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Related Party Transactions
3 Months Ended
Mar. 31, 2014
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, the 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 of our corporate website at www.DGSECompanies.com.

 

Elemetal is DGSE's largest stockholder. Elemetal, through its affiliates NTR and Elemetal Capital, is also DGSE's primary refiner and bullion trading partner. For the three months ended March 31, 2014, 28% of sales and 30% of purchases were transactions with Elemetal, and in the same period in 2013 these transactions represented 32% of DGSE's sales and 39% of our purchases. As of March 31, 2014 and December 31, 2013, we were obligated to pay $3,727,916 and $3,332,858, respectively, to Elemetal as a trade payable. DGSE also paid Elemetal and its affiliates $54,813 in interest for the three months ended March 31, 2014, including interest on DGSE's trade payable with Elemetal. In the same period in 2013 DGSE recognized $17,671 in interest related to Elemetal and its affiliates.

 

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 any additional proceeds are expected to be used as working capital in the ordinary course of business. As of March 31, 2014 and December 31, 2013, we had outstanding balances of $2,303,359 and $2,383,359, respectively, drawn on the NTR credit facility. On February 25, 2014, the Company and NTR entered into a one-year extension of the Loan Agreement, extending the termination date to August 1, 2015. All other terms of the agreement remain the same.

 

Estate Gold and Silver, LLC, a Texas limited liability company ("Estate Gold") was 25% owned by an entity owned by James Vierling, DGSE's former Chief Executive Officer and Chairman, and operated five stores in Oklahoma, primarily focused on buying gold, but also engaging in retail sales of jewelry and bullion. In July of 2013, Estate Gold ceased all operations. The Company previously had 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 periodically engaged in the purchase or sale of jewelry, bullion and diamonds to Estate Gold, from time to time in the normal course of business. DGSE had no transactions with Estate Gold in the three months ended March 31, 2014. 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.