               --             --
                                                                ------------   ------------
Pro forma net loss                                              $    419,251   $    229,893
                                                                ============   ============

Earnings per share:
     Basic income per common share, as reported                         $.09           $.05
     Basic income per common share, including the
          Effect of stock-based compensation  expense                   $.09           $.05


    Diluted income per common share, as reported                        $.09           $.05
    Diluted income per common share, including the
          Effect of stock-based compensation  expense                   $.08           $.05
</TABLE>



<PAGE>

(6) Subsequent Event

On July  17,  2006 the  Company  announced  that it had  executed  a  definitive
agreement  to  acquire  all of the  issued  and  outstanding  stock of  Superior
Galleries,  Inc.  in a  transaction  valued  at  $  14,000,000.  For  additional
information  regarding this transaction  reference is made to the Company's Form
8-K filed on July 17, 2006.


MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Results of Operations
---------------------

Six months ended June 30, 2006 vs 2005:


Sales increased by $ 8,726,641  (65.4%) in 2006. This increase was primarily the
result of a $6,019,000 (169.0%) increase in bullion sales, a $ 1,132,000 (17.6%)
increase in retail  jewelry  sales,  a $ 356,000  (18.3%)  increase in wholesale
jewelry  sales  and a $  1,355,000  (116.5%)  increase  in the sale of rare coin
products.  The increase in both retail and  wholesale  jewelry sales were due to
higher gold prices and improved  activity  from our  customers.  The increase in
rare coin and  bullion  sales were the  result of an  increase  in gold  prices,
increased  volatility in the bullion market and the Company's increased focus on
these segments of our business.  Consumer loan service fees increased $22,187 in
2006 due to an increase in pay day loans outstanding during the period.  Cost of
goods  as a  percentage  of  sales  increased  from  80.7%  in 2005 to 85.8 % in
2006.This increase was due to the increase in rare coin and bullion revenue as a
percentage of total sales.

Selling,  general and  administrative  expenses  increased by $309,348 or 14.3%.
This increase was primarily due to an increase in staff and payroll related cost
($180,000),  higher  advertising  cost ($73,000) and $ 63,000 in cost related to
the new pay day loan stores.  The increase in staff was  necessary to maintain a
high level of customer  service as sales  increased and the opening of three pay
day loan stores.  The increase in advertising  was necessary in order to attract
new customers in our local markets.  Depreciation and amortization  decreased by
$12,856 during 2006 due to certain assets becoming fully depreciated.

Income taxes are provided at the corporate rate of 34% for both 2006 and 2005.

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 the Company operates.  It is expected that due
to the  commodity  nature of these  products,  future price changes for precious
metals will  continue to be indicative  of the  Company's  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.


Three months ended June 30, 2006 vs 2005:
-----------------------------------------

Sales increased by $ 5,735,902  (85.5%) in 2006. This increase was primarily the
result of a $4,132,000  (261.7%)  increase in bullion sales, a $ 924,000 (27.1%)
increase in retail  jewelry  sales,  a $ 175,000  (17.4%)  increase in wholesale
jewelry  sales  and a $  570,000  (92.8%)  increase  in the  sale of  rare  coin
products.  The increase in both retail and  wholesale  jewelry sales were due to
higher gold prices and improved  activity  from our  customers.  The increase in
rare coin and  bullion  sales were the  result of an  increase  in gold  prices,
increased  volatility in the bullion market and the Company's increased focus on
these segments of our business.  Consumer loan service fees increased  $9,741 in
2006 due to an increase in pay day loans outstanding during the period.  Cost of
goods as a percentage  of sales  increased  from 81.2% in 2005 to 86.5% in 2006.
This  increase  was due to the  increase in rare coin and  bullion  revenue as a
percentage of total sales.



<PAGE>
<TABLE>
<CAPTION>

Selling,  general and  administrative  expenses  increased by $156,281 or 14.3%.
This increase was primarily due to an increase in staff and payroll related cost
($97,000), higher advertising cost ($47,000) and $ 16,000 in cost related to the
new pay day loan stores.  The increase in staff was necessary to maintain a high
level of customer  service as sales  increased  and the opening of three pay day
loan stores.  The increase in advertising  was necessary in order to attract new
customers  in our local  markets.  Depreciation  and  amortization  decreased by
$9,353 during 2006 due to certain assets becoming fully depreciated.

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 the Company operates.  It is expected that due
to the  commodity  nature of these  products,  future price changes for precious
metals will  continue to be indicative  of the  Company's  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.

Income taxes are provided at the corporate rate of 34% for both 2006 and 2005.


Liquidity and Capital Resources

Management of the Company  expects capital  expenditures to total  approximately
$50,000 during the next twelve months. It is anticipated that these expenditures
will be funded from working capital and its credit facility. As of June 30, 2006
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 the Company extended payment terms to finance
the need for jewelry  inventory  growth and  management of the Company  believes
that they will  continue to do so in the  future.  Any  significant  increase in
wholesale  accounts  receivable will be financed under the Company's bank credit
facility.

The ability of the Company to finance its operations and working capital needs
are dependent upon management's ability to negotiate extended terms or refinance
its debt. The Company has historically renewed, extended or replaced short-term
debt as it matures and management believes that it will be able to continue to
do so in the near future.

From time to time,  management  has adjusted the Company's  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 the  Company's
investments  in  marketable  securities  may be  liquidated  in  order  to  meet
unforeseen working capital requirements.

