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, 2010


or





o
            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 NOo





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).


YESo NOþ





Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of November 10, 2010





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








TABLE OF
CONTENTS





Page No.PART
      I.
                                            FINANCIAL INFORMATIONItem 1.
                                            Consolidated
      Financial Statements.Consolidated
      Balance Sheets as of September 30, 2010 and December 31,
    2009
                                            1Consolidated
      Statements of Operations for the nine months ended of
      September  30,  2010 and 2009
                                            2Consolidated
      Statements of Operations for the three months ended of
      September  30 , 2010 and 2009
                                            3Consolidated
      Statements of Cash Flows for the nine months ended of
      September  30 , 2010 and 2009
                                            4Notes
      to Consolidated Financial Statements
                                            5Item 2.
                                            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations.
                                            11Item 3.
                                            Quantitative
      and Qualitative Disclosures About Market Risk.
                                            18Item 4.
                                            Controls
      and Procedures.
                                            18PART
      II.
                                            OTHER INFORMATIONItem 3.
                                            Legal
      Proceedings.
                                            20Item 5.
                                            Other
      Information.
                                            20Item 6.
                                            Exhibits.
                                            20SIGNATURES


i


DGSE
Companies, Inc. and Subsidiaries





PART
I.   FINANCIAL INFORMATION





Item
1. Consolidated Financial Statements.





CONSOLIDATED
BALANCE SHEETS





September 30,
                  2010
                
                
                December31,
                  2009UnauditedASSETSCurrent
      Assets:Cash
      and cash equivalents
                
                $
                620,773
                
                
                $
                1,446,724Trade
      receivables
                
                
                822,048
                
                
                
                649,310Inventories
                
                
                16,027,897
                
                
                
                17,766,285Prepaid
      expenses
                
                
                945,656
                
                
                
                807,298Prepaid
      federal income tax
                
                
                631,419
                
                
                
                639,372Total
      current assets
                
                
                19,047,793
                
                
                
                21,308,989Marketable
      securities- available for sale
                
                $
                —
                
                
                
                45,000Property
      and equipment, net
                
                
                4,813,836
                
                
                
                4,713,142Deferred
      income taxes
                
                
                417,987
                
                
                
                1,731,175Goodwill
                
                
                837,117
                
                
                
                837,117Intangible
      assets
                
                
                2,464,006
                
                
                
                2,464,006Other
      assets
                
                
                299,202
                
                
                
                260,904Non-current
      assets of discontinued operations
                
                
                295,617
                
                
                
                295,617$
                28,175,558
                
                
                $
                31,655,950LIABILITIESCurrent
      Liabilities:Notes
      payable
                
                $
                —
                
                
                $
                48,569Current
      maturities of long-term debt
                
                
                293,799
                
                
                
                310,714Line
      of credit
                
                
                2,979,886
                
                
                
                3,195,000Accounts
      payable – trade
                
                
                714,176
                
                
                
                1,472,663Accrued
      expenses
                
                
                347,664
                
                
                
                492,710Customer
      deposits
                
                
                1,187,580
                
                
                
                2,092,593Total
      current liabilities
                
                
                5,523,105
                
                
                
                7,612,249Long-term
      debt, less current maturities
                
                
                2,738,005
                
                
                
                11,605,1438,261,110
                
                
                
                19,217,392STOCKHOLDERS’
      EQUITYCommon
      stock, $.01 par value; 30,000,000 shares authorized; 9,863,635 and
      9,863,635 shares issued and outstanding at the end of each period in 2010
      and 2009, respectively
                
                
                98,637
                
                
                
                98,637Additional
      paid-in capital
                
                
                18,698,091
                
                
                
                18,698,091Retained
      earnings (deficit)
                
                
                1,117,720
                
                
                
                (6,358,170
                )19,914,448
                
                
                
                12,438,558$
                28,175,558
                
                
                $
                31,655,950





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


1





DGSE
Companies, Inc. and Subsidiaries





CONSOLIDATED
STATEMENTS OF OPERATIONS


Unaudited





NinemonthsendedSeptember30,2010
                
                
                2009RevenueSales
                
                $
                56,201,530
                
                
                $
                63,254,038Costs
      and expensesCost
      of goods sold
                
                
                48,097,685
                
                
                
                53,677,847Selling,
      general and administrative expenses
                
                
                7,486,053
                
                
                
                6,770,875Depreciation
      and amortization
                
                
                236,098
                
                
                
                196,14555,819,836
                
                
                
                60,644,867Operating
      income
                
                
                381,694
                
                
                
                2,609,171Other
      expense (income)Other
      income
                
                
                (
      8,831,872
                )
                
                
                —Interest
      expense
                
                
                369,568
                
                
                
                608,241Earnings
      before income taxes
                
                
                8,843,998
                
                
                
                2,000,930Income
      tax expense
                
                
                1,368,108
                
                
                
                430,.385Net
      earnings from continuing operations
                
                
                7,475,890
                
                
                
                1,570,545Discontinued
      operations:Loss
      from discontinued operations (less applicable income benefit tax
      of  $201,241 in 2009)
                
                
                —
                
                
                
                (381,784
                )Net
      earnings
                
                $
                7,475,890
                
                
                $
                1,188,761Earnings
      per common share – basicFrom
      continuing operations
                
                $
                0.76
                
                
                $
                0.16From
      discontinued operations
                
                $
                —-
                
                
                $
                (0.04
                )Net
      earnings per common share
                
                $
                0.76
                
                
                $
                .
      012Earnings
      per common share – dilutedFrom
      continuing operations
                
                $
                0.72
                
                
                $
                0.16From
      discontinued operations
                
                $
                —
                
                
                $
                (0.04
                )Net
      earnings per common share
                
                $
                0.72
                
                
                $
                0.12Weighted
      average number of common sharesBasic
                
                
                9,833,635
                
                
                
                9,833,635Diluted
                
                
                10,398,670
                
                
                
                9,833,635





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


2





DGSE
Companies, Inc. and Subsidiaries





CONSOLIDATED
STATEMENTS OF OPERATIONS


Unaudited





ThreemonthsendedSeptember30,2010
                    
                    
                    2009RevenueSales
                    
                    $
                    18,108,477
                    
                    
                    $
                    16,280,397Costs
      and expensesCost
      of goods sold
                    
                    
                    15,344,631
                    
                    
                    
                    13,286,097Selling,
      general and administrative expenses
                    
                    
                    2,440,108
                    
                    
                    
                    2,185,049Depreciation
      and amortization
                    
                    
                    99,794
                    
                    
                    
                    78,46317,884,533
                    
                    
                    
                    15,549,609Operating
      income
                    
                    
                    223,944
                    
                    
                    
                    730,788Other
      expense (income)Other
      income
                    
                    
                    —
                    
                    
                    
                    —-Interest
      expense
                    
                    
                    85,435
                    
                    
                    
                    223,685Earnings
      before income taxes
                    
                    
                    138,509
                    
                    
                    
                    507,103Income
      tax expense
                    
                    
                    —
                    
                    
                    
                    197,202Net
      earnings from continuing
                    
                    
                    138,509
                    
                    
                    
                    309,901Discontinued
      operations:Loss
      from discontinued operations (less applicable income tax benefit of
      $13,647in 2009)
                    
                    
                    —
                    
                    
                    
                    40,160Net
      earnings
                    
                    $
                    138,509
                    
                    
                    $
                    269,741Earnings
      per common share – basicFrom
      continuing operations
                    
                    $
                    0.01
                    
                    
                    $
                    0.03From
      discontinued operations
                    
                    $
                    —
                    
                    
                    $
                    —Net
      earnings per common share
                    
                    $
                    0.01
                    
                    
                    $
                    0.03Earnings
      per common share – dilutedFrom
      continuing operations
                    
                    $
                    0.01
                    
                    
                    $
                    0.03From
      discontinued operations
                    
                    $
                    —
                    
                    
                    $
                    —Net
      earnings per common share
                    
                    $
                    0.01
                    
                    
                    $
                    0.03Weighted
      average number of common sharesBasic
                    
                    
                    9,833,635
                    
                    
                    
                    9,833,635Diluted
                    
                    
                    10,398,670
                    
                    
                    
                    9,833,635





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 September 30,2010
                              
                              
                              2009UnauditedCash
      flows from operating activitiesNet
      earnings
                              
                              $
                              7,475,890
                              
                              
                              $
                              1,188,761Adjustments
      to reconcile net earnings to net cash provided by operating
      activitiesDepreciation
      and amortization
                              
                              
                              236,098
                              
                              
                              
                              196,145Deferred
      income taxes
                              
                              
                              1,313,188
                              
                              
                              
                              20,038Gain
      on elimination of long term debt
                              
                              
                              (9,198,570
                              )
                              
                              
                              —Noncash
      legal settlement
                              
                              
                              385,000
                              
                              
                              
                              —Gain
      (loss) on disposal of discontinued operations
                              
                              
                              —
                              
                              
                              
                              (381,784
                              )Gain
      (loss) on sale of marketable securities
                              
                              
                              (17,440
                              )
                              
                              
                              —(Increase)
      decrease in operating assets and liabilitiesTrade
      receivables
                              
                              
                              (172,738
                              )
                              
                              
                              916,567Inventories
                              
                              
                              1,738,388
                              
                              
                              
                              448,917Prepaid
      expenses and other current assets
                              
                              
                              (138,358
                              )
                              
                              
                              (28,520
                              )Prepaid
      federal income taxes
                              
                              
                              7,953
                              
                              
                              
                              94,603Other
      assets
                              
                              
                              (38,298
                              )
                              
                              
                              (49,176
                              )Accounts
      payable and accrued expenses
                              
                              
                              (903,533
                              )
                              
                              
                              (992,151
                              )Customer
      deposits
                              
                              
                              (905,013
                              )
                              
                              
                              (769,535
                              )Net
      cash provided (used in) by operating activities
                              
                              
                              (217,433
                              )
                              
                              
                              643,865Cash
      flows from investing activitiesProceeds
      from sale of discontinued operations
                              
                              
                              —
                              
                              
                              
                              1,324,450Proceeds
      from sale of marketable securities
                              
                              
                              62,400
                              
                              
                              
                              —Purchase
      of property and equipment
                              
                              
                              (287,340
                              )
                              
                              
                              (290,352
                              )Net
      cash provided by (used in) investing activities
                              
                              
                              (224,940
                              )
                              
                              
                              1,034,098Cash
      flows from financing activitiesRepayments
      of line of credit
                              
                              
                              (365,113
                              )
                              
                              
                              —Proceeds
      from notes payable
                              
                              
                              1,000,000
                              
                              
                              
                              —Repayments
      of notes payable
                              
                              
                              (1,018,465
                              )
                              
                              
                              (736,188
                              )Net
      cash provided by (used in) financing activities
                              
                              
                              (383,578
                              )
                              
                              
                              (736,188
                              )Net(decrease)
      increase in cash and equivalents
                              
                              
                              (825,951
                              )
                              
                              
                              941,775Cash
      and cash equivalents at beginning of period
                              
                              
                              1,446,724
                              
                              
                              
                              244,429Cash
      and cash equivalents at end of period
                              
                              $
                              620,773
                              
                              
                              $
                              1,186,204





Supplemental
disclosures:





Interest
paid for the nine months ended September 30, 2010 and 2009 was $ 369,568 and
$608,241, respectively.


Income
taxes paid for the nine months ended September 30, 2010 and 2009 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, Charleston
Gold and Diamond Exchange, Inc., Superior Galleries Inc., Superior Precious
Metals, Inc., and American Gold and Diamond Exchange, 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, 2009.  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
December  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.





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.





In
November 2009 we discontinued the independent operations of Superior Estate
Buyers due to operating loss incurred during the first half of the year in the
amount of $ 87,120. This operation was restructured to include buying events in
existing local operations to reduce extraordinary overhead related to remote
events. As a result of the restructuring the personnel of SEB were reassigned
and the Company holds approximately 10 special buying events per
year.


5




DGSE
COMPANIES, Inc. and Subsidiaries





(2)  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, 2010
and 2009 is as follows:





2010
                  
                  
                  2009Three months ended September 30
                  
                  
                  Three months ended September 30Net Earnings
                  
                  
                  Shares
                  
                  
                  Per share
                  
                  
                  Net Earnings
                  
                  
                  Shares
                  
                  
                  Per shareBasic
      earnings per common share
                  
                  $
                  138,765
                  
                  
                  
                  9,833,635
                  
                  
                  $
                  0.01
                  
                  
                  $
                  269,741
                  
                  
                  
                  9,833,635
                  
                  
                  $
                  0.03Effect
      of dilutive stock options
                  
                  
                  —
                  
                  
                  
                  565,035
                  
                  
                  
                  (.00
                  )
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —Diluted
      earnings per common share
                  
                  $
                  138,765
                  
                  
                  
                  10,398,670
                  
                  
                  $
                  0.01
                  
                  
                  $
                  269,741
                  
                  
                  
                  9,833,635
                  
                  
                  $
                  0.03





Earnings
      per common share from continuing operations:
                  
                  2010
                  
                  
                  2009Nine ended September 30
                  
                  
                  Nine months ended September 30Net Earnings
                  
                  
                  Shares
                  
                  
                  Per share
                  
                  
                  Net Earnings
                  
                  
                  Shares
                  
                  
                  Per shareBasic
      earnings per common share
                  
                  $
                  7,475,890
                  
                  
                  
                  9,833,635
                  
                  
                  $
                  0.76
                  
                  
                  $
                  1,188,761
                  
                  
                  
                  9,833,635
                  
                  
                  $
                  0.12Effect
      of dilutive stock options
                  
                  
                  —
                  
                  
                  
                  565,085
                  
                  
                  
                  (.04
                  )
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —Diluted
      earnings per common share
                  
                  $
                  7,337,125
                  
                  
                  
                  10,398,670
                  
                  
                  $
                  0.72
                  
                  
                  $
                  1,188,761
                  
                  
                  
                  9,833,635
                  
                  
                  $
                  0.12





For the
nine months and three months ended September 30, 2010, 29,500 shares related to
employee stock options were not added to the denominator because inclusion of
such shares would be antidilutive.





The
following table sets forth outstanding shares of common stock issued in the form
of stock purchase warrants and employee stock options as of September
30


2010
                      
                      
                      2009Warrants
      issued in conjunction with acquisitions
                      
                      
                      —
                      
                      
                      
                      438,672Common
      stock options
                      
                      
                      1,498,134
                      
                      
                      
                      1,423,134





The
warrants issued in conjunction with acquisitions were issued to expire on May
29, 2014 at an exercise price of $1.89.  The warrants were terminated on
May 25, 2010 in connection with the closing of the transaction authorized by the
US District Court for the Northern District of Texas  in
the  Stanford  International Bank, Ltd.-
settlement.





6




DGSE
COMPANIES, Inc. and Subsidiaries





(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 had no significant non cash items other than depreciation and
amortization. Our operations by segment for the three months ended September 30
are as follows:





(In thousands)
                  
                  Retail
                    Jewelry
                  
                  
                  Wholesale
                    Jewelry
                  
                  
                  Precious
                    Metals
                  
                  
                  Rare
                    Coins
                  
                  
                  Discontinued
                    Operations
                  
                  
                  Corporate
                    and Other
                  
                  
                  ConsolidatedRevenues2010
                  
                  $
                  5,714
                  
                  
                  $
                  626
                  
                  
                  $
                  9,200
                  
                  
                  $
                  2,568
                  
                  
                  $
                  —
                  
                  
                  $
                  —
                  
                  
                  $
                  18,1082009
                  
                  
                  5,734
                  
                  
                  
                  872
                  
                  
                  
                  7,203
                  
                  
                  
                  2,471
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  16,280Net
      earnings (loss)2010
                  
                  
                  63
                  
                  
                  
                  (26
                  )
                  
                  
                  184
                  
                  
                  
                  65
                  
                  
                  
                  —
                  
                  
                  
                  (147
                  )
                  
                  
                  1392009
                  
                  
                  207
                  
                  
                  
                  (22
                  )
                  
                  
                  61
                  
                  
                  
                  107
                  
                  
                  
                  (40
                  )
                  
                  
                  (43
                  )
                  
                  
                  270Identifiable
      assets2010
                  
                  
                  22,488
                  
                  
                  
                  1,715
                  
                  
                  
                  1,725
                  
                  
                  
                  1,138
                  
                  
                  
                  295
                  
                  
                  
                  815
                  
                  
                  
                  28,1762009
                  
                  
                  23,267
                  
                  
                  
                  1,779
                  
                  
                  
                  1,951
                  
                  
                  
                  2,386
                  
                  
                  
                  305
                  
                  
                  
                  318
                  
                  
                  
                  30,006Goodwill20010
                  
                  
                  —
                  
                  
                  
                  837
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  8372009
                  
                  
                  —
                  
                  
                  
                  837
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  837Capital
      Expenditures2010
                  
                  
                  96
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  962009
                  
                  
                  200
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  200Depreciation
      and amortization2010
                  
                  
                  100
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  1002009
                  
                  
                  78
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  78Interest
      expense
                  
                  
                  
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —2010
                  
                  
                  85
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  852009
                  
                  
                  66
                  
                  
                  
                  26
                  
                  
                  
                  66
                  
                  
                  
                  66
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  224Income
      tax expense2010
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —2009
                  
                  
                  169
                  
                  
                  
                  (12
                  )
                  
                  
                  (12
                  )
                  
                  
                  77
                  
                  
                  
                  (12
                  )
                  
                  
                  (13
                  )
                  
                  
                  197


7




DGSE
COMPANIES, Inc. and Subsidiaries





Our
operations by segment for the Nine months ended September 30 are as
follows:


(In thousands)
                  
                  Retail
                    Jewelry
                  
                  
                  Wholesale
                    Jewelry
                  
                  
                  Precious
                    Metals
                  
                  
                  Rare
                    Coins
                  
                  
                  Discontinued
                    Operations
                  
                  
                  Corporate
                    and Other
                  
                  
                  ConsolidatedRevenues2010
                  
                  $
                  17,524
                  
                  
                  $
                  1,845
                  
                  
                  $
                  29,288
                  
                  
                  $
                  7,545
                  
                  
                  $
                  —
                  
                  
                  $
                  —
                  
                  
                  $
                  56,2022009
                  
                  
                  17,881
                  
                  
                  
                  2,672
                  
                  
                  
                  31,227
                  
                  
                  
                  11,474
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  63,254Net
      earnings (loss)2010
                  
                  
                  (474
                  )
                  
                  
                  (28
                  )
                  
                  
                  549
                  
                  
                  
                  216
                  
                  
                  
                  —
                  
                  
                  
                  7,213
                  
                  
                  
                  7,4762009
                  
                  
                  689
                  
                  
                  
                  (99
                  )
                  
                  
                  481
                  
                  
                  
                  600
                  
                  
                  
                  (382
                  )
                  
                  
                  (100
                  )
                  
                  
                  1,189Identifiable
      assets2010
                  
                  
                  22,488
                  
                  
                  
                  1,715
                  
                  
                  
                  1,725
                  
                  
                  
                  1,138
                  
                  
                  
                  295
                  
                  
                  
                  815
                  
                  
                  
                  28,1762009
                  
                  
                  23,267
                  
                  
                  
                  1,779
                  
                  
                  
                  1,951
                  
                  
                  
                  2,386
                  
                  
                  
                  305
                  
                  
                  
                  318
                  
                  
                  
                  30,006Goodwill2010
                  
                  
                  —
                  
                  
                  
                  837
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  8372009
                  
                  
                  —
                  
                  
                  
                  837
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  837Capital
      Expenditures2010
                  
                  
                  233
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  2332009
                  
                  
                  290
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  290Depreciation
      and amortization2010
                  
                  
                  236
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  2362009
                  
                  
                  196
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  196Interest
      expense2010
                  
                  
                  370
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  3702009
                  
                  
                  175
                  
                  
                  
                  83
                  
                  
                  
                  175
                  
                  
                  
                  175
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  608Income
      tax expense2010
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  1,337
                  
                  
                  
                  1,3372009
                  
                  
                  421
                  
                  
                  
                  (27
                  )
                  
                  
                  132
                  
                  
                  
                  164
                  
                  
                  
                  (160
                  )
                  
                  
                  (100
                  )
                  
                  
                  430Non-cash
      item:Gain
      on forgiveness of debt2010
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  9,198
                  
                  
                  
                  9,1982009
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —





(4)  Stock-based
Compensation.





We
account for all share-based payment awards to employees and directors, including
stock options granted under our employee stock option plan, using the fair value
recognition provisions of ASC Topic 718, Compensation—Stock Compensation(ASC 718) and the provisions of Staff Accounting Bulletin No. 107,
issued by the SEC. We use the Black-Scholes-Merton option-pricing formula to
value share-based payments granted to employees and attribute the value of
stock-based compensation to expense using the straight-line single option
method. Stock-based compensation expense recognized each period 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 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 ASC 718, we estimate forfeitures at the time of
grant and revise our estimates, if necessary, in subsequent periods if actual
forfeitures differ materially from those estimates. Stock-based compensation
expense under ASC 718 for the nine months ended September 30, 2010 and 2009 was
$0 and $48,100, respectively relating to employee and director stock
options.


8




DGSE
COMPANIES, Inc. and Subsidiaries





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. Due to our
historical net operating loss position, we have not recorded these excess tax
benefits at September 30, 2010 and December 31, 2009.





(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 all periods presented.  During the first nine months of 2010 and 2009
the auction segment incurred pretax losses of $0 and $512,136,
respectively.





The
following summarizes the carrying amount of assets and liabilities of the
auction segment as of September 30, 2010 and 2009:





AssetsAccounts
      receivable
                  
                  $
                  —Current
      assets
                  
                  $
                  —Long-term
      receivable
                  
                  $
                  295,617Total
      assets
                  
                  $
                  295,617LiabilitiesAuctions
      payable
                  
                  $
                  —





As of
September 30, 2010, 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.


9




DGSE
COMPANIES, Inc. and Subsidiaries





(7)  New
Accounting Pronouncements.





Effective
August 1, 2009, we adopted Statement of Financial Accounting Standard
(“SFAS”) No. 168, The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles — a
replacement of FASB Statement No. 162 (“SFAS 168”), effective for our fiscal
quarter endedOctober 31,
2009.  SFAS 168 established the Financial Accounting Standards Board
(“FASB”) Accounting Standards Codification(“ASC”) as the single
source of authoritative non-governmental accounting principles to be applied in
the preparation of financial statements in conformity with GAAP.  Although
SFAS 168 does not change GAAP, the adoption of SFAS 168 impacted our financial
statements since all future references to authoritative accounting literature
are now in accordance with SFAS 168, except for the following standards, which
will remain authoritative until they are integrated into the ASC: SFAS 164,
Not-for-Profit Entities:
Mergers and Acquisitions;SFAS 166,Accounting for Transfers of
Financial Assets; SFAS 167, Amendments to FASB Interpretation
No. 46R;and
SFAS 168.




In
April 2009, the FASB issued accounting standards under ASC Topic 825, Financial Instruments, which
extend the annual financial statement disclosure requirements for financial
instruments to interim reporting periods of publicly traded companies.  We
adopted this standard effective August 1, 2009.




In
August 2009, the FASB issued Accounting Standards Update 2009-05, Measuring Liabilities at Fair
Value (“ASU 2009-05”), which is effective for the first reporting period
(including interim periods) following issuance.  ASU 2009-05 clarifies the
application of certain valuation techniques in circumstances in which a quoted
price in an active market for the identical liability is not available.  We
adopted this standard effective November 1, 2009.





In
January 2010, the FASB issued Accounting Standards Update 2010-06, Improving Disclosures about Fair
Value Measurements (“ASU 2010-06”).  ASU 2010-06 provides more
robust disclosures about the transfers between Levels 1 and 2, the activity in
Level 3 fair value measurements and clarifies the level of disaggregation and
disclosure related to the valuation techniques and inputs used.  The new
disclosures are effective for interim and annual reporting periods beginning
after December 15, 2009, except for the Level 3 activity disclosures, which
are effective for fiscal years beginning after December 15, 2010.  We
do not expect a material impact from the adoption of this guidance on our
consolidated financial statements.




In
February 2010, the FASB issued Accounting Standards Update 2010-09, Amendments to Certain Recognition
and Disclosure Requirements (“ASU 2010-09”).  ASU 2010-09 amends the
guidance issued in ASC 855, Subsequent Events, by not
requiring SEC filers to disclose the date through which an entity has evaluated
subsequent events.  ASU 2010-09 was effective upon issuance.  There
was not a material impact from the adoption of this guidance on our consolidated
financial statements.





(8)  Settlement
of Litigation.





On
January 27, 2010, DGSE Companies, Inc. (“DGSE”) and Stanford International Bank,
LTD (‘SIBL”), which prior to the closing of certain settlement agreements
discussed below was a beneficial owner of a significant equity interest in DGSE,
a primary lender to a wholly owned subsidiary of DGSE and subject to certain
agreements with DGSE and its Chairman, entered into a Purchase and Sale
Agreement and a Debt Conversion Agreement to settle DGSE’s lawsuit against
SIBL.   On May 25, 2010, DGSE and SIBL and a third party entered in a
closing agreement to finalize the settlement agreements upon the approval of the
settlement by the United States District Court for the Northern District of
Texas which has jurisdiction for the assets of SIBL.   Upon closing of
the transaction, SIBL terminated all agreements, converted all of its
subsidiary's debt, interest and other expenses for 1,000 shares of DGSE
common stock provided to its subsidiary, and sold 3,000,000 shares of
common stock to DGSE’s assignee, NTR Metals for $3,000,000 under a Partial
Assignment Agreement.  Pursuant to the partial assignment of the Company’s
rights as a Buyer to NTR under the Company-SIBL Purchase Agreement, NTR acquired
directly from SIBL 3,000,000 Shares of the Company (the “NTR Acquired
Interest”). The parties agreed that the remaining portion of the SIBL Equity
Interest (i.e. 377,361 Shares) be transferred as designated by the Company. SIBL
cancelled 422,814 additional warrants to purchase additional shares of DGSE as
part of the settlement agreement.  As a result of the transaction, the
Company recognized a gain of $9,198,570 related to the cancellation of
debt.





On
February 26, 2010, Superior Galleries, Inc. (‘Superior’) entered into a
settlement agreement for a lawsuit filed by its previous landlord, DBKK, LLC for
$385,000 to be paid over three years bearing interest at 8%.  The Company’s
settlement with DBBK was a risk management decision based on an original claim
in the amount of $806,000.  The lawsuit resulted from a lease transaction
entered into by certain officers of Superior.  As of September 30,
2010, the Company has recorded $385,000 loss related to the settlement of this
litigation in other (income) expense.


10




DGSE
COMPANIES, Inc. and Subsidiaries





(9)
Income Taxes




The
Company records deferred income tax assets and liabilities for differences
between the book basis and tax basis of the related net assets. The Company
records a valuation allowance, when appropriate, to adjust deferred tax asset
balances to the amount management expects to realize. Management considers, as
applicable, the amount of taxable income available in carry-back years, future
taxable income and potential tax planning strategies in assessing the need for a
valuation allowance. The Company has recorded the net present value of the
future expected benefits of the net operating loss (NOL) carry-forward related
to its subsidiary Superior Galleries, Inc. due to IRS loss limitation
rules.  The Company will require future taxable income to fully realize the
net deferred tax asset resulting from the NOL.




As of
January 1, 2007, the Company adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income
Taxes, an Interpretation of FASB Statement No. 109, Accounting for Income
Taxes(“FIN 48”), as codified by ASC 740, “Income Taxes.”. The adoption
did not have a material impact on the Company’s consolidated financial
statements or effective tax rate and did not result in any unrecognized tax
benefits.




Interest
costs and penalties related to income taxes are classified as interest expense
and general and administrative costs, respectively, in the Company’s
consolidated financial statements. For the period ended September 30, 2009, the
Company did not recognize any interest or penalty expense related to income
taxes. It is determined not to be reasonably likely for the amounts of
unrecognized tax benefits to significantly increase or decrease within the next
12 months. The Company is currently subject to a three year statute of
limitations by major tax jurisdictions. The Company and its subsidiaries file
income tax returns in the U.S. federal jurisdiction.




On
January 27, 2010, DGSE Companies, Inc. (“DGSE”) and Stanford International Bank,
LTD (‘SIBL”) as discussed herein, entered into a settlement agreement that
resulted in the Company through it's wholly
owned susidiary recognizing a gain of $9,198,570 related to the
cancellation of debt owed to SIBL.  The transaction was treated for tax
reporting purposes under the insolvency exemption under Section 108, as the
stand alone subsidiary, Superior Galleries, was deemed insolvent as its
liabilities exceeded it assets by approximately $11 million before the debt was
forgiven in the settlement agreement.   Accordingly, the gain was not
included in gross income for income tax reporting purposes as the gain excluded
did not exceed the amount by which Superior Galleries was insolvent.  The
non-recognition rules under Section 108, required a utilization of NOL’s
equivalent to the amount of “non-recognized” Cancellation of Debt (COD) income
of $9,198,570.  The Superior Galleries NOL acquired primarily through the
acquisition in May 2007 resulted in the recording of a deferred tax asset with a
valuation allowance recorded against it. The valuation recorded was due to the
fact that, as of the acquisition date, the entire NOL could not be
fully utilized due to the Section 382 limitation.  In the current
period, this valuation allowance was reversed since the NOL was used in this
period to offset the COD income on the Stanford settlement.  The
provisions of SEC. 108 provided utilization of the net operatin losses of the
insolvent subsidiary in excess of net operation losses orginally estimated by
the company to beuseableto
provide future tax benefit. uperior's
exchange of DGSE shares provided by its parent settle the debt in exchange
for the cancellation of the debt, and DGSE assigned its right to NTR Metals to
acquire Stanford’s 3,376,361 shares in exchange for $3,600,000.




(10)  Subsequent
Events.




The
Company entered into agreements to sell securities through an exempt offering to
certain accredited investors in August2010. The Company filed
a Form I.) "Notice of Exempt Offering of Securities" in accordance with SEC
regulations to reportthe offering. The
private placement of units, with each unit consisting of (1) 24,286 shares of
common stock and (2) $50,000of indebtedness of the
company, evidenced by notes convertible into common stock, for a purchase price
of $100,000 perunit, generated
aggregate of proceeds of $500,000. The shares of common stock were issued in
October 2010. The resultingtransaction will be recorded
in the 4thquarter of
2010.


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;


11




DGSE
COMPANIES, Inc. and Subsidiaries





·       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, 2009.  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
jewelry, rare coins and bullion  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.




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.




Critical
Accounting Policies and Estimates




The
following discussion addresses our most critical accounting policies, which are
those that are both important to the portrayal of our financial condition and
results of operations and that require significant judgment or use of complex
estimates.




Inventories.   Jewelry and other inventories are valued at the lower
of cost or market.  Bullion is valued at the lower-of-cost-or-market
(average cost).  See also “Critical Accounting Estimates”.


12




DGSE
COMPANIES, Inc. and Subsidiaries




Impairment of
Long-Lived and Amortized Intangible Assets.  The Company performs
impairment evaluations of its long-lived assets, including property, plant and
equipment and intangible assets with finite lives, including the customer base
acquired in the Superior acquisition, whenever business conditions or events
indicate that those assets may be impaired.  When the estimated future
undiscounted cash flows to be generated by the assets are less than the carrying
value of the long-lived assets, the assets are written down to fair market value
and a charge is recorded to current operations.   Based on our
evaluations no impairment was required as of September 30, 2010.




Impairment of
Goodwill and Indefinite-Lived Intangible Assets.  Goodwill and
indefinite-lived intangible assets are tested for impairment annually, or more
frequently if events or changes in circumstances indicate that the assets might
be impaired.  The Company performs its annual review at the beginning of
the fourth quarter of each fiscal year.




The
Company evaluates the recoverability of goodwill by estimating the future
discounted cash flows of the businesses to which the goodwill relates. 
Estimated cash flows and related goodwill are grouped at the reporting unit
level.  A reporting unit is an operating segment or, under certain
circumstances, a component of an operating segment that constitutes a
business.  When estimated future discounted cash flows are less than the
carrying value of the net assets and related goodwill, an impairment test is
performed to measure and recognize the amount of the impairment loss, if
any.  Impairment losses, limited to the carrying value of goodwill,
represent the excess of the carrying amount of a reporting unit’s goodwill over
the implied fair value of that goodwill.  In determining the estimated
future cash flows, the Company considers current and projected future levels of
income as well as business trends, prospects and market and economic
conditions.




The
Company cannot predict the occurrence of certain events that might adversely
affect the carrying value of goodwill and indefinite-lived intangible assets.
Such events may include, but are not limited to, the impact of the economic
environment, a material negative change in relationships with significant
customers, or strategic decisions made in response to economic and competitive
conditions.  See “Critical Accounting Estimates.”




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.




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.   See “Critical Accounting Estimates”.




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 ASC 845, “Nonmonetary
Transactions.” 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.


13




DGSE
COMPANIES, Inc. and Subsidiaries




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.




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.  See “Critical Accounting Estimates”.




Taxes Collected
From Customers.FASB Accounting Guidance 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 this
guidance 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 this guidance on a net basis.




Inventories.The Company acquires a majority of its retail jewelry inventory from
individuals that is pre-owned.  The Company acquires the jewelry based on
its own internal estimate of the fair market value of the items offered for sale
considering factors such as the current spot market prices of precious metals
and current demand for the items offered for sale.  Because the overall
market value for precious metals fluctuates, these fluctuations could have
either a positive or negative impact to the profitability of the Company. 
The Company monitors these fluctuations to evaluate any impairment to its retail
jewelry inventory.




Allowance
for Doubtful Accounts.The allowance for doubtful accounts requires management to estimate a
customer’s ability to satisfy its obligations.  The estimate of the
allowance for doubtful accounts is particularly critical in the Company’s
wholesale coin segment where a significant amount of the Company’s trade
receivables are recorded.  The Company evaluates the collectability of
receivables based on a combination of factors.  In circumstances where the
Company is aware of a specific customer’s inability to meet its financial
obligations, a specific reserve is recorded against amounts due to reduce the
net recognized receivable to the amount reasonably expected to be
collected.  Additional reserves are established based upon the Company’s
perception of the quality of the current receivables, including the length of
time the receivables are past due, past experience of collectability and
underlying economic conditions.  If the financial condition of the
Company’s customers were to deteriorate resulting in an impairment of their
ability to make payments, additional reserves would be required.




Impairment of
Goodwill and Indefinite-Lived Intangible Assets.In
evaluating the recoverability of goodwill, it is necessary to estimate the fair
value of the reporting units.  The estimate of fair value of intangible
assets is generally determined on the basis of discounted future cash
flows.  The estimate of fair value of the reporting units is generally
determined on the basis of discounted future cash flows supplemented by the
market approach.  In estimating the fair value, management must make
assumptions and projections regarding such items as future cash flows, future
revenues, future earnings and other factors.  The assumptions used in the
estimate of fair value are generally consistent with the past performance of
each reporting unit and are also consistent with the projections and assumptions
that are used in current operating plans.  Such assumptions are subject to
change as a result of changing economic and competitive conditions.  The
rate used to discount estimated cash flows is a rate corresponding to the
Company’s cost of capital, adjusted for risk where appropriate, and is dependent
upon interest rates at a point in time.  There are inherent uncertainties
related to these factors and management’s judgment in applying them to the
analysis of goodwill impairment.  It is possible that assumptions
underlying the impairment analysis will change in such a manner to cause further
impairment of goodwill, which could have a material impact on the Company’s
results of operations. .


14




DGSE
COMPANIES, Inc. and Subsidiaries




The
analysis of the wholesale watch sales division resulting from the acquisition of
Fairchild with a carrying value of goodwill of $837,117 resulted in no
impairment as its estimated future discounted cash flows significantly exceeded
the net assets and related goodwill.




Income
Taxes.The Company records deferred income tax assets and liabilities for
differences between the book basis and tax basis of the related net assets. The
Company records a valuation allowance, when appropriate, to adjust deferred tax
asset balances to the amount management expects to realize. Management
considers, as applicable, the amount of taxable income available in carry-back
years, future taxable income and potential tax planning strategies in assessing
the need for a valuation allowance. The Company has recorded the net present
value of the future expected benefits of the net operating loss (NOL)
carry-forward related to its subsidiary Superior Galleries, Inc. due to IRS loss
limitation rules.  The Company will require future taxable income to fully
realize the net deferred tax asset resulting from the NOL.




As of
January 1, 2007, the Company adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income
Taxes, an Interpretation of FASB Statement No. 109, Accounting for Income
Taxes(“FIN 48”), as codified by ASC 740, “Income Taxes.”. The adoption
did not have a material impact on the Company’s consolidated financial
statements or effective tax rate and did not result in any unrecognized tax
benefits.




Interest
costs and penalties related to income taxes are classified as interest expense
and general and administrative costs, respectively, in the Company’s
consolidated financial statements. For the years ended December 31, 2009
and 2008 and for the nine-months ended September 30, 2010, the Company did not
recognize any interest or penalty expense related to income taxes. It is
determined not to be reasonably likely for the amounts of unrecognized tax
benefits to significantly increase or decrease within the next 12 months.
The Company is currently subject to a three year statute of limitations by major
tax jurisdictions. The Company and its subsidiaries file income tax returns in
the U.S. federal jurisdiction.


15




DGSE
COMPANIES, Inc. and Subsidiaries





Results
of Operations





Three
Months Ended September 30, 2010 compared to Three Months Ended September 30,
2009





Sales
increased by $1,828,000 or 11.0%, during the three months ended September 30,
2010 as compared to 2009.  This increase was primarily the result of a
$1,997,000 or 27.4% increase in precious metal, due to higher prices in all
metal markets. Sales from all other segments were relative stable during the
quarter.   Cost of goods as a percentage of sales was increased to
84.7% in 2010 from 81.6% in 2009 due to the increase in precious metal sales
which have lower margins compared to our other segments.





Selling,
general and administrative expenses increased by $255,059 or 11.7%, during the
three months ended September 30, 2010 as compared to 2009. This increase was
primarily due to higher advertising and payroll related cost.  The decrease
in interest expense is due to lower interest rates on our line of credit and due
the  transaction concluded with the Receiver in the matter of Stanford
International Bank LTD





Income
tax expense is directly affected by the levels of pretax income and
non-deductible permanent differences. The Company’s effective tax rate for the
three months ended June 30, 2010 and 2009 were 18.0% and 16.0%,
respectively.




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, 2010 compared to Nine Months Ended September 30,
2009





Sales
decreased by $7,052,000 or 11.1%, during the nine months ended September 30,
2010 as compared to 2009.  This decrease was primarily the result of a
$357,000, or 1.9%, decrease in retail jewelry sales, a 1,939,000, or 6.2%,
decrease in the sale of precious metal products, a $3,929,000 or 34.2% decrease
in rare coin sales and a $827,000, or 30.9% decrease in our wholesale jewelry
sales.  The decreases in precious metals and rare coin sales were due to a
decrease in demand resulting from a less volatile gold market. The decrease in
jewelry sales was due to the sluggish retail environment.   Cost of
goods as a percentage of sales was 85.6% in 2010 vs. 84.9% in 2009.





Selling,
general and administrative expenses increased by $715,178 or 10.6%, during the
six months ended June 30, 2010 as compared to 2009. This increase was primarily
due to higher advertising and payroll related cost. The decrease in interest
expense is due to lower interest rates on our line of credit.





Other
income during 2010 was a  result of the transaction concluded with the
Receiver in the matter of Stanford International Bank LTD





Income
tax expense is directly affected by the levels of pretax income and
non-deductible permanent differences. The Company’s effective tax rate for the
nine months ended September 30, 2010 and 2009 were 15.5% and 21.5%,
respectively.





Liquidity
and Capital Resources





During
the nine months ended September 30, 2010 and 2009 cash flows from operating
activities totaled ($217,433) and $643,865, respectively. During 2010 the
($217,433) cash flows from operating activities were primarily the result of the
decrease in current liabilities ($1,808,546) which was partly offset by a
1,738,388 decrease in inventory. Cash flows from operating activities
during 2009 were primarily the result of a decrease in inventory $448,917, a
decrease in accounts payable and accrued expenses ($992,151), a decrease in
customer deposits ($769,535) and a decrease
in trade receivables 916,567. The decrease in inventory and customer deposits
was due to a decrease in demand for precious metal products. The decrease in
trade receivables was a result of a decrease in the sales of wholesale jewelry
products.





During
the nine months ended September 30 2010 and 2009 cash flows from investing
activities totaled ($224,940) and  $1,034,098, respectively. During
2010 the Company invested $287,340 in property and equipment. During 2009 the
primary source of cash from investing activities was the result of cash received
from the sale of the Company’s pawn shops in June 2009.


16




DGSE
COMPANIES, Inc. and Subsidiaries





During
the nine months ended September 30, 2010 and 2009 cash flows from financing
activities totaled ($383,578) and ($736,181), respectively.
The use of cash during 2010 and 2009 was the result of repayment
of  loans.





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, 2010 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 under a new bank credit facility
or from short-term loans from individuals.





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.




On May
27, 2010, the Company announced that Texas Capital Bank has agreed to renew and
increase the size of its current credit facility. The new facility is composed
of a $3.5 million revolving note and a $1.0 million term
loan  provided immediate availability to finance current
operations.  The agreement was finalized and funded June 2,
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 September 30, 2010, approximately $3.9 million
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. This credit facility matures in June
2011.





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
                
                ActualcalculationMinimum
      tangible net worth
                
                17,750,000
                
                17,981,577Maximum
      total liabilities to tangible net worth
                
                Not
      to exceed  .75
                
                .44Minimum
      debt service coverage
                
                Must
      be greater than 1.40
                
                1.43




On
October 17, 2007, we closed on the purchase of our new headquarters
location.  As a result, we assumed a new loan with a remaining principal
balance of $2,323,484 and an interest rate of 6.70%.  The loan has required
monthly payments of $20,192 with the final payment due on August 1,
2016.





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 accrued 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.





On
January 27, 2010, DGSE and Stanford International Bank, LTD (‘SIBL”),
which was the beneficial owner of a significant equity interest in DGSE, a
primary lender to a wholly owned subsidiary of DGSE and subject to certain
agreements with DGSE and its Chairman,  entered into definitive
agreements whereby  SIBL would terminate all agreements, convert all
of its debt through its subsidiary, interest and other expenses and sell
all of its equity interests including common stock and warrants to DGSE or its
assignees.


17




DGSE
COMPANIES, Inc. and Subsidiaries





On
January 27, 2010, DGSE Companies, Inc. (“DGSE”) and Stanford International Bank,
LTD (‘SIBL”), which prior to the closing of certain settlement agreements
discussed below was a beneficial owner of a significant equity interest in DGSE,
a primary lender to a wholly owned subsidiary of DGSE and subject to certain
agreements with DGSE and its Chairman, entered into a Purchase and Sale
Agreement and a Debt Conversion Agreement to settle DGSE’s lawsuit against
SIBL.   On May 25, 2010, DGSE and SIBL and a third party entered in a
closing agreement to finalize the settlement agreements upon the approval of the
settlement by the United States District Court for the Northern District of
Texas which has jurisdiction for the assets of SIBL.   Upon closing of
the transaction, SIBL terminated all agreements, converted all of its
subsidiary's debt, interest and other expenses for 1,000 shares of DGSE
common stock provided to its subsidiary and sold 3,000,000 shares of
common stock to DGSE’s assignee, NTR Metals for $3,000,000 under a Partial
Assignment Agreement.  Pursuant to the partial assignment of the Company’s
rights as a Buyer to NTR under the Company-SIBL Purchase Agreement, NTR acquired
directly from SIBL 3,000,000 Shares of the Company (the “NTR Acquired
Interest”). The parties agreed that the remaining portion of the SIBL Equity
Interest (i.e. 377,361 Shares) be transferred as designated by the Company. SIBL
cancelled 422,814 additional warrants to purchase additional shares of DGSE as
part of the settlement agreement.  As a result of the transaction, the
Company recognized a gain of $9,198,570 related to the cancellation of
debt.





Payments due by periodContractual Cash Obligations
                            
                            Total
                            
                            
                            2010
                            
                            
                            2011 - 2012
                            
                            
                            2013 – 2014
                            
                            
                            ThereafterLine
      of credit
                            
                            $
                            2,979,886
                            
                            
                            $
                            —
                            
                            
                            $
                            2,979,886
                            
                            
                            $
                            —
                            
                            
                            $
                            —Long-term
      debt and capital leases
                            
                            
                            3,031,804
                            
                            
                            
                            80,768
                            
                            
                            
                            489,859
                            
                            
                            
                            484,608
                            
                            
                            
                            1,976,569Operating
      Leases
                            
                            
                            1,736,195
                            
                            
                            
                            151,190
                            
                            
                            
                            1,248,447
                            
                            
                            
                            302,486
                            
                            
                            
                            34,072Total
                            
                            $
                            7,747,885
                            
                            
                            $
                            231,958
                            
                            
                            $
                            4,718,192
                            
                            
                            $
                            787,094
                            
                            
                            $
                            2,010,641





In
addition, we estimate that we will pay approximately $400,000 in interest during
the next twelve months.





Off-Balance
Sheet Arrangements.





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.





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 pawn lending and 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.


18


DGSE
COMPANIES, Inc. and Subsidiaries




Changes in internal controls.For the quarter ended June 30, 2010, 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.


19




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


20




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


21




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


22




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.


23





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 14. 2010L.
      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 14. 2010L.
      S. SmithChairman
      of the Board,Chief
      Executive Officer andSecretaryBy:
              /s/ W. H. Oyster
              
              Dated:
      November 14. 2010W.
      H. OysterDirector,
      President andChief
      Operating OfficerBy:
              /s/ John Benson
              
              Dated:
      November 14. 2010John
      BensonChief
      Financial Officer(Principal
      Accounting Officer)