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SPGR News Superior Galleries Reports First Quarter Fiscal 2007 Results

BEVERLY HILLS, Calif.--(BUSINESS WIRE)--Superior Galleries, Inc. (“Superior”) (OTCBB:SPGR) today reported results for its fiscal 2007 first quarter, ended September 30, 2006.

Revenues of $8.6 million for the quarter ended September 30, 2006 declined by 27% compared to the corresponding quarter of calendar 2005, primarily due to a decrease in sales of rare coins, consisting of a 10% year-over-year decrease in sales through the Company’s wholesale channel and a 63% decrease in the retail channel. As of the 2006 third quarter, the Company had refocused its marketing efforts away from direct wholesale and retail customers toward the auction market for consigned collector coins held in private portfolios, in order to mitigate a perceived weakened market for quantity purchases caused by a recent decrease in the price of gold, rising interest rates and new record highs set in the stock market. Also driving this shift in marketing strategy was lower operating cash flow to fund inventory purchases.

Commission income of $1.1 million in the quarter ended September 30, 2006 increased 54% over the comparable period in 2005, primarily due to the Company’s strategy to attract higher-quality consignments with higher average commission rates. Hammer prices realized at auction totaled $10.1 million, an increase of approximately 29% over the comparable prior-year period, reflecting a 29% increase in volume and a 31% decrease in the buy-back/return rate year over year.

The Company’s net loss for the quarter ended September 30, 2006 was $939,000, or $0.20 per share, as compared to a net loss of $105,000, or $0.02 per share, for the quarter ended September 30, 2005. In addition to lower revenues year over year, the loss in the fiscal 2007 first quarter reflects, among other factors, SG&A expenses representing a higher percentage of total revenues, a $245,000 inventory adjustment, additional spending of approximately $148,000 in legal and audit fees and $105,000 in costs incurred in connection with the proposed merger with DGSE Companies, Inc. that was announced July 17, 2006.

Silvano DiGenova, CEO of Superior, commented, “Despite challenging market conditions, we were able to maintain gross profit margins at 18% in the September 2006 quarter, compared to 20% for the prior-year quarter. We also recorded outstanding and record prices realized at our recent Denver, Beverly Hills and Santa Clara Elite auctions, reflecting the success of our strategy to attract higher-quality consignments. We continue to work toward closing our merger agreement with DGSE in a timely manner, and look forward to serving our customers as a wholly owned subsidiary of DGSE with enhanced financial and staff resources.”

Superior Galleries, Inc. is a publicly traded company, acting as a dealer and auctioneer in rare coins and other fine collectibles. The firm markets its products through its prestigious location in Beverly Hills, California and the Company’s web site at sgbh.com.

Included in this release are statements that are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including express and implied statements concerning future results of operations, expansion plans and expectations. Although the company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that the expectations reflected in such forward looking statements will prove to be correct. These forward-looking statements are subject to certain risks and uncertainties, including market and other conditions that may affect the Company’s ability to expand its auction and dealer activities and control our operating costs, changes in investment recommendations by financial advisors and risks identified in its SEC filings. The company’s actual results could differ materially from those anticipated in the forward looking statements as a result of certain factors including sales levels, operating costs, distribution and competition trends, consumer preferences and other market factors. Past sales performance may not be indicative of future results. No assurances are given that sales trends or sales performance on behalf of consignors or customers will continue.