  Contractual Cash Obligations                                            Payments due by year end
------------------------------                   ---------------------------------------------------------------------------
                                       Total        2006         2007         2008         2009         2010      Thereafter
                                    ----------   ----------   ----------   ----------   ----------   ----------   ----------
<S>                                 <C>          <C>          <C>          <C>          <C>          <C>          <C>
Notes payable                       $  194,183      194,183         --           --           --           --           --
Long-term debt and capital leases    3,984,074      148,074    3,118,904   $  381,654   $   74,677   $   70,580   $  190,185
Federal income taxes                   154,898      154,898         --           --           --           --           --
Operating leases                       396,907       85,296      137,418      100,994       54,899       18,300         --
                                    ----------   ----------   ----------   ----------   ----------   ----------   ----------
                                    $4,730,062   $  582,451   $3,256,322   $  482,648   $  129,576   $   88,880   $  190,185
                                    ==========   ==========   ==========   ==========   ==========   ==========   ==========
</TABLE>


In addition,  the Company  estimates that it will pay approximately $ 290,000 in
interest during the next twelve months.




<PAGE>

This  report  contains  forward-looking  statements  which  reflect  the view of
Company's management with respect to future events. Although management believes
that  the  expectations   reflected  in  such  forward-looking   statements  are
reasonable,  it can give no assurance that such  expectations will prove to have
been  correct.  Important  factors  that could  cause  actual  results to differ
materially from such  expectations  are a down turn in the current strong retail
climate and the  potential  for  fluctuations  in precious  metals  prices.  The
forward-looking  statements  contained  herein  reflect the current views of the
Company's  management  and the  Company  assumes  no  obligation  to update  the
forward-looking  statements or to update the reasons actual results could differ
from those contemplated by such forward-looking statements.


ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.

The following  discussion about the Company's  market risk disclosures  involves
forward-looking  statements.  Actual results could differ  materially from those
projected in the  forward-looking  statements.  The Company is exposed to market
risk related to changes in interest  rates and gold values.  The Company also is
exposed to regulatory risk in relation to its payday loans. The Company does not
use derivative financial instruments.

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

ITEM 4. Controls and Procedures

Controls and Procedures Under the supervision and with the  participation of the
Company's management,  including its Chief Executive Officer and Chief Financial
Officer,  the Company has evaluated the effectiveness of its disclosure controls
and  procedures,  as of the end of the period  covered by this report.  Based on
that evaluation,  the Chief Executive  Officer and Chief Financial  Officer have
concluded  that these  disclosure  controls  and  procedures  are  effective  in
enabling  the  Company  to record,  process,  summarize  and report  information
required to be included in its  periodic SEC filings  within the  required  time
period.  There  has  been no  change  in the  Company's  internal  control  over
financial  reporting  that  occurred  during the  Company's  most recent  fiscal
quarter that has  materially  affected,  or is  reasonably  likely to materially
affect, the Company's internal control over financial reporting.


PART II- OTHER INFORMATION

Item 4. Submission of Matters to a vote of Security Holders

The Company's  annual  meeting of  stockholders  was held on June 27, 2006.  The
purpose of the meeting was the  election of  directors  and approval of the 2006
equity incentive plan.

The following is a tabulation of voting at the meeting:

For election of directors
:                                                            Against or
                                      For        Withheld    Abstentions
                                ----------------------------------------
L.S. Smith                         4,683,403         300           0
William Oyster                     4,700,862      20,859           0
William Cordeiro                   4,700,929      20,792           0
Craig Alan-Lee                     4,700,929      20,792           0
Paul Hagen                         4,700,929      20,792           0

For the approval of the 2006
  Equity incentive plan            4,394,954      39,055       3,266





<PAGE>

Item 5. Other Information

On July  17,  2006 the  Company  announced  that it had  executed  a  definitive
agreement  to  acquire  all of the  issued  and  outstanding  stock of  Superior
Galleries,  Inc.  in a  transaction  valued  at  $  14,000,000.  For  additional
information  regarding this transaction  reference is made to the Company's Form
8-K filed on July 17, 2006.




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

Exhibits:
         31.1     Certificate  of L.S.  Smith  pursuant  to  Section  302 of the
                  Sarbanes-Oxley Act of 2002, Chief Executive Officer.

         31.2     Certificate  of John  Benson  pursuant  to Section  302 of the
                  Sarbanes-Oxley Act of 2002, Chief Financial Officer .

         32.1     Certificate  of L.S.  Smith  pursuant  to  Section  906 of the
                  Sarbanes-Oxley Act of 2002, Chief Executive Officer.

         32.2     Certificate  of John  Benson  pursuant  to Section  906 of the
                  Sarbanes-Oxley Act of 2002, Chief Financial Officer.





Reports on Form 8-K :

         None















<PAGE>

                                   SIGNATURES


         In  accordance  with  Section  13 and 15(d) of the  Exchange  Act,  the
Registrant  caused  this  report to be signed on its behalf by the  undersigned,
thereunto duly authorized.



DGSE Companies, Inc.


By:      /s/ L. S. Smith                    Dated: August 10, 2006
         -------------------------
         L. S. Smith
         Chairman of the Board,
         Chief Executive Officer and
         Secretary

         In accordance  with the Exchange Act, this report has been signed below
by the following  persons on behalf of the  Registrant and in the capacities and
on the date indicated.


By:      /s/ L. S. Smith                    Dated: August 10, 2006
         -------------------------
         L. S. Smith
         Chairman of the Board,
         Chief Executive Officer and
         Secretary


By:      /s/ W. H. Oyster                   Dated: August 10, 2006
         -------------------------
         W. H. Oyster
         Director, President and
         Chief Operating Officer


By:      /s/ John Benson                    Dated: August 10, 2006
         -------------------------
         John Benson
         Chief Financial Officer
         (Principal Accounting Officer)