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Summary of Accounting Policies and Nature of Operations | 12 Months Ended
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Dec. 31, 2011
Summary of Accounting Policies and Nature of Operations [Abstract] |
Summary of Accounting Policies and Nature of Operations | Note 1 - Summary of Accounting Policies and Nature of Operations A summary of the significant accounting policies applied in the preparation of the accompanying consolidated financial statements follows: DGSE Companies, Inc., a Nevada corporation (the "Company") previously filed its Annual Report on Form 10-K for the fiscal year ended December 31, 2010 ("Fiscal 2010") on April 15, 2011. The Company was obligated to file its Annual Report on Form 10-K (this "Form 10-K") for the year ended December 31, 2011 ("Fiscal 2011") by March 30, 2012. On March 30, 2012, the Company filed a Form 12b-25 with the Securities and Exchange Commission (the "SEC") stating that the Company was unable to file the Form 10-K by the prescribed filing date. On April 16, 2012 the Company filed a Current Report on Form 8-K disclosing that its Board of Directors (the "Board") had determined the existence of certain accounting irregularities beginning approximately during the second calendar quarter of 2007 and continuing in periods subsequent thereto (the "Accounting Irregularities"), which could affect financial information reported since that time. The Company also announced that we 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 be the second calendar quarter of 2007, should not be relied upon. As of the filing of this Form 10-K, the Company has removed and replaced all Executives who served the Company prior to December 20, 2011, including, the Chairman of the Board, the Chief Executive Officer, the President, the Chief Operating Officer and all senior finance staff members, including the Chief Financial Officer, the Controller and the Company's Vice President of Finance (collectively: "Prior Management"). While many of these management changes occurred in 2012, management felt it was relevant to include updates on these changes through the date of the filing of this Form 10-K. With the appointments of Mr. James J. Vierling as Chairman of the Board, CEO and President, Mr. C. Brett Burford as CFO, Mr. James D. Clem as COO, along with other key additions, the Company believes that it has significantly increased the integrity, professionalism, and quality of its senior leadership team (collectively: "Current Management"). Principles of Consolidation and Nature of Operations The Company and its subsidiaries, sell jewelry and bullion products to both retail and wholesale customers throughout the United States through its facilities in Alabama, Florida, Georgia, Illinois, South Carolina, North Carolina, Tennessee, and Texas, and through its various internet sites. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") and include the accounts of the Company and its subsidiaries. All material intercompany transactions and balances have been eliminated. Restatement of our Consolidated Financial Statements The Company previously issued its Form 10-K for Fiscal 2010 on April 15, 2011. The Company was obligated to file its Form 10-K for Fiscal 2011 by March 30, 2012. On March 30, 2012, the Company filed a Form 12b-25 with the SEC stating that it was unable to file the Form 10-K by the prescribed filing date. On April 16, 2012 the Company filed a Current Report on Form 8-K disclosing that its Board had determined the existence of certain 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. The Company also announced that we 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 be the second calendar quarter of 2007, should not be relied upon for investment purposes. In addition to engaging new independent auditors, we have removed and replaced the Chairman of the Board, the Chief Executive Officer, the President and all senior finance staff members, including the Chief Financial Officer and our previous Controller. Since the departure of all individuals who had critical decision making authority during the Accounting Irregularities, we have had very limited access to most of these individuals. As a result, the reasoning behind or motivation for the many and significant Accounting Irregularities remains largely unknown. Our Current Management has focused a very significant amount of time, energy, money and human resources on uncovering and correcting these Accounting Irregularities to provide our shareholders with restated information that can be relied upon for investment purposes, as well as assurance that financial information provided by us going forward is true and correct and may be properly relied upon. The following sections present information on all material restatements made to Fiscal 2010 and Fiscal 2011, as well as changes that impacted prior periods which are represented by an adjustment in December 31, 2009 retained earnings. December 31, 2009 - Adjustment to Retained Earnings Review of journal entries made by Prior Management at year end 2009 revealed an $8,283,469 entry which increased inventory by $7,004,063, reduced customer deposits by $1,000,000, and increased other assets by $279,406. No support could be found for this adjustment and Current Management does not believe this entry to be appropriate. As a result these amounts have been reversed, with the impact being an $8,283,469 reduction to retained earnings. Additional review and analysis related to inventory balances in various inventory accounts determined that as of December 31, 2009 inventory was additionally overstated by $4,660,824, which has been corrected with a resulting offset to retained earnings. As of December 31, 2009 the Company was carrying goodwill of $837,117 related to the acquisition of Fairchild Watches, and $2,464,006 of Intangible Assets related to the purchase of Superior Galleries, Inc. ("Superior"). Analysis was performed by prior management as of December 31, 2009 which determined that neither amount should be impaired. As part of the current review and restatement, Current Management has reviewed these earlier analyses, including review of the assumptions used at that time, as well as comparison of projections with actual results achieved in subsequent periods. Current management believes that these assets should have been fully impaired as of December 31, 2009, and as a result these assets have been written off with a corresponding reduction to retained earnings as of that point. On November 29, 2011, the Company and its subsidiary Superior entered into a settlement agreement with FASNAP Corporation ("FASNAP") in relation to a lawsuit filed against us in California. The lawsuit resulted from a transaction under Prior Management in which we sold rare coins in our possession which belonged to FASNAP, who had not given us authorization to sell the coins. Under the terms of the agreement, DGSE returned the remaining coins that were still in the Company's possession, and agreed to pay FASNAP the approximate market value of those coins that 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 we had sufficient information to accrue for this settlement as a contingent loss, as early as 2009. As a part of the current review and restatement, the Company has recognized this accrual through a reduction to retained earnings as of December 31, 2009. As of December 31, 2009, we had a deferred tax asset of $1,731,175 on its balance sheet, related to prior net operating losses of the Company. Per U.S. GAAP, such a tax asset should be reviewed as to the likelihood of the Company being able to utilize the asset in the future, to offset future tax liabilities related to taxable earnings. Current Management believes that based on cumulative three year losses of the Company at that point, that a full valuation allowance was warranted. As part of the current restatement process, this valuation allowance has been recorded, along with a corresponding $1,731,175 reduction to 2009 retained earnings. A federal income tax receivable for $639,372 was also established by Prior Management as of December 31, 2009 and no support can be found for this amount, nor has it been subsequently received by us. As a result, this receivable is being written off to retained earnings as well. The Company acquired Superior in May of 2007. As part of this transaction we assumed an existing $11,500,000 credit facility that Superior had with Stanford International Bank, Ltd. ("SIBL"). Per the credit agreement, interest on this facility was to be paid at the prime rate. Upon review, no interest was accrued or paid on this debt from inception until the debt was extinguished as part of the larger settlement with SIBL in January of 2010. Interest that should have been accrued from January of 2007 through December of 2009 has been calculated at $1,350,000, with a corresponding reduction being made to retained earnings as of December 31, 2009. On February 26, 2010, Prior Management entered into a settlement agreement for a lawsuit filed by its previous landlord, DBKK, LLC ("DBKK") for $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. As of December 31, 2010, we had recorded a $385,000 loss related to the settlement of this litigation in other (income) expense. Upon review of the facts leading to the lawsuit and settlement, Current Management believes that under U.S. GAAP we had sufficient information to accrue for this settlement as a contingent loss, as early as 2009. As a part of the current review and restatement, the Company is recognizing this accrual through a reduction to retained earnings as of December 31, 2009. A review by Current Management of prepaid expenses on the balance sheet as of December 31, 2009 revealed many items that either had no supporting documentation, had no future value to the Company, or should have been partly or fully amortized and were not. The total value of these items was $373,176, and this amount has been offset to retained earnings as of December 31, 2009. In addition to the above amounts, a review under the guidance of Current Management has revealed numerous other accounting errors, primarily in relation to amounts posted to the balance sheet with missing, insufficient or incorrect supporting data. In many cases it has been difficult or impossible to accurately agree detail or sub-ledger amounts to the general ledger balances. In these situations, Current Management has chosen to adjust balances to amounts that can be reasonably supported with an appropriate level of detail. These areas include accounts payable, accounts receivable, customer deposits, fixed assets and associated accumulated depreciation, as well as rent and escrow payments on leased properties. The cumulative adjustments related to all of these areas, results in an additional $884,443 reduction to retained earnings as of December 31, 2009. The total of all adjustments related to the year ended December 31, 2009 ("Fiscal 2009") and prior years, results in a $24,169,295 reduction of retained earnings, as of December 31, 2009.
|  | Year Ended December 31, 2010 |
|  | As |  |  | Inventory |  |  | Inventory |  |  | SIBL |  |  | AP |  |  | DBKK |  |  |  |  |  | As |
Consolidated Statements of Operations |  | Reported |  |  | Impairment |  |  | Adjustment |  |  | Settlement |  |  | Accrual |  |  | Settlement |  |  | Other |  |  | Restated |
Revenue: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Sales |  | $ | 82,567,921 |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 82,567,921 |
Costs and expenses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cost of goods sold |  |  | 70,769,750 |  |  |  | - |  |  |  | (607,005 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 2 |  |  |  | 70,162,747 |
Inventory Impairment |  |  | 3,771,702 |  |  |  | (3,771,702 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Selling, general and administrative expenses |  |  | 11,096,407 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 686,452 |  |  |  | - |  |  |  | (79,206 | ) |  |  | 11,703,653 |
Depreciation and amortization |  |  | 494,911 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (80,769 | ) |  |  | 414,142 |
Operating income (loss) |  |  | (3,564,849 | ) |  |  | 3,771,702 |  |  |  | 607,005 |  |  |  | - |  |  |  | (686,452 | ) |  |  | - |  |  |  | 159,973 |  |  |  | 287,379 |
Other expense (income) : |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Gain on settlement of debt and other liabilities |  |  | (9,198,570 | ) |  |  | - |  |  |  | - |  |  |  | (1,350,000 | ) |  |  | - |  |  |  | - |  |  |  | (296,479 | ) |  |  | (10,845,049 | )
Loss on Legal Settlement |  |  | 385,000 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (385,000 | ) |  |  | - |  |  |  | - |
Other expense (income), net |  |  | (18,301 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 858 |  |  |  | (17,443 | )
Interest expense |  |  | 383,994 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 383,994 |
Income before income taxes |  |  | 4,883,028 |  |  |  | 3,771,702 |  |  |  | 607,005 |  |  |  | 1,350,000 |  |  |  | (686,452 | ) |  |  | 385,000 |  |  |  | 455,594 |  |  |  | 10,765,877 |
Income tax expense |  |  | (780,346 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 805,021 |  |  |  | 24,675 |
Net income |  | $ | 5,663,374 |  |  | $ | 3,771,702 |  |  | $ | 607,005 |  |  | $ | 1,350,000 |  |  | $ | (686,452 | ) |  | $ | 385,000 |  |  | $ | (349,427 | ) |  | $ | 10,741,202 |
Earnings per common share: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  |  | 0.57 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 1.04 |
Diluted |  |  | 0.55 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 0.96 |
Weighted-average number of common shares |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  |  | 9,894,243 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 10,335,794 |
Diluted |  |  | 10,355,531 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 11,216,158 |
As noted in the Annual Report on Form 10-K for the fiscal year ended December 31, 2010, as part of our year-end close, we adjusted inventory by approximately $3,771,702 (the "2010 Inventory Adjustment") in order to reflect multiple book to physical and other inventory reconciling items. Based on the recent review and restatement efforts, Current Management has determined that the 2010 Inventory Adjustment was improperly accounted for in Fiscal 2010, and should have been accounted for in earlier periods. Accordingly, the 2010 Inventory Adjustment has been incorporated in its entirety into the 2009 adjustments detailed above. As a result, the 2010 Inventory Adjustment has been reversed out of Fiscal 2010, eliminating the previously reported Inventory Impairment of $3,771,702. The analysis of December 31, 2010 inventory accounts also indicated that the previously reported Cost of Sales had been overstated by $607,005, which has been restated as well. As noted in the previous section entitled "December 31, 2009 - Adjustment to Retained Earnings", we assumed an existing $11,500,000 credit facility with SIBL upon our acquisition of Superior in May of 2007. Interest that should have been accrued from January, 2007 through December, 2010 was subsequently calculated, as part of the current restatement, at $1,350,000 with a corresponding reduction being made to retained earnings as of December 31, 2009. On January 27, 2010, we and SIBL entered into a Purchase and Sale Agreement and a Debt Conversion Agreement to settle our lawsuit against SIBL. Upon closing of the transaction, SIBL terminated all agreements, converted all of its subsidiary's debt, interest and other receivables for 1,000 shares of our common stock issued to its subsidiary, and sold 3,000,000 shares of common stock held by SIBL to our assignee, NTR for $3,600,000 under a Partial Assignment Agreement. As a result of the transaction, SIBL cancelled all our debt obligations to it, including principal and interest. In relation to this transaction, and as part of the current restatement, we will reverse the $1,350,000 interest accrual noted above, and recognize a corresponding gain in Other Income for the year ended December 31, 2010. As part of the current review and restatement process, we have analyzed accounts payable as of December 31, 2010 and compared the balance sheet balance with the sub-ledger, as well as subsequent related payments in Fiscal 2011. This analysis has revealed that accounts payable was understated by approximately $686,452 as of December 31, 2010, and SG&A was understated by the same amount. As part of the 2010 restatement, accounts payable was increased by $686,452 as of December 31, 2010, and SG&A was increased by the same amount. As stated above, on February 26, 2010, Superior entered into a settlement agreement for a lawsuit filed by the previous landlord of our Superior facility in Beverly Hills, CA , DBKK for $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. As of December 31, 2010, we had previously recorded a $385,000 loss related to the settlement of this litigation in other (income) expense. Upon review of the facts leading to the lawsuit and settlement, Current Management believes that under U.S. GAAP, we had sufficient information to accrue for this settlement as a contingent loss, as early as the fiscal year ended December 31, 2009. As a part of the current review and restatement, we are recognizing this accrual in fiscal 2009 through a reduction to retained earnings, and a corresponding adjustment is being made in the restated financials for 2010 to decrease $385,000 of other expense that had been recorded. As in the above section, the review of the year ended December 31, 2010 by Current Management also revealed numerous other accounting errors, primarily in relation to amounts posted to the balance sheet with missing, insufficient or incorrect supporting data. In many cases it has been difficult or impossible to accurately agree to detail or sub-ledger amounts to the general ledger balances. In these situations, Current Management has chosen to adjust balances to amounts that can be reasonably supported with an appropriate level of detail. These areas include pre-paid expenses, accrued liabilities, accounts payable, accounts receivable, customer deposits, fixed assets and associated accumulated depreciation, as well as rent and escrow payments on leased properties. The cumulative adjustments related to all of these areas, results in an additional $455,594 reduction in various expense categories as of December 31, 2010. The cumulative effect of all 2010 restatements, results in an improvement of $5,882,849 in pre-tax income for the year, compared to previously reported results.
Consolidated Statements of Operations |  | Year Ended December 31, 2010 |
|  | As |  |  |  |  |  | As |
|  | Reported |  |  | Adjustments |  |  | Restated |
Revenue: |  |  |  |  |  |  |  |  |  |  |  |
Sales |  | $ | 82,567,921 |  |  | $ | - |  |  | $ | 82,567,921 |
Costs and expenses: |  |  |  |  |  |  |  |  |  |  |  |
Cost of goods sold |  |  | 70,769,750 |  |  |  | (607,003 | ) |  |  | 70,162,747 |
Inventory Impairment |  |  | 3,771,702 |  |  |  | (3,771,702 | ) |  |  | - |
Selling, general and administrative expenses |  |  | 11,096,407 |  |  |  | 607,246 |  |  |  | 11,703,653 |
Depreciation and amortization |  |  | 494,911 |  |  |  | (80,769 | ) |  |  | 414,142 |
Operating income |  |  | (3,564,849 | ) |  |  | 3,852,228 |  |  |  | 287,379 |
Other expense (income) : |  |  |  |  |  |  |  |  |  |  |  |
Gain on settlement of debt and other liabilities |  |  | (9,198,570 | ) |  |  | (1,646,479 | ) |  |  | (10,845,049 | )
Loss on Legal Settlement |  |  | 385,000 |  |  |  | (385,000 | ) |  |  | - |
Other expense (income), net |  |  | (18,301 | ) |  |  | 858 |  |  |  | (17,443 | )
Interest expense |  |  | 383,994 |  |  |  | - |  |  |  | 383,994 |
Income before income taxes |  |  | 4,883,028 |  |  |  | 5,882,849 |  |  |  | 10,765,877 |
Income tax expense |  |  | (780,346 | ) |  |  | 805,021 |  |  |  | 24,675 |
Net income |  | $ | 5,663,374 |  |  | $ | 5,077,828 |  |  | $ | 10,741,202 |
Earnings per common share: |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | (0.57 | ) |  |  |  |  |  | $ | (1.04 | )
Diluted |  | $ | (0.55 | ) |  |  |  |  |  | $ | (0.96 | )
Weighted-average number of common shares |  |  |  |  |  |  |  |  |  |  |  |
Basic |  |  | 9,894,243 |  |  |  |  |  |  |  | 10,335,794 |
Diluted |  |  | 10,355,531 |  |  |  |  |  |  |  | 11,216,158 |
Consolidated Balance Sheets |  | Year Ended December 31, 2010 |
|  | As |  |  |  |  |  | As |
|  | Reported |  |  | Adjustments |  |  | Restated |
ASSETS |  |  |  |  |  |  |  |  |  |  |  |
Current Assets: |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 871,468 |  |  | $ | (139,019 | ) |  | $ | 732,449 |
Trade receivables |  |  | 793,869 |  |  |  | (78,487 | ) |  |  | 715,382 |
Inventories |  |  | 17,046,716 |  |  |  | (9,069,488 | ) |  |  | 7,977,228 |
Prepaid federal income tax |  |  | 319,772 |  |  |  | (319,772 | ) |  |  | - |
Prepaid expenses |  |  | 416,376 |  |  |  | (387,903 | ) |  |  | 28,473 |
Total current assets |  |  | 19,448,201 |  |  |  | (9,994,669 | ) |  |  | 9,453,532 |
Marketable securities-available for sale |  |  | 7,500 |  |  |  | - |  |  |  | 7,500 |
Property and equipment, net |  |  | 4,466,517 |  |  |  | (123,961 | ) |  |  | 4,342,556 |
Deferred income taxes |  |  | 2,844,511 |  |  |  | (2,844,511 | ) |  |  | - |
Goodwill |  |  | 837,117 |  |  |  | (837,117 | ) |  |  | - |
Intangible assets, net |  |  | 2,435,339 |  |  |  | (2,393,987 | ) |  |  | 41,352 |
Other assets |  |  | 220,949 |  |  |  | (199,457 | ) |  |  | 21,492 |
Total assets |  | $ | 30,260,134 |  |  | $ | (16,393,702 | ) |  | $ | 13,866,432 |
LIABILITIES |  |  |  |  |  |  |  |  |  |  |  |
Current Liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Line of credit |  |  | 3,499,887 |  |  |  | - |  |  |  | 3,499,887 |
Current maturities of long-term debt |  |  | 472,625 |  |  |  | 261,642 |  |  |  | 734,267 |
Convertible debt, net of debt discount |  |  | 148,000 |  |  |  | (1 | ) |  |  | 147,999 |
Accounts payable-trade |  |  | 1,791,451 |  |  |  | (313,471 | ) |  |  | 1,477,980 |
Accrued expenses |  |  | 260,361 |  |  |  | 815,905 |  |  |  | 1,076,266 |
Customer deposits and other liabilities |  |  | 2,428,452 |  |  |  | 372,311 |  |  |  | 2,800,763 |
Total current liabilities |  |  | 8,600,776 |  |  |  | 1,136,386 |  |  |  | 9,737,162 |
Long-term debt, less current maturities |  |  | 3,169,647 |  |  |  | (268,284 | ) |  |  | 2,901,363 |
Accrued expenses, less current maturities |  |  | - |  |  |  | 1,829,663 |  |  |  | 1,829,663 |
Total liabilities |  |  | 11,770,423 |  |  |  | 2,697,765 |  |  |  | 14,468,188 |
Commitments and contingencies |  |  |  |  |  |  |  |  |  |  |  |
STOCKHOLDERS' EQUITY |  |  |  |  |  |  |  |  |  |  |  |
Common stock, $0.01 par value |  |  | 99,861 |  |  |  | 4,256 |  |  |  | 104,117 |
Additional paid-in capital |  |  | 19,084,646 |  |  |  | (4,256 | ) |  |  | 19,080,390 |
Accumulated deficit |  |  | (694,796 | ) |  |  | (19,091,467 | ) |  |  | (19,786,263 | )
Total stockholders' equity (deficit) |  |  | 18,489,711 |  |  |  | (19,091,467 | ) |  |  | (601,756 | )
Total liabilities and stockholders' equity |  | $ | 30,260,134 |  |  | $ | (16,393,702 | ) |  | $ | 13,866,432 |
|  | Year Ended December 31, 2010 |
|  | 1st Qtr |  |  | 2nd Qtr |  |  | 3rd Qtr |  |  | 4th Qtr |  |  | Fiscal Year |
|  | 3/31/2010 |  |  | 6/30/2010 |  |  | 9/30/2010 |  |  | 12/31/2010 |  |  | 12/31/2010 |
|  | (Unaudited) |  |  | (Unaudited) |  |  | (Unaudited) |  |  | (Unaudited) |  |  |  |
Net Income as Reported |  | $ | (130,151 | ) |  | $ | 5,644,678 |  |  | $ | 138,509 |  |  | $ | 10,338 |  |  | $ | 5,663,374 |
Inventory Impairment |  |  | - |  |  |  | 3,771,702 |  |  |  | - |  |  |  | - |  |  |  | 3,771,702 |
Inventory Adjustment |  |  | 129,068 |  |  |  | 154,292 |  |  |  | 132,752 |  |  |  | 190,893 |  |  |  | 607,005 |
SIBL Settlement |  |  | - |  |  |  | 1,350,000 |  |  |  | - |  |  |  | - |  |  |  | 1,350,000 |
AP Accrual |  |  | (152,409 | ) |  |  | (159,370 | ) |  |  | (150,769 | ) |  |  | (223,904 | ) |  |  | (686,452 | )
DBKK Settlement |  |  | - |  |  |  | 385,000 |  |  |  | - |  |  |  | - |  |  |  | 385,000 |
Other Adjustments |  |  | 379,746 |  |  |  | (37,993 | ) |  |  | (12,624 | ) |  |  | 126,465 |  |  |  | 455,594 |
Utilize Income Tax NOL |  |  | (69,131 | ) |  |  | (516,537 | ) |  |  | - |  |  |  | (219,353 | ) |  |  | (805,021 | )
Net Income As Restated |  | $ | 157,123 |  |  | $ | 10,591,772 |  |  | $ | 107,868 |  |  | $ | (115,561 | ) |  | $ | 10,741,202 |
Nine Months Ended September 30, 2011 - Restatement In addition to restatements made to Fiscal 2010, as well as changes that impacted prior years which are represented by an adjustment to December 31, 2009 retained earnings, certain changes have been made to Fiscal 2011 unaudited quarterly financial statements previously filed as part of our quarterly reports on Form 10-Q filed for the quarters ended March 31, 2011, June 30, 2011 and September 31, 2011. The following section details changes made for this nine-month period, in total and by quarter.
|  | Nine Months Ended September 30, 2011 |
|  | As |  |  | Inv |  |  | Correct Adv |  |  | Correct PY |  |  | FASNAP |  |  | Loss on Debt |  |  | Discount on |  |  |  |  |  | As |
Consolidated Statements of Operations (Unaudited) |  | Reported |  |  | Adjustments |  |  | Accrual |  |  | Accts Payable |  |  | Settlement |  |  | Settlment |  |  | Conv Debt |  |  | Other |  |  | Restated |
Revenue: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Sales |  | $ | 105,573,142 |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | - |  |  | $ | 105,573,142 |
Costs and expenses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cost of goods sold |  |  | 92,671,662 |  |  |  | 1,980,711 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 94,652,373 |
Selling, general and administrative expenses |  |  | 9,184,257 |  |  |  | - |  |  |  | (62,358 | ) |  |  | (198,272 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 25,121 |  |  |  | 8,948,748 |
Depreciation and amortization |  |  | 289,053 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (22,404 | ) |  |  | 266,649 |
Operating income |  |  | 3,428,170 |  |  |  | (1,980,711 | ) |  |  | 62,358 |  |  |  | 198,272 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (2,717 | ) |  |  | 1,705,372 |
Other expense (income) : |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loss on Legal Settlement |  |  | 1,700,000 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (1,700,000 | ) |  |  | - |  |  |  |  |  |  |  | - |  |  |  | - |
Loss on settlement of debt with related party |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 1,720,000 |  |  |  | - |  |  |  | - |  |  |  | 1,720,000 |
Other expense (income), net |  |  | (1,745 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (1,745 | )
Interest expense |  |  | 326,061 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 102,001 |  |  |  | 9,827 |  |  |  | 437,889 |
Income before income taxes |  |  | 1,403,854 |  |  |  | (1,980,711 | ) |  |  | 62,358 |  |  |  | 198,272 |  |  |  | 1,700,000 |  |  |  | (1,720,000 | ) |  |  | (102,001 | ) |  |  | (12,544 | ) |  |  | (450,772 | )
Income tax expense |  |  | 393,933 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (393,933 | ) |  |  | - |
Net income |  | $ | 1,009,921 |  |  | $ | (1,980,711 | ) |  | $ | 62,358 |  |  | $ | 198,272 |  |  | $ | 1,700,000 |  |  | $ | (1,720,000 | ) |  | $ | (102,001 | ) |  | $ | 381,389 |  |  | $ | (450,772 | )
Earnings per common share: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | 0.10 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | (0.04 | )
Diluted |  | $ | 0.09 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | (0.04 | )
Weighted-average number of common shares |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  |  | 10,453,450 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 10,441,418.0 |
Diluted |  |  | 11,134,368 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 10,441,418.0 |
As part of our year-end close for Fiscal 2011, Current Management engaged an analysis of physical inventory levels as of the three quarters previously-reported during Fiscal 2011. Based on this analysis, for the nine-month period ended September 30, 201,1 we adjusted inventory by approximately $1,980,711, in order to reflect multiple book-to-physical and other inventory reconciling items. This inventory adjustment caused a corresponding increase to cost of goods sold for this same period. As part of the review of year-end Fiscal 2010 balances, Current Management determined that advertising expense had been improperly accrued. Correction of this accrual resulted in a $62,358 increase for the year-end 2010 advertising accrual, and a corresponding decrease in previously-reported advertising expense in the first nine months of 2011. This review of year-end 2010 balances also resulted in an increase of $198,272 in accounts payable as of December 31, 2010, and a corresponding decrease in selling, general and administrative expenses compared to amounts previously recorded in the first quarter of 2011. As noted previously, we and our subsidiary Superior entered into a settlement agreement with FASNAP on November 29, 2011. The total cost of the settlement was $2,560,713, and we had reserved $1,700,000 against this settlement during the quarter ended September 30, 2011. Upon review of the facts leading to the lawsuit and settlement, Current Management believes that we had sufficient information to accrue for this settlement as a contingent loss, as early as 2009. As a part of the current review and restatement, we have recognized this accrual through a reduction to retained earnings as of December 31, 2009, and as result we have reversed the effect of the 2011 accrual, resulting in an improvement of $1,700,000 to the previously-filed third quarter 2011 results. Other expense for the quarter ended September 30, 2011 has been restated to include a $1,720,000 non-cash loss on the settlement of debt with NTR. This loss related to the issuance of 400,000 shares of our common stock to NTR, in exchange for $2,000,000 in debt forgiveness. This charge represents the excess in market value of the securities issued over the value of the debt forgiven, and had not been properly recognized by Prior Management. On August 16, 2010, we offered and sold a total of 5 units, at a purchase price of $100,000 per unit, to three "accredited investors" (as that term is defined in Rule 501(a) of Regulation D), with each unit consisting of (i) 24,286 shares of our common stock, and (ii) indebtedness of the Company in the principal amount of $50,000 and evidenced by a convertible promissory note, amounting to a sale of a total of 121,430 shares of our common stock and indebtedness in the aggregate principal amount of $250,000, in exchange for aggregate cash consideration of $500,000. Pursuant to the terms of the convertible promissory notes, the unpaid principal balance and unpaid accrued interest on each note was convertible at the option of the lender into a number of shares of our common stock, determined according to the following schedule: (i) if converted prior to the one-year anniversary of the date of the note, at a rate of one share of our common stock for each $3.50 of principal and accrued interest, (ii) if converted after the one-year anniversary of the date of note but prior to the two-year anniversary of the date of the note, at a rate of one share of our common stock for each $4.00 of principal and accrued interest, (iii) if converted after the two-year anniversary of the date of the note but prior to the three-year anniversary of the date of the note, at a rate of one share of our common stock for each $4.50 of principal and accrued interest, (iv) if converted after the three-year anniversary of the date of the note but prior to the four-year anniversary of the date of the note, at a rate of one share of our common stock for each $5.00 of principal and accrued interest, and (v) if converted after the four-year anniversary of the date of the note, at a rate of one share of our common stock for each $5.50 of principal and accrued interest. There were no underwriters for this private placement, and therefore there were no underwriting discounts or commissions. Because this offer and sale was a private placement of securities, and each offeree represented to us in writing that he or she was an "accredited investor," as that term is defined in Rule 501(a) of Regulation D, we relied upon the exemption of the offer and sale of these shares from the registration requirements of Section 5 of the Securities Act provided by Rule 506 of Regulation D. As a result of this offering, we allocated the fair market value to both the shares of our common stock and the indebtedness debt at a cost of $100,000 per unit. Accordingly, we recorded a discount of $102,001 for Fiscal 2010. Prior to the first year anniversary, all of the holders converted their respective balances under their promissory notes, and we therefore issued to the three accredited investors an aggregate total of 71,429 additional shares of our common stock at a price of $3.50 per share. Accordingly the discount of $102,001 was expensed at the time of conversion, during the second and third quarters of 2011. Interest expense for these periods has now been restated to include this amount. As with the reviews of the periods prior to December 31, 2010, the review of the nine-month period ended September 30, 2011 by Current Management also revealed numerous accounting errors, primarily in relation to amounts posted to the balance sheet with missing, insufficient or incorrect supporting data. In many cases it has been difficult or impossible to accurately agree to detail or sub-ledger amounts to the general ledger balances. In these situations, Current Management has chosen to adjust balances to amounts that can be reasonably supported with an appropriate level of detail. These areas include pre-paid expenses, accrued liabilities, accounts payable, accounts receivable, customer deposits, fixed assets and associated accumulated depreciation, as well as rent and escrow payments on leased properties. The cumulative adjustments related to all of these areas, results in an additional net increase of $12,544 across various expense categories over the nine months ended September 30, 2011. The total impact of all adjustments resulted in a reduction of $1,854,626 in income before taxes, compared to the previously reported results for the nine-months ended September 30, 2011.
|  | Nine Months Ended September 30, 2011 |
|  | 1st Qtr |  |  | 2nd Qtr |  |  | 3rd Qtr |  |  | Nine Mo Ended |
|  | 3/31/2011 |  |  | 6/30/2011 |  |  | 9/30/2011 |  |  | 9/30/2011 |
|  | (Unaudited) |  |  | (Unaudited) |  |  | (Unaudited) |  |  | (Unaudited) |
Net Income as Reported |  | $ | 302,612 |  |  | $ | 568,099 |  |  | $ | 139,210 |  |  | $ | 1,009,921 |
Inventory Adjustment |  |  | (485,432 | ) |  |  | (572,681 | ) |  |  | (922,598 | ) |  |  | (1,980,711 | )
Correct Advertising Accrual |  |  | 20,786 |  |  |  | 20,786 |  |  |  | 20,786 |  |  |  | 62,358 |
Correct Prior Year Accounts Payable |  |  | 198,272 |  |  |  | - |  |  |  | - |  |  |  | 198,272 |
Loss on Debt Settlement with Related Party |  |  | - |  |  |  | - |  |  |  | (1,720,000 | ) |  |  | (1,720,000 | )
Reclass FASNAP to Prior Year |  |  | - |  |  |  | - |  |  |  | 1,700,000 |  |  |  | 1,700,000 |
Expense Disc on Convertible Debt |  |  | - |  |  |  | (61,201 | ) |  |  | (40,800 | ) |  |  | (102,001 | )
Other |  |  | (1,698 | ) |  |  | (19,785 | ) |  |  | 8,939 |  |  |  | (12,544 | )
Utilize Income Tax NOLs |  |  | 160,766 |  |  |  | 302,751 |  |  |  | (69,584 | ) |  |  | 393,933 |
Net Income As Restated |  | $ | 195,306 |  |  | $ | 237,969 |  |  | $ | (884,047 | ) |  | $ | (450,772 | )
Cash and Cash Equivalents The Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. Investments in Marketable Equity Securities Marketable equity securities have been categorized as available-for-sale and carried at fair value. Unrealized gains and losses for available-for-sale securities are included as a component of stockholders' equity net of tax until realized. Realized gains and losses on the sale of securities are based on the specific identification method. The Company continually reviews its investments to determine whether a decline in fair value below the cost basis is other than temporary. If the decline in the fair values is judged to be other than temporary, the cost basis of the security is written down to fair value and the amount of the write-down is included in the consolidated statements of operations. Inventories All inventory is valued at the lower of cost or market. The Company acquires a majority of its inventory from individual customers, including pre-owned jewelry, watches, bullion, rare coins and collectibles. The Company acquires these items based on its own internal estimate of the fair market value of the items at the time of purchase. The Company considers factors such as the current spot market price of precious metals and current market demand for the items being purchased. The Company supplements these purchases from individual customers with inventory purchased from wholesale vendors. These wholesale purchases can take the form of full asset purchases, or consigned inventory. Consigned inventory is accounted for on our balance sheet with a fully offsetting contra account so that consigned inventory has a net zero balance. The majority of our inventory has some component of its value that is based on the spot market price of precious metals. Because the overall market value for precious metals regularly fluctuates, these fluctuations could have either a positive or negative impact on the value of the Company's inventory and could positively or negatively impact the profitability of the Company. The Company regularly monitors these fluctuations to evaluate any necessary impairment to its inventory. Property and Equipment Property and equipment are stated at cost and are depreciated over their estimated useful lives, generally from five to ten years, on a straight-line basis. Equipment capitalized under capital leases are amortized over the lesser of the useful life or respective lease terms and the related amortization is included in depreciation and amortization expense. Leasehold improvements are amortized on a straight-line basis over the shorter of their useful life or the term of the lease. Expenditures for maintenance and repairs are charged against income as incurred; betterments that increase the value or materially extend the life of the related assets are capitalized. When assets are sold or retired, the cost and accumulated depreciation are removed from the accounts and any gain or loss is recorded to current operating income. Impairment of Long-Lived Assets The Company performs impairment evaluations of its long-lived assets, including property, plant and equipment and intangible assets with finite lives 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 December 31, 2011 or 2010. Financial Instruments The carrying amounts reported in the consolidated balance sheets for cash equivalents, accounts receivable, short-term debt, accounts payable and accrued expenses approximate fair value because of the immediate or short-term maturity of these financial instruments. The carrying amount reported for long-term debt approximates fair value because substantially all of the underlying instruments have variable interest rates which adjust frequently or the interest rates approximate current market rates. None of these instruments are held for trading purposes. Advertising Costs Advertising costs are expensed as incurred and amounted to $2,226,592 and $1,803,506, for 2011 and 2010, respectively. Accounts Receivable The Company records trade receivables when revenue is recognized. No product has been consigned to customers. When appropriate, the Company will record an allowance for doubtful accounts, which is primarily determined by review of specific trade receivables. Those accounts that are doubtful of collection are included in the allowance. These provisions are reviewed to determine the adequacy of the allowance for doubtful accounts. Trade receivables are charged off when there is certainty as to their being uncollectible. Trade receivables are considered delinquent when payment has not been made within contract terms. As of December 31, 2011 and 2010, the Company did not have an allowance recorded. Income Taxes Income taxes are accounted for under the asset and liability method prescribed by ASC 740, Income Taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets unless it is more likely than not such assets will be realized. The Company accounts for its position in tax uncertainties in accordance with ASC 740, Income Taxes. The guidance establishes standards for accounting for uncertainty in income taxes. The guidance provides several clarifications related to uncertain tax positions. Most notably, a "more likely-than-not" standard for initial recognition of tax positions, a presumption of audit detection and a measurement of recognized tax benefits based on the largest amount that has a greater than 50 percent likelihood of realization. The guidance applies a two-step process to determine the amount of tax benefit to be recognized in the financial statements. First, the Company must determine whether any amount of the tax benefit may be recognized. Second, the Company determines how much of the tax benefit should be recognized (this would only apply to tax positions that qualify for recognition). The Company has not taken a tax position that, if challenged, would have a material effect on the financial statements or the effective tax rate during the years ended December 31, 2011 and 2010, respectively. Revenue Recognition Revenue is generated from wholesale and retail sales of jewelry, rare coins and currency, bullion and scrap. 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 a shipping point basis. The Company sells jewelry, rare coins and currency 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. Revenues for monetary transactions (i.e., cash and receivables) with dealers are recognized when the merchandise is shipped to the related dealer. The Company does not grant credit to retail customers, however it does offer a structured layaway plan. When a retail customer utilizes the Company's layaway plan, 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 are paid in full. Revenue for layaway sales is recognized when the merchandise is paid for in full and delivered to the retail customer. 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 the monetary assets received and determines the cost of sale based on the ratio of monetary assets received to monetary and non-monetary assets received multiplied by the cost of the assets surrendered. The Company has a return policy (money-back guarantee). The policy covers retail transactions involving jewelry and graded rare coins and currency only. Customers may return jewelry and graded rare coins and currency purchased within 30 days of the receipt of the items for a full refund as long as the items are returned in exactly the same condition as they were delivered. In the case of jewelry and graded rare coins and currency sales on account, customers may cancel the sale within 30 days of making a commitment to purchase the items. The receipt of a deposit and a signed purchase order evidences the commitment. Any customer may return a jewelry item or graded rare coins and currency if they can demonstrate that the item is not authentic, or there was an error in the description of a graded coin or currency piece. Returns are accounted for as a reversal of the original transaction, with the effect of reducing revenues, and cost of sales, and returning the merchandise to inventory. Fair Value Measures The Company follows the Financial Accounting Standards Board issued ASC 820, Fair Value Measurements and Disclosure. ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair values. These tiers include:
| Level 1 |  | - |  | Quoted prices for identical instruments in active markets;
| Level 2 |  | - |  | Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose significant inputs are observable; and
| Level 3 |  | - |  | Instruments whose significant inputs are unobservable.
We utilize fair value techniques to evaluate the need for potential impairment losses related to goodwill and intangible assets not subject to amortization pursuant to ASC 350, Intangible-Goodwill and Other and long-lived assets pursuant to ASC 360, Property, Plant and Equipment. We calculate estimated fair value using Level 3 inputs, including the present value of future cash flows expected to be generated using weighted average cost of capital, terminal values and updated financial projections. The weighted average cost of capital is estimated using information from comparable companies and management's judgment related to risks associated with the operations of each reporting unit. The terminal value used in the goodwill analysis is determined based on estimates of long-term inflation expectations. Shipping and Handling Costs Shipping and handling costs are included in selling general and administrative expenses, and amounted to $261,191 and $186,450, for 2011 and 2010, respectively. Taxes Collected From Customers The Company's policy is to present taxes collected from customers and remitted to governmental authorities on a net basis. The Company records the amounts collected as a current liability and relieves such liability upon remittance to the taxing authority without impacting revenues or expenses. Earnings Per Share Basic earnings per common share is computed by dividing net earnings available to common stockholders by the weighted average number of common shares outstanding for the reporting period. Diluted earnings per share reflect the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. For the calculation of diluted earnings per share, the basic weighted average number of shares is increased by the dilutive effect of stock options and warrants outstanding determined using the treasury stock method. Comprehensive Income The Company reports all changes in comprehensive income in the consolidated statements of changes in stockholders' equity, in accordance with the provisions of ASC 220, Comprehensive Income. Stock-Based Compensation The Company accounts for stock-based compensation by measuring the cost of the employee services received in exchange for an award of equity instruments, including grants of stock options, based on the fair value of the award at the date of grant. In addition, to the extent that the Company receives an excess tax benefit upon exercise of an award, such benefit is reflected as cash flow from financing activities in the consolidated statement of cash flows. Stock-based compensation expense for Fiscal 2011 and 2010 includes compensation expense for new stock-based awards and for stock-based awards granted prior to, but not yet vested, as of January 1, 2007. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires the use of certain estimates and assumptions by management in determining the reported amounts of assets and liabilities, disclosure of contingent liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including depreciation of property and equipment and amortization or impairment of intangible assets. The Company evaluates its estimates and assumptions on an ongoing basis and relies on historical experience and various other factors that it believes to be reasonable under the circumstances to determine such estimates. Because uncertainties with respect to estimates and assumptions are inherent in the preparation of financial statements, actual results could differ from these estimates. New Accounting Pronouncements In May 2011, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs ("ASU 2011-04"). ASU 2011-04 amends ASC 820, Fair Value Measurements and Disclosures, to improve comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and International Financial Reporting Standards. The amendment is effective during interim and annual periods beginning after December 15, 2011. We do not expect a material impact from the adoption of this guidance on our consolidated financial statements. In June 2011, the FASB issued Accounting Standards Update 2011-05, Presentation of Comprehensive Income ("ASU 2011-05"). ASU 2011-05 eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholders' equity. The amendment will instead require that all nonowner changes in stockholders' equity be presented either in a single continuous statement, referred to as the statement of comprehensive income, or in two separate but consecutive statements. The amendment is effective for fiscal years beginning after December 15, 2011. We do not expect a material impact from the adoption of this guidance on our consolidated financial statements.

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