Related party transactions

9 Months Ended

Sep. 30, 2012

Related party transactions [Abstract]

Related party transactions

(8) Related party transactions.

The Company purchases and sells a substantial portion of precious metal and bullion to NTR. During the nine months ended September 30, 2012, the Company sold approximately $38.5 million, or 39%, of precious metals and bullion to NTR. During the three months ended September 30, 2012, the Company sold approximately $13.5 million, or 39.7%, of precious metals and bullion to NTR. During the nine months ended September 30, 2012, the Company purchased approximately $14.8 million, or 18.5%, in precious metal, bullion and other products from NTR to fulfill customer orders. During the three months ended September 30, 2012, the Company purchased approximately $2.9 million, or 11.8%, in precious metal, bullion and other products from NTR to fulfill customer orders. As of September 30, 2012, the Company was obligated to pay $966,121 to NTR as a trade payable. During the nine months ended September 30, 2011, the Company sold approximately $41.5 million, or 38%, of precious metals and bullion to NTR. During the three months ended September 30, 2011, the Company purchased approximately $10.9 million, or 25.4%, in precious metal, bullion and other products from NTR to fulfill customer orders. During the nine months ended September 30, 2011, the Company purchased approximately $21.6 million, or 22%, in precious metal and bullion from NTR to fulfill customer orders. During the three months ended September 30, 2011, the Company sold approximately $20.4 million, or 39.8%, of precious metals and bullion to NTR. As of December 31, 2011, the Company was obligated to pay $677,000 to NTR as a trade payable.

On July 19, 2012, DGSE entered into a Loan Agreement with NTR, pursuant to which NTR agreed to provide the Company a guidance line of revolving credit in an amount up to $7,500,000. The Loan Agreement will terminate-and all Obligations outstanding thereunder will be due and payable-upon the earlier of: (i) August 1, 2014; (ii) the date that is twelve months after the Company receives notice from NTR demanding the repayment of the Obligations; (iii) the date the Obligations are accelerated in accordance with the terms of the Loan Agreement; or (iv) the date on which the commitment terminates under the Loan Agreement. In connection with the Loan Agreement, the Company granted a security interest in the respective personal property of each of its subsidiaries. The loan carries an interest rate of two percent (2%) per annum for all funds borrowed pursuant to the Loan Agreement. Proceeds received by the Company pursuant to the terms of the Loan Agreement were used for repayment of all outstanding financial obligations incurred in connection with that certain Loan Agreement, dated as of December 22, 2005, between the Company and Texas Capital Bank, N.A., and additional proceeds are expected to be used as working capital in the ordinary course of business. As of September 30, 2012 we had an outstanding balance of $3,583,358 drawn on the NTR credit facility.

On September 14, 2011, we announced that we had completed our acquisition of 100% of SBT, of which NTR was the majority owner. Under the terms of the acquisition, we acquired SBT for 600,000 shares of our restricted common stock.

On September 14, 2011, NTR forgave $2,000,000 of payables owed by us, and received 400,000 of our restricted shares of common stock. This transaction resulted in a non-cash expense of $1,720,000 recorded as a loss on debt settlement.

The Audit Committee has reviewed these transactions and deemed them to be on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances.