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Related party transactions
 3 Months Ended
Mar. 31, 2013
Related party transactions [Abstract]  
Related party transactions

(8) Related party transactions

 

DGSE has a corporate policy governing the identification, review, consideration and approval or ratification of transactions with related persons, as that term is defined in the Instructions to Item 404(a) of Regulation S-K, promulgated under the Securities Act ("Related Party"). Under this policy, all Related Party transactions are identified and approved prior to consummation of the transaction to ensure they are consistent with DGSE's best interests and the best interests of its stockholders. Among other factors, DGSE's Board of Directors (our "Board") considers the size and duration of the transaction, the nature and interest of the Related Party in the transaction, whether the transaction may involve a conflict of interest and if the transaction is on terms that are at least as favorable to DGSE as would be available in a comparable transaction with an unaffiliated third party. DGSE's Board reviews all Related Party transactions at least annually to determine if it is in DGSE's best interests and the best interests of our stockholders to continue, modify, or terminate the Related Party transactions. DGSE's Related Party Transaction Policy is available for review in its entirety under the "Investor Relations" menu in the "DGSE Companies" section of the Company's website at www.DGSE.com.

 

NTR is DGSE's largest stockholder. NTR is also DGSE's primary refiner and bullion trading partner. For the three months ended March 31, 2013, 29% of sales and 36% of purchases were transactions with NTR, and in the same period in 2012 these transactions represented 38% of DGSE's sales and 19% of our purchases. As of March 31, 2013 and December 31, 2012, we were obligated to pay $2,453,812 and $1,278,000, respectively, to NTR as a trade payable.

 

On July 19, 2012, the Company entered into the Loan Agreement with NTR, pursuant to which NTR agreed to provide the Company with a guidance line of revolving credit in an amount up to $7,500,000. The Loan Agreement provides that the Loan Agreement will terminate-and DGSE's Obligations will be due and payable- upon the earlier of (i) August 1, 2014, (ii) the date that is twelve months after DGSE 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, DGSE 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 DGSE 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 DGSE 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 March 31, 2013 and December 31, 2012, the outstanding balance of the loan was $3,583,358.

 

Estate Gold and Silver, LLC ("Estate Gold") is 25% owned by James Vierling, DGSE's Chief Executive Officer and Chairman, and operates five stores in Oklahoma, primarily focused on buying gold, but also engaging in retail sales of jewelry and bullion. The Company has an agreement with Estate Gold to provide operations management services, consisting of: (i) the receipt, inventorying, and re-sale of Estate Gold purchases; (ii) the management of Estate Gold's payroll, insurance, accounts payable and receivable; (iii) the maintenance of and updates to Estate Gold's business software; maintenance of the Estate Gold website; and (iv) financial reporting of Estate Gold to its owners. The Company also engages in the purchase or sale of jewelry, bullion and diamonds to Estate Gold, from time to time in the normal course of business. During the three months ended March 31, 2013, the Company received $16,641 in fees for services, sold $8,214 in products, and purchased $23,342 in products in transactions with Estate Gold. During the three months ended March 31, 2012, the Company received $59,046 in fees for services, and sold $67,871 in products, and purchased $0 in products in transactions with Estate Gold.