XML 27 R18.htm IDEA: XBRL DOCUMENT
v2.4.0.6

Litigation | 12 Months Ended
--- | ---
Dec. 31, 2011
Settlement of Litigation [Abstract] |
Settlement of Litigation | Note 12 -Litigation On April 16, 2012 the Company filed a Form 8-K disclosing that the Company's Board of Directors had determined the existence of Accounting Irregularities beginning approximately during the second calendar quarter of 2007 and continuing in periods subsequent thereto, which could affect financial information reported since that time. At that time, the Company announced that it had engaged forensic accountants to analyze the Accounting Irregularities, and that financial statements and information reported since the inception of the Accounting Irregularities, believed to begin in the second calendar quarter of 2007, should not be relied upon. The Company brought the Accounting Irregularities to the attention of the SEC in a letter dated April 16, 2012. On June 18, 2012, DGSE received written notice that SEC had initiated a private investigation into the Accounting Irregularities, to determine whether any persons or entities engaged in any possible violations of the federal securities laws. The Company has and continues to cooperate fully with the SEC staff in the investigation. There can be no certainty as to the outcome of this investigation, or to the findings of the SEC. The Company is not currently aware of any fines or sanctions against any individuals or against us as a result of the SEC investigation. Also, in connection with the Accounting Irregularities, and the subsequent halt in trading of the Company's Common Stock on the Exchange, the Company has received notice of two lawsuits filed by shareholders of the Company. These suits have been filed against the Company's former CEO and Chairman, and the individual Directors of the Company. On November 29, 2011, the Company and its subsidiary Superior entered into a settlement agreement with FASNAP in relation to a lawsuit filed against us in California. The lawsuit resulted from a transaction whereby the Company mistakenly sold rare coins in its possession, which belonged to FASNAP, who had not given us authorization to sell the coins. Under the terms of the agreement, the Company returned the remaining coins which were still in the Company's possession, and agreed to pay FASNAP the approximate market value of those coins which had been sold. The total cost of the settlement agreement was $2,560,713. Upon review of the facts leading to the lawsuit and settlement, Current Management believes that under U.S. GAAP the Company had sufficient information to accrue for this settlement as a contingent loss, as early as Fiscal 2009. As a part of the current review and restatement, the Company recognized this accrual in Fiscal 2009 through a reduction to retained earnings (see Note 1). As of December 31, 2011 and 2010, $1,829,662 and $2,560,713 respectively, remains payable and is included in accrued liabilities. Subsequent to December 31, 2011 all amounts have been paid in relation to this settlement. On February 26, 2010, Superior entered into a settlement agreement for a lawsuit filed by its previous landlord, DBKKfor $385,000 to be paid over three years bearing interest at 8%. The lawsuit resulted from a lease transaction entered into by certain officers of Superior. The Company had previously recorded a $385,000 loss related to the settlement of this litigation in other (income) expense in its 2010 Consolidated Statement of Operations. As part of the current review and restatement of its financial reports, Current Management believes that enough information was available as of December 31, 2009 to enable the Company to reasonably accrue for this settlement as a contingent loss in Fiscal 2009. As a result, the $385,000 loss is not included in the restated 2010 operating results, and its impact has been reflected as a reduction in retained earnings in the Company's December 31, 2009 Balance Sheet (see Note 1). On January 27, 2010, the Company and SIBL, which prior to the closing of certain settlement agreements discussed below was a beneficial owner of a significant equity interest in the Company, a primary lender to a wholly owned subsidiary of the Company and subject to certain agreements with the Company and its then-current Chairman, entered into a Purchase and Sale Agreement and a Debt Conversion Agreement to settle the Company's lawsuit against SIBL. On May 25, 2010, DGSE, SIBL and NTR 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. At the time of the agreement the Company's wholly-owned subsidiary, Superior, owed $10,550,000 under its credit agreement with SIBL. Upon closing of the transaction, SIBL terminated all agreements, converted all of its subsidiary's debt, interest and other expenses in exchange for 1,000 shares of the Company's common stock. As part of the agreement SIBL sold 3,000,000 shares of common stock to DGSE's assignee, NTR Metals for $3,600,000 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 distributed to key DGSE employees, as designated by the Company. SIBL cancelled 422,814 additional warrants to purchase additional shares of the Company as part of the settlement agreement. As a result of the transaction, the Company recognized a gain of $10,548,570 related to the cancellation of debt (see Note 1). The Texas Comptroller of Public Accounts (the "Comptroller") conducted a sales and use tax audit of DGSE with respect to the period March 1, 2006 through November 30, 2009 and subsequently sent a Notification of Audit Results, by letter dated December 17, 2010, asserting that we owe an amount of tax due, plus penalties and interest. We submitted a request for redetermination to the Comptroller by letter dated January 13, 2011. By letter dated August 25, 2011, the Comptroller stated that our request for a redetermination hearing has been granted. The hearing has not yet taken place. We are currently discussing, both internally among the members of our Board and with our outside counsel, whether we will take legal action against those officers and providers of professional services who were involved in the Accounting Irregularities.

X
- Details
Name: | us-gaap_CommitmentsAndContingenciesDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for legal proceedings, legal contingencies, litigation, regulatory and environmental matters and other contingencies. + References No definition available. + Details
Name: | us-gaap_LegalMattersAndContingenciesTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration