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<SEC-DOCUMENT>0001010549-01-000118.txt : 20010330
<SEC-HEADER>0001010549-01-000118.hdr.sgml : 20010330
ACCESSION NUMBER:		0001010549-01-000118
CONFORMED SUBMISSION TYPE:	10KSB
PUBLIC DOCUMENT COUNT:		3
CONFORMED PERIOD OF REPORT:	20001231
FILED AS OF DATE:		20010329

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			DALLAS GOLD & SILVER EXCHANGE INC /NV/
		CENTRAL INDEX KEY:			0000701719
		STANDARD INDUSTRIAL CLASSIFICATION:	RETAIL-JEWELRY STORES [5944]
		IRS NUMBER:				880097334
		STATE OF INCORPORATION:			NV
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10KSB
		SEC ACT:		
		SEC FILE NUMBER:	001-11048
		FILM NUMBER:		1584263

	BUSINESS ADDRESS:	
		STREET 1:		2817 FOREST L
		STREET 2:		STE 202
		CITY:			DALLAS
		STATE:			TX
		ZIP:			75234
		BUSINESS PHONE:		9724843662

	MAIL ADDRESS:	
		STREET 1:		2817 FOREST LN
		CITY:			DALLAS
		STATE:			TX
		ZIP:			75234

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	AMERICAN PACIFIC MINT INC
		DATE OF NAME CHANGE:	19920703

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	CANYON STATE CORP
		DATE OF NAME CHANGE:	19860819
</SEC-HEADER>
<DOCUMENT>
<TYPE>10KSB
<SEQUENCE>1
<FILENAME>0001.txt
<TEXT>

                    U. S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549

                                   FORM 10-KSB
(Mark One)
 ( x )   Annual  Report  pursuant  to  Section  13  or  15 (d) of the Securities
         Exchange Act of 1934
For the Fiscal year ended       December 31, 2000         or
                          --------------------------------

 (   )   Transition  Report  under  Section  13  or  15 (d)  of  the  Securities
         Exchange Act of 1934 (No Fee Required)

For the transition period from                  to
                               ----------------    ----------------
Commission file number     1-11048
                       -----------

                      Dallas Gold and Silver Exchange, Inc.
                      -------------------------------------
                         (Name of small business issuer)
      NEVADA                                                 88-0097334
- -------------------------------                   ------------------------------
(State or other jurisdiction                      (I.R.S.Employer Identification
 incorporation or organization)                    Number)

2817 Forest Lane, Dallas, Texas                 75234
- ----------------------------------------    -------------
(Address of Principal Executive Offices)     (Zip Code)

Issuer's telephone number, including area code (972) 484-3662
                                               --------------

Securities registered under Section 12(b) of the Exchange Act:

 Title of each class           Name of each exchange on which registered
 -------------------           -----------------------------------------
        None                                    None

Securities registered pursuant to Section 12 (g) of the Exchange Act:

Title of each class                    Name of each exchange on which registered
- -------------------                    -----------------------------------------
Common Stock                                            None
$ .01 par value

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15 (d) of the  Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirement for the past 90 days. Yes X  No
                                                            ---

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation  S-B is not  contained  in  this  form,  and no  disclosure  will  be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
                                      ---

During fiscal year ended December 31, 2000, total revenues were $ 25,799,918.

As of March 14,  2001,  the  aggregate  market value of the voting stock held by
non-affiliates of the registrant was $ 24,496,115.

As of March 14, 2001, 4,907,990 shares of Common Stock were outstanding.

Documents  incorporated  by reference:  Portions of the proxy  statement for the
annual  shareholders'  meeting to be held June 25,  2001,  are  incorporated  by
reference into Part III.

<PAGE>

                                     PART I

ITEM 1.   DESCRIPTION OF BUSINESS

Dallas Gold and Silver Exchange,  Inc. (the "Company") sells jewelry and bullion
products to both retail and wholesale customers throughout the United States and
makes  collateralized  loans to  individuals.  During the last  three  years the
Company has focused its efforts toward  expanding its retail jewelry  operations
and internet related businesses. Management expects this trend to continue until
such time that interest in precious metals results in significantly higher gross
profit margins on bullion related products.  The Company's products are marketed
through its facilities in Dallas and  Carrollton,  Texas and Mt.  Pleasant South
Carolina and through its internet web sites dgse.com;  FirstJewelryAuctions.com;
USBullionExchange.com;        FirstCoinAuction.com;        FairchildWatches.com;
SilvermanLiquidations.com; and ejewelryportal.com.

The Company also provides  consulting  services  involving the reorganization of
other business enterprises (primarily enterprises that are or have been involved
in proceedings  under Chapter 11 of the United States  Bankruptcy  Code).  These
services are provided through the Company's  subsidiary DLS Financial  Services,
Inc. ("DLS").

The  Company  operates  seven  internet  sites on the World  Wide  Web.  Through
dgse.com  the Company  operates a virtual  store and a real-time  auction of its
jewelry  products.  Customers  and the Company buy and sell items of jewelry and
are   free   to   set   their   own   prices   in   an    interactive    market.
FirstJewelryAuctions.com  provides a forum for business to business and business
to consumer  auctions  for the jewelry  industry.  For its  services the Company
receives a fee from the  seller.  The  Company  also  offers  customers  current
quotations    for    precious    metals    prices   on   its    internet    site
USBullionExchange.com.  During  2000  the  Company  launched  three  new  sites.
FirstCoinAuctions.com  provides  auctions of the Company's  rare coin  products.
FairchildWatches.com  provides  wholesale  customers  a virtual  catalog  of the
Company's  fine  watch  inventory  and   SilvermanLiquidations.com   provides  a
real-time auction of closeout jewelry products. By December 31, 2000, over 7,500
items were  available  for sale on the  Company's  internet  sites  including  $
10,000,000  in  diamonds.   In  addition,   the  Company  recently   launched  a
consolidating  portal  through  which  all of its  web  sites  can be  accessed,
ejewelryportal.com.

During 1998, the Company  continued the development of its internet software and
in  February  1999,  announced  the  release  of  Virtual  Auctioneer  v2.0,  an
electronic  commerce  product that allows  users to easily build online  auction
sites.  The Company began marketing its internet  software  product in late 1999
through its subsidiary eye media, inc. ("eye media").

In December  1998, the Company  acquired the assets  including  inventory,  pawn
loans,  equipment and pawn license of Belt Line Pawn Shop located in Carrollton,
Texas.  The Company  formed a new  wholly-owned  subsidiary  in  February  1999,
National Jewelry Exchange, Inc. ("NJE") and transferred these assets to this new
subsidiary. The operations of Belt Line Pawn Shop are being continued under NJE.
The Company has focused the operations of NJE on sales and pawn loans of jewelry
products.

In August 1999 the Company  purchased  substantially all assets of The Silverman
Group ("Silverman") located in Mt. Pleasant, South Carolina. Silverman's primary
business  is  conducting  liquidation,   consolidation,   promotional  or  other
large-scale  retail sales for jewelry  stores and other types of retailers.  The
purchase price of $ 3,115,000 consisted of the issuance of 200,000 shares of the
Company's newly issued restricted common stock and the assumption by the Company
of a $ 2,500,000  obligation to a bank. The purchase price has been allocated as
follows:  inventory  ($  2,500,000);  property and  equipment  ($ 131,000);  and
goodwill  ($  484,000).  The  results of  Silverman  have been  included  in the
consolidated financial statements since the date of acquisition.

<PAGE>

On  March  2,  2000,   the  Company   acquired   certain   assets  of  Fairchild
International,  Inc. ("Fairchild") located in Dallas, Texas. Fairchild's primary
business is the  wholesaling of fine watches.  The purchase  price  consisted of
$350,000  in cash,  a  promissory  note for  $450,000  and 62,745  newly  issued
restricted  shares of the  Company's  common  stock.  The  acquisition  has been
accounted for as a purchase.  Accordingly,  a portion of the purchase  price has
been  allocated to net tangible and  intangible  assets  acquired based on their
estimated  fair  values.  The  results of  Fairchild  have been  included in the
consolidated financial statements since the date of acquisition.

Products and Services
- ---------------------

JEWELRY
- -------

The Company's  jewelry  operations  include  sales to both  wholesale and retail
customers.  The Company sells finished jewelry,  gem stones,  and findings (gold
jewelry  components)  and makes custom  jewelry to order.  Jewelry  inventory is
readily  available from wholesalers  throughout the United States.  In addition,
the Company purchases inventory from pawn shops and individuals. During the last
three years  management  has focused its  efforts  toward  expanding  its retail
jewelry  business.  Additional  resources have been invested in advertising  and
additional staff has been added in jewelry sales and jewelry and watch repair.

The  Company's  bullion  trading  operations  buy and sell all forms of precious
metals products including United States and other government coins,  medallions,
art bars and trade unit bars.

Bullion  products are  purchased  and sold based on current  market  price.  The
availability  of precious metal products is a function of price as virtually all
bullion items are actively  traded.  Precious  metals sales amounted to 15.9% of
total sales for 2000 and 41.3% in 1999 (For further details,  see Item 6 below).
The Company did not have any customer or supplier  that  accounted for more than
10% of total sales or purchases during 2000 or 1999.

PAWN
- ----

Pawn loans  ("loans")  are made on the  pledge of  tangible  personal  property,
primarily jewelry,  for one month with an automatic  sixty-day  extension period
("loan term").  Pawn service charges are recorded on a constant yield basis over
the loan term.  If the loan is not  repaid,  the  principal  amount  loaned plus
accrued  pawn  service  charges  become  the  carrying  value  of the  forfeited
collateral  and is  transferred  to inventory  which is recovered  through sale.
Although  revenues  from the  Company's  pawn loans  have not been  significant,
management  believes this activity to be a good source of jewelry  inventory and
provides an excellent return on investment.

CONSULTING SERVICES
- -------------------

DLS provides insolvency advisory services primarily to business enterprises that
are or have been involved in proceedings under Chapter

<PAGE>

Products and Services (continued...)
- ---------------------

11 of the United  States  Bankruptcy  Code.  Services  provided  by DLS  include
assistance in developing plans of  reorganization,  negotiations  with creditors
and general management advice.

DLS earns a cash fee and or equity  participation in the  organizations to which
it provides services. DLS expects to accept only a limited number of assignments
each year which meet the criteria of having  significant  fee and or substantial
growth  potential.  Where  equity  participation  is  involved,  as  the  client
enterprises  mature, DLS plans to sell its equity interest subject to compliance
with state and federal securities law in order to provide non-dilutive resources
for the expansion of the Company's other business activities.

During  2000 and 1999,  the DLS sold a portion of these  equity  securities  and
realized  gains in the  amount  of $  266,714  and $  83,116,  respectively.  In
addition,  during 1999 the Company had unrealized gains on trading securities in
the amount of $ 109,771.  As of December 31, 2000 the  Company's  investment  in
these enterprises  totaled $ 856,081.  In addition,  during 2000 DLS completed a
consulting  engagement for which DLS received fee in the form of common stock in
the client  company.  This  common  stock had a value of $ 456,000  and has been
recorded as consulting service revenue during 2000.

INTERNET
- --------

During 1995 the Company  developed a World Wide Web Site on the Internet located
at dgse.com.  This web site is a fully integrated live trading market in jewelry
items on the internet.  Customers can buy and sell items of jewelry and are free
to set their own prices in an interactive market. For its services,  the Company
collects a listing fee and a sales commission from the seller. In addition,  the
Company may offer for sale its own inventory.  This site also includes a virtual
store of the Company's jewelry products.

In April 1996 the Company began operating an additional web site.

This site allows customers  unlimited access to current quotations for prices on
approximately  200 precious  metals,  coins and other bullion related  products.
This site is located at USBullionExchange.com.

During 1997  management  made a decision to  significantly  expand the Company's
internet  activities.  With over 1 million page views during its first two years
of operations,  it became  apparent that the Internet was a viable  mechanism to
sell products and introduce  customers  from around the world to the business of
the Company. dgse.com was one of the first to utilize the auction format to sell
jewelry and related  products.  In  addition,  introduction  of a live real time
trading floor in jewelry, diamonds and fine watches allowed this commercial site
to attract wide  participation.  Our internet  store  functions as a CyberCashTM
authorized  site which  allows  customers  to purchase  products  automatically,
securely  and on line.  Auctions  close at least five times per week and trading
floor transactions can occur twenty-four hours per day.

In   September   1999,   the   Company   launched   its  third   internet   site
FirstJewelryAuctions.com.  This new site  significantly  expanded the  Company's
offerings on the internet and provides a forum for business to business auctions
for the jewelry industry.  By December 31, 2000, over 7,500 items were available
for sale including over $ 10 million in diamonds.

<PAGE>

Products and Services (continued...)
- ---------------------

During  2000  the  launched  three  new  sites.  FirstCoinAuctions.com  provides
auctions of the  Company's  rare coin  products.  FairchildWatches.com  provides
wholesale  customers a virtual catalog of the Company's fine watch inventory and
SilvermanLiquidations.com  provides  a  real-time  auction of  closeout  jewelry
products.  In addition,  the Company  recently  launched a consolidating  portal
through which all of its web sites can be accessed, ejewelryportal.com.

SOFTWARE
- --------

During  1998,  management  decided to continue the  development  of its internet
software and in February 1999 announced the release of Virtual  Auctioneer v2.0,
an electronic  commerce product that allows users to easily build online auction
sites. Virtual Auctioneer is built around an eye media developed bidding engine,
which was created utilizing the Allaire  ColdFusiontm  development  environment.
Virtual Auctioneer allows clients  unparalleled  flexibility,  customization and
power,  placing it in its own market space,  by offering a complete,  integrated
online product.

LIQUIDATION
- -----------

On August 13,  1999 the  Company  purchased  substantially  all of the assets of
Silverman located in Mt. Pleasant, South Carolina.  Silverman's primary business
is  conducting  liquidation,  consolidation,  promotional  or other  large-scale
retail  sales for jewelry  stores and other types of  retailers.  The Company is
conducting  the business of the through a newly formed wholly owned  subsidiary,
Silverman Consultants,  Inc. ("SCI"). All senior management and key employees of
the Silverman have become employees of the SCI.

During December 2000 the Company opened a new jewelry super store located in Mt.
Pleasant, South Carolina. The store operates through a newly formed wholly owned
subsidiary,  Charleston Gold And Diamond Exchange, Inc. ("CGDE"). A newly leased
facility  located in Mt.  Pleasant,  South Carolina now houses the operations of
CGDE and SCI.

RECENT DEVELOPMENTS
- -------------------

On  March  2,  2000  the  Company   purchased   certain   assets  of   Fairchild
International,  Inc. ("Fairchild") located in Dallas, Texas. Fairchild's primary
business is the  wholesale  of fine  watches and other  jewelry  products.  Four
former  Fairchild  key  employees  have become  employees  of the  Company.  The
business is being conducted from the Company's facility in Dallas, Texas.

Sales and Marketing
- -------------------

All Company  activities  other than  consulting  services  rely heavily on local
television,  print media,  the  internet,  pamphlets,  and  brochures to attract
retail  customers.  Solicitations of wholesale  customers are made through local
print media, direct mailings, and direct contact. Marketing activities emphasize
what the  Company  perceives  to be the  attractiveness  of its  pricing and its
customer service.  The Company relies on professional  contacts of the Company's
Chairman in order to attract new consulting clients.

The Company  markets its  bullion  trading  services  through a  combination  of
advertising in national coin  publications,  local print media, coin and bullion
wire  services  and its internet web site.  Trades are  primarily  with coin and
bullion  dealers on a "cash on  confirmation"  basis which is  prevalent  in the
industry.  Cash on  confirmation  means that once credit is  approved  the buyer
remits  funds by mail or wire  concurrently  with the  mailing  of the  precious
metals.  Customer  orders for bullion trades are  customarily  delivered  within
three days of the order or upon  clearance of funds  depending on the customer's
credit  standing.  Consequently,  there was no  significant  backlog for bullion
orders as of December 31, 2000 or 1999.  Company backlogs for fabricated jewelry
products were also insignificant as of December 31, 2000 and 1999.

<PAGE>

Seasonality
- -----------

The retail and  wholesale  jewelry  business  and the  liquidation  business  is
seasonal. The Company realized 32.5% and 38.2% of its annual sales in the fourth
quarters of 2000 and 1999, respectively.

While the Company's bullion business is not seasonal,  management believes it is
directly  impacted  by  the  perception  of  inflation   trends.   Historically,
anticipation  of  increases  in the rate of  inflation  have  resulted in higher
levels of interest in precious  metals as well as higher prices for such metals.
Other Company business activities are not seasonal.

Competition
- -----------

The Company operates in a highly competitive industry where competition is based
on a combination of price, service and product quality. The jewelry and consumer
loan  activities of the Company  compete with numerous other retail jewelers and
consumer  lenders in Dallas,  Texas and Mt.  Pleasant,  South  Carolina  and the
surrounding areas.

The bullion industry in which the Company competes is dominated by substantially
larger enterprises which wholesale bullion and other

precious metal products.  Likewise,  the consulting and liquidation  industry in
which the Company competes is dominated by large investment banking, accounting,
consulting and liquidation firms.

The Company attempts to compete in these industries by offering quality products
and services at prices below that of its  competitors and by maintaining a staff
of highly qualified  employees to provide  customers  services such as watch and
jewelry repairs and custom jewelry design.

Management is of the opinion that the Company is a factor in the Dallas
area jewelry market. However, its consumer lending, bullion trading,  consulting
and liquidation activities are dominated by larger companies.

Employees
- ---------

As of December 31, 2000, the Company employed 53 individuals,  all of which were
full time employees.


<PAGE>

ITEM 2.   DESCRIPTION OF PROPERTY

The Company  owns a 6,000  square foot  building in Dallas,  Texas which  houses
retail  jewelry,  consumer  lending  and  bullion  trading  operations  and  its
principal  executive  offices.  The land and  building are subject to a mortgage
maturing in January 2014, with a balance  outstanding of approximately $ 591,000
as of December 31, 2000.

The Company leases a 5,000 square foot building in Dallas,  Texas which housed a
retail jewelry store.  The lease has a term of ten years  beginning July 1, 1994
and  requires  monthly  payments of $ 7,500 for the first five years and $ 9,000
thereafter. In November 1995, the Company closed this store and during 1999, the
Company moved its internet  activities into this facility.  During July 2000 the
Company subleased this facility for a term ending on June 30, 2004.

The Company  leases a 2,400  square foot  facility  in  Carrollton,  Texas which
houses  National  Jewelry  Exchange.  The  lease  expires  on July 31,  2002 and
requires monthly lease payments in the amount of $ 1,088.

Silverman  and CGDE are housed in a leased  11,000  square foot  facility in Mt.
Pleasant,  South Carolina. The lease expires in August 2005 and requires monthly
lease payments in the amount of $ 14,421.

The Company  also  maintains a resident  agent office in Nevada at the office of
its Nevada counsel,  McDonald,  Carano, Wilson, McClure, Bergin, Frankovitch and
Hicks, 241 Ridge Street, Reno, Nevada 89505.

ITEM 3.   LEGAL PROCEEDINGS

The Company is not a party to any material pending legal  proceedings  which are
expected  to have a  material  adverse  effect  on the  Company  and none of its
property is the subject of any material pending legal proceedings.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.





<PAGE>

                            PART II

ITEM 5.   MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER  MATTERS

On June 29, 1999 the  Company's  Common Stock began  trading on the NASDAQ Small
CAP Market under the symbol "DGSE".  Previously,  the Company's Common Stock was
traded  on the  American  Stock  Exchange  ("ASE")  pursuant  to  its  "Emerging
Companies"  listing program under the symbol "DLS.EC".  The following table sets
forth  for the  period  indicated,  the per  share  high and low sale  prices as
reported  by the NASDAQ or the ASE,  as the case may be,  for the common  stock.
During the past two years,  the  Company has not  declared  any  dividends  with
respect to its common  stock.  The  Company  intends to retain all  earnings  to
finance future growth;  accordingly,  it is not anticipated  that cash dividends
will be paid to holders of common stock in the foreseeable future.

High and low stock prices for the last two years were:

                                  2000                       1999
                                  ----                       ----
                           High         Low           High         Low
                           ----         ---           ----         ---

     First Quarter        7  5/8       4  1/2        4  17/32     2

     Second Quarter       9  1/8       5             4  1/8       2  3/4

     Third Quarter        8  5/8       6  3/4        4  1/8       3  17/32

     Fourth Quarter      10  1/8       7  1/8        6            3  1/8





On March 14, 2001, the closing sales price for the Company's  common stock was $
8.25 and there were 675 shareholders of record.


<PAGE>

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

GENERAL
- -------

The  Company's  bullion  trading  operation  has the  ability  to  significantly
increase or decrease  sales by adjusting  the  "spread" or gross  profit  margin
added to bullion products.  In addition,  economic factors such as inflation and
interest rates as well as political uncertainty are major factors affecting both
bullion  sales volume and gross profit  margins.  Historically,  the Company has
earned  gross  profit  margins  of from  2.0% to  3.0%  on its  bullion  trading
operations  compared  to 29.0% to 32.0% on the sale of  jewelry  products.  As a
result, the Company emphasizes the more profitable jewelry products.  Management
expects this trend to continue until such time that interest in precious  metals
results in higher gross margins on bullion products.

In 1993 the Company founded DLS in an effort to generate  additional revenue and
enhance  shareholder  value by capitalizing  on the experience and  professional
contacts of the Company's Chairman. DLS provides insolvency advisory services to
businesses that are or have been involved in proceedings under Chapter 11 of the
United States Bankruptcy Code.

Marketable equity securities have been categorized as either  available-for-sale
or  trading  and  carried  at  fair  value.  Unrealized  gains  and  losses  for
available-for-sale  securities  are  included  as a component  of  shareholders'
equity net of tax until realized,  while unrealized gains and losses for trading
securities are included in the statement of income. Realized gains and losses on
the sale of securities are based on the specific identification method.

Results of Operations
- ---------------------

Sales increased by $ 3,554,302  (16.6%) in 2000. This increase was the result of
a $ 2,124,490  increase in sales from the  liquidations  segment,  a $ 1,412,982
(7.5%)  increase  in  sales  from the  jewelry  segment  and a $ 45,368  (28.4%)
increase in the sale of internet software  products.  The increase in sales from
the  liquidations  segment was the result of the  acquisition  of  Silverman  in
August 1999.  The increase in sales from the jewelry  segment were the result of
sales in the amount of $ 4,389,486 from Fairchild  acquired in March 2000.  This
increase  in sales from  Fairchild  was  partially  offset by a decrease  in the
amount of $3,924,931 in sales of bullion products.  Consulting  services revenue
during  2000 was the result of common  stock in a client  company  received  for
services  rendered by DLS during the year. The Company sold  marketable  trading
securities  during 2000 and 1999 and  realized  gains of $ 266,714 and $ 83,116,
respectively.  The  unrealized  gains on trading  securities  during 1999 in the
amounts  of $ 109,771  was the  result  of an  increase  in market  value of the
Company's investment in trading securities.  These realized and unrealized gains
on trading securities are reflected in the statement of income.  During 2000 the
Company  transferred all unsold trading  securities to held for sale securities.
As a result,  unrealized gains and losses on these  investments are include as a
component of shareholders' equity net of tax.

Sales  increased  by $  5,597,390  in 1999.  This  increase  was the result of $
2,212,060 in sales from Silverman,  $ 1,438,976 increase in the sales

<PAGE>

Results of Operations (continued...)
- ---------------------

of jewelry products,  $ 1,786,354 increase in the sale of bullion products and $
160,000 in the sale of internet software products.  Management believes that the
Company's  Internet  related  activities  have had a  significant  impact on all
sectors of its  business.  In addition,  public  concerns  related to Y2K issues
during 1999 resulted in an increase in demand for bullion products.  The Company
sold marketable trading securities during 1999 realizing a gain in the amount of
$ 83,116.  The unrealized gains on trading  securities in 1999 was the result of
an  increase  in  the  market  value  of the  Company's  investment  in  trading
securities.

Cost of  goods  sold  increased  by $ $  1,759,357  (10.3%)  during  2000  and $
3,987,148 (30.5%) during 1999 due to the changes in sales volume.

Consulting  services cost decreased by $ 132,091 during 1999 due to lower travel
and related costs.

Selling,  general and administrative  expenses increased $ 1,862,032 during 2000
and $  1,403,875  during  1999  due to the  acquisitions  of Belt  Line  Pawn in
December 1998, the  acquisition of Silverman in August 1999 and the  acquisition
of Fairchild in March 2000.

Depreciation and  amortization  increased by $ 177,858 during 2000 and $ 108,949
during 1999 due to the acquisitions of Beltline Pawn, Silverman and Fairchild.

Interest expense  increased by $ 283,019 during 2000 and $ 9,627 during 1999 due
to notes payable issued for the acquisitions of Silverman and Fairchild.

Liquidity and Capital Resources
- -------------------------------

During  2000  the  Company  generated  $  2,730,745  cash  flow  from  operating
activities.  These  funds were used to reduce  net  indebtness  by $  1,017,773,
purchase and retire common stock in the amount of $ 148,863,  purchase Fairchild
in the amount of $ 369,933,  purchase  property and equipment in the amount of $
147,174  and  purchase  marketable  securities  in the amount of $ 36,500.  As a
result, cash and cash equivalents increased by $ 98,502.

Management of the Company expects capital  expenditures to total approximately $
100,000 during 2001. It is anticipated  that these  expenditures  will be funded
from working capital.

From time to time,  management  has adjusted the Company's  inventory  levels to
meet  seasonal  demand  or  in  order  to  meet  working  capital  requirements.
Management  is of the opinion that if  additional  working  capital is required,
additional loans can be obtained from  individuals or from commercial  banks. If
necessary,  inventory  levels  may be  adjusted  or a portion  of the  Company's
investments  in  marketable  securities  may be  liquidated  in  order  to  meet
unforseen working capital requirements.

<PAGE>

This  report  contains  forward-looking  statements  which  reflect  the view of
Company's management with respect to future events. Although management believes
that  the  expectations   reflected  in  such  forward-looking   statements  are
reasonable,  it can give no assurance that such  expectations will prove to have
been  correct.  Important  factors  that could  cause  actual  results to differ
materially from such  expectations  are a down turn in the current strong retail
climate and the  potential  for  fluctuations  in precious  metals  prices.  The
forward-looking  statements  contained  herein  reflect the current views of the
Company's  management  and the  Company  assumes  no  obligation  to update  the
forward-looking  statements or to update the reasons actual results could differ
from those contemplated by such forward-looking statements.

ITEM 7.  FINANCIAL STATEMENTS

(a)      Financial Statements (see pages 15 - 31 of this report).


ITEM 8.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
         FINANCIAL DISCLOSURE

None.


                                    PART III

ITEM 9.  DIRECTORS,   EXECUTIVE   OFFICERS,   PROMOTERS  AND  CONTROL   PERSONS;
         COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

The  information  contained  in Dallas Gold and Silver  Exchange,  Inc.'s  Proxy
Statement to be filed  pursuant to Regulation  14A within 120 days after the end
of the fiscal year  covered by this Form 10-KSB with  respect to  directors  and
executive  officers of the Company,  is incorporated by reference in response to
this item.

ITEM 10. EXECUTIVE COMPENSATION

The  information  contained  in Dallas Gold and Silver  Exchange,  Inc.'s  Proxy
Statement to be filed  pursuant to Regulation  14A within 120 days after the end
of the  fiscal  year  covered by this Form  10-KSB,  with  respect to  executive
compensation and transactions,  is incorporated by reference in response to this
item.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND  MANAGEMENT

The information  contained in the Dallas Gold and Silver Exchange,  Inc.'s Proxy
Statement to be filed  pursuant to Regulation  14A within 120 days after the end
of the  fiscal  year  covered  by this Form  10-KSB  with  respect  to  security
ownership  of certain  beneficial  owners and  management,  is  incorporated  by
reference in response to this item.

<PAGE>

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The  information  contained  in Dallas Gold and Silver  Exchange,  Inc.'s  Proxy
Statement to be filed  pursuant to Regulation  14A within 120 days after the end
of the  fiscal  year  covered  by this Form  10-KSB,  with  respect  to  certain
relationships and related transactions, is incorporated by reference in response
to this item.

ITEM 13. EXHIBITS REPORTS ON FORM 8-K

(a)      Exhibits:

         21 -   List of subsidiaries
                  DGSE Corporation
                  International Jewelry Exchange, Inc.
                  (formerly Dallas Global Travel, Inc.)
                  DLS Financial Services, Inc.
                  eye media, inc.
                  National Jewelry Exchange, Inc.
                  Silverman Consultants, Inc.
                  Charleston Gold And Diamond Exchange, Inc.

         10.1     LEASE  AGREEMENT  dated  JUNE  2,  2000  by  and  between  SND
                  PROPERTIES and CHARLESTON GOLD AND DIAMOND EXCHAMGE, INC.

     The following  exhibits are incorporated by reference to the Company's Form
     10-QSB dated May 14, 2000:

         10.2     EXHIBIT 10.1 - BILL OF SALE AND ASSET PURCHASE AGREEMENT dated
                  March 2, 2000 by and among  Dallas  Gold AND Silver  Exchange,
                  INC., FAIRCHILD INTERNATIONAL, INC. and MACK H. HOSKINS.

     The following  exhibits are incorporated by reference to the Company's Form
     8-K dated August 26, 1999:

         10.3     EXHIBIT 1.0 AGREEMENT AND PLAN OF MERGER dated AUGUST 13, 1999
                  by and among Dallas Gold and Silver Exchange Silver  Exchange,
                  Inc.,  SILVERMAN  ACQUISITION,  INC.,  JEWEL CASH,  INC.  (the
                  "COMPANY") and the COMPANY'S SHAREHOLDERS.

         10.4     EXHIBIT 2.0 ASSIGNMENT AGREEMENT DATED AUGUST 13, 1999 between
                  SILVERMAN JEWELRY CONSULTANTS, INC., FIRST UNION NATIONAL BANK
                  OF SOUTH CAROLINA, and DALLAS GOLD & SILVER EXCHANGE, INC.

<PAGE>

(a)      Exhibits:, continued

         10.5     EXHIBIT 3.0  PROMISSORY  NOTE DATED  AUGUST 13, 1999 BY DALLAS
                  GOLD & SILVER  EXCHANGE,  INC. PAYABLE TO FIRST UNION NATIONAL
                  BANK.

         10.6     EXHIBIT 4.0 SECURITY AGREEMENT DATED AUGUST 13, 1999 BY DALLAS
                  GOLD & SILVER EXCHANGE, INC. and FIRST UNION NATIONAL BANK.

         10.7     EXHIBIT 5.0 BILL OF SALE DATED  AUGUST 13, 1999 BY AND BETWEEN
                  FIRST  UNION  NATIONAL  BANK,  SILVERMAN  RETAIL  CONSULTANTS,
                  SILVERMAN  JEWELRY   CONSULTANTS  AND  DALLAS  GOLD  &  SILVER
                  EXCHANGE, INC.

     The following  exhibits are incorporated by reference to the Company's Form
     10-KSB for the year ended December 31, 1998:

         10.8     EXHIBIT  10.1  Renewal of  Shopping  Center  Lease dated as of
                  August 1, 1997 by and between Beltline Pawn Shop and Belt Line
                  - Denton Road Associates.

     The following  exhibits are incorporated by reference to the Company's Form
     10-KSB for the year ended December 31, 1996:

         10.9     EXHIBIT  10.1  Agreement  For Purchase And Sale Of Stock dated
                  December  30,  1996  by  and  among  Dallas  Gold  And  Silver
                  Exchange, Inc. and Henry Hirschman.

     The following  exhibits are incorporated by reference to the Company's Form
     10-KSB for the year ended December 31, 1995:

         10.10    EXHIBIT 10.1 9% Convertible  Promissory Note dated December 5,
                  1995, by and among Dallas Gold And Silver  Exchange,  Inc. and
                  A-Mark Precious Metals, Inc.

     The following  exhibits are incorporated by reference to the Company's Form
     10-KSB for the year ended December 31, 1994:

         10.11    EXHIBIT 10.1 Lease  Agreement  dated February 11, 1994, by and
                  among Dallas Gold And Silver Exchange, Inc. and Stanley Kline.

         10.12    EXHIBIT 10.2 renewal, extension,  modification agreement dated
                  January 28, 1994 by and among DGSE  Corporation And Michael E.
                  Hall and Marion Hall.


(b)      Reports on Form 8-K - None

<PAGE>

                                   SIGNATURES

         In  accordance  with  Section  13 or 15(d)  of the  Exchange  Act,  the
Registrant  caused  this  report to be signed on its behalf by the  undersigned,
thereunto duly authorized.

Dallas Gold and Silver Exchange, Inc.


By:      /s/ L. S. Smith                    Dated: March 21, 2001
         -------------------------
         L. S. Smith
         Chairman of the Board,
         Chief Executive Officer and
         Secretary

         In accordance  with the Exchange Act, this report has been signed below
by the following  persons on behalf of the  Registrant and in the capacities and
on the date indicated.

By:      /s/ L. S. Smith                    Dated: March 21, 2001
         -------------------------
         L.S Smith
         Chairman of the Board,
         Chief Executive Officer and
         Secretary

By:      /s/ W. H. Oyster                   Dated: March 21, 2001
         -------------------------
         W. H. Oyster
         Director, President and
         Chief Operating Officer


By:      /s/ John Benson                    Dated: March 21, 2001
         -------------------------
         John Benson
         Director and Chief Financial
         Officer
         (Principal Accounting Officer)

BY:      /s/ William P. Cordeiro            Dated: March 21, 2001
         -----------------------
         Director

By:      /s/ James Walsh                    Dated: March 21, 2001
         ---------------
         Director

<PAGE>

               Report of Independent Certified Public Accountants



Board of Directors and Shareholders
Dallas Gold and Silver Exchange, Inc.


We have audited the accompanying  consolidated  balance sheet of Dallas Gold and
Silver Exchange,  Inc. and Subsidiaries as of December 31, 2000, and the related
consolidated statements of income, shareholders' equity, and cash flows for each
of the two years ended December 31, 2000 and 1999.  These  financial  statements
are the  responsibility of the Company's  management.  Our  responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates made by management.  We believe that our audits provide a
reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the consolidated  financial position of Dallas Gold and
Silver  Exchange,  Inc.  and  Subsidiaries  as of  December  31,  2000,  and the
consolidated  results  of their  operations  and their  cash flows for the years
ended  December  31,  2000 and 1999 in  conformity  with  accounting  principles
generally accepted in the United States of America.

GRANT THORNTON LLP

Dallas, Texas
February 7, 2001


<PAGE>

             Dallas Gold and Silver Exchange, Inc. and Subsidiaries

                           CONSOLIDATED BALANCE SHEET

                                December 31, 2000



                                     ASSETS

CURRENT ASSETS
    Cash and cash equivalents                                $  1,362,219
    Trade receivables                                             935,002
    Inventories                                                 7,087,265
    Prepaid expenses                                              142,291
                                                             ------------

                 Total current assets                           9,526,777

MARKETABLE SECURITIES - AVAILABLE FOR SALE                        856,081

PROPERTY AND EQUIPMENT - AT COST, NET                           1,391,618

DEFERRED TAX ASSETS                                               171,432

GOODWILL, NET OF ACCUMULATED AMORTIZATION OF $209,702           1,343,804

OTHER ASSETS                                                      123,531
                                                             ------------

                                                             $ 13,413,243
                                                             ============
                      LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
    Notes payable                                            $  2,899,918
    Current maturities of long-term debt                          830,561
    Accounts payable - trade                                    2,176,834
    Accrued expenses                                              458,191
    Accrued compensation                                          322,539
    Customer deposits                                             127,144
    Federal income taxes payable                                  656,604
                                                             ------------

                 Total current liabilities                      7,471,791

LONG-TERM DEBT, less current maturities                           949,838

SHAREHOLDERS' EQUITY
    Common stock, $.01 par value; authorized 10,000,000
       shares; issued and outstanding 4,907,990 shares             49,080
    Additional paid-in capital                                  5,609,445
    Accumulated other comprehensive loss                         (690,749)
    Retained earnings                                              23,838
                                                             ------------

                 Total shareholders' equity                     4,991,614
                                                             ------------

                                                             $ 13,413,243
                                                             ============


         The accompanying notes are an integral part of this statement.

<PAGE>

             Dallas Gold and Silver Exchange, Inc. and Subsidiaries

                        CONSOLIDATED STATEMENTS OF INCOME

                            Years ended December 31,

                                                      2000          1999
                                                  -----------   -----------

Revenue
   Sales                                          $24,969,467   $21,415,165
   Pawn service fees                                   95,718        62,809
   Consulting services                                456,000          --
   Gain on sale of marketable securities              266,714        83,116
   Unrealized gains on marketable securities             --         109,771
   Other income                                        12,019         1,744
                                                  -----------   -----------
                                                   25,799,918    21,672,605

Costs and expenses
   Cost of goods sold                              18,834,689    17,075,332
   Consulting service costs                           115,053       114,670
   Selling, general and administrative expenses     5,467,265     3,605,233
   Depreciation and amortization                      387,963       210,105
   Interest expense                                   497,004       213,985
                                                  -----------   -----------
                                                   25,301,974    21,219,325
                                                  -----------   -----------

                 Income before income taxes           497,944       453,280

   Income tax expense                                 246,260       167,978
                                                  -----------   -----------

                 Net Income                       $   251,684   $   285,302
                                                  ===========   ===========

Earnings per common share
   Basic                                          $       .05   $       .07
   Diluted                                        $       .05   $       .06

Weighted average number of common shares
   Basic                                            4,682,375     4,256,920
   Diluted                                          5,043,103     4,612,245





        The accompanying notes are an integral part of these statements.

<PAGE>
<TABLE>
<CAPTION>

             Dallas Gold and Silver Exchange, Inc. and Subsidiaries

                 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

                     Years ended December 31, 2000 and 1999

                                                                                                  Accumulated
                                              Common stock           Additional                      other           Total
                                      --------------------------      paid-in        Retained    comprehensive   shareholders'
                                         Shares         Amount        capital        earnings        loss           equity
                                      -----------    -----------    -----------    -----------    -----------    -----------
<S>                                   <C>            <C>            <C>            <C>            <C>            <C>
Balances at January 1, 1999             4,144,912    $    41,449    $ 3,341,387    $  (513,148)   $    (4,950)   $ 2,864,738
Net income                                   --             --             --          285,302           --          285,302
Other comprehensive income:
    Unrealized loss on marketable
       securities, net of tax                --             --             --             --           (1,980)        (1,980)
                                                                                                                 -----------

Comprehensive income                         --             --             --             --             --          283,322
                                                                                                                 -----------
Purchase and retirement of
    common shares                         (39,500)          (395)      (128,581)          --             --         (128,976)
Issuance of warrants in connection
    with debt                                --             --           30,000           --             --           30,000
Common stock issued on
    conversion of debt                     25,000            250         18,500           --             --           18,750
Common stock issued for services           37,500            375         93,625           --             --           94,000
Common stock issued for acquisition       200,000          2,000        613,000           --             --          615,000
                                      -----------    -----------    -----------    -----------    -----------    -----------

Balances at December 31, 1999           4,367,912         43,679      3,967,931       (227,846)        (6,930)     3,776,834
Net income                                   --             --             --          251,684           --          251,684
Other comprehensive income:
    Unrealized loss on marketable
       securities, net of tax                --             --             --             --         (683,819)      (683,819)
                                                                                                                 -----------

Comprehensive loss                           --             --             --             --             --         (432,135)
                                                                                                                 -----------

Purchase and retirement of
    common shares                         (24,500)          (245)      (148,618)          --             --         (148,863)
Issuance of warrants in connection
    with debt                                --             --           53,584           --             --           53,584
Common stock issued on
    conversion of debt                    498,333          4,983      1,403,002           --             --        1,407,985
Common stock issued for services            3,500             35         14,173           --             --           14,208
Common stock issued for acquisition        62,745            628        319,373           --             --          320,001
                                      -----------    -----------    -----------    -----------    -----------    -----------

Balances at December 31, 2000           4,907,990    $    49,080    $ 5,609,445    $    23,838    $  (690,749)   $ 4,991,614
                                      ===========    ===========    ===========    ===========    ===========    ===========

</TABLE>



        The accompanying notes are an integral part of these statements.

<PAGE>
<TABLE>
<CAPTION>

             Dallas Gold and Silver Exchange, Inc. and Subsidiaries

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                            Years ended December 31,

                                                                                 2000           1999
                                                                             -----------    -----------
<S>                                                                          <C>            <C>
Reconciliation of net income to net cash provided by
   (used in) operating activities
       Net income                                                            $   251,684    $   285,302
       Adjustments to reconcile net income to cash provided by
          (used in) operating activities
              Common stock issued for services                                    14,208         94,000
              Marketable securities received for consulting services             456,000           --
              Depreciation and amortization                                      387,963        210,105
              Unrealized gain on marketable securities - trading                    --         (109,771)
              Realized gain on marketable securities - trading                  (266,714)          --
              Accretion of debt discount                                          56,792           --
              Deferred taxes                                                    (438,136)        32,962
              Change in operating assets and liabilities
                Net change in marketable securities - trading                  1,966,902         30,955
                Trade receivables                                               (199,224)      (568,849)
                Inventories                                                   (1,174,784)    (1,655,411)
                Prepaid expenses and other assets                               (142,626)       (80,707)
                Accounts payable and accrued expenses                          1,289,806        656,712
                Accrued compensation                                             (48,102)         5,914
                Customer deposits                                                 36,950        (84,406)
                Federal income taxes payable                                     540,026        104,920
                                                                             -----------    -----------


                 Total net cash provided by (used in) operating activities     2,730,745     (1,078,274)

Cash flows from investing activities
   Purchase of marketable securities                                             (36,500)          --
   Decrease in notes receivable - officers                                          --            4,001
   Purchases of property and equipment                                          (147,174)      (172,280)
   Acquisition of Fairchild assets                                              (369,933)          --
                                                                             -----------    -----------

                 Net cash used in investing activities                          (553,607)      (168,279)
                                                                             -----------    -----------

</TABLE>



        The accompanying notes are an integral part of these statements.

<PAGE>
<TABLE>
<CAPTION>

             Dallas Gold and Silver Exchange, Inc. and Subsidiaries

                CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

                            Years ended December 31,

                                                                           2000           1999
                                                                       -----------    -----------
<S>                                                                    <C>            <C>
Cash flows from financing activities
   Proceeds from indebtness                                            $ 1,001,136    $ 3,524,079
   Repayment of indebtness                                              (2,018,909)    (1,889,670)
   Purchase and retirement of common stock                                (148,863)      (128,976)
                                                                       -----------    -----------

                 Net cash provided by (used in) financing activities    (1,166,636)     1,505,433
                                                                       -----------    -----------

Net increase in cash and cash equivalents                                   98,502        258,880

Cash and cash equivalents at beginning of year                           1,263,716      1,004,836
                                                                       -----------    -----------

Cash and cash equivalents at end of year                               $ 1,362,218    $ 1,263,716
                                                                       ===========    ===========

</TABLE>

Supplemental schedule of noncash, investing and financing activities:

   Interest  paid  during  2000 and 1999  amounted  to  $457,518  and  $211,189,
   respectively.

   Income  taxes paid during 2000  amounted to  $165,153.  No taxes were paid in
   1999.

   During 2000 and 1999, debt amounting to $1,006,863 and $18,750, respectively,
   was converted to common stock.

   As  more  fully  described  in  Note  L, in  connection  with  the  Company's
   acquisition of Silverman  Consultants,  Inc.,  200,000 shares of common stock
   were  issued  with a value of  $615,000  and a  $2,500,000  note  payable was
   assumed for $2,500,000 of inventory and $131,000 of furniture and fixtures.

   As  more  fully  described  in  Note  L, in  connection  with  the  Company's
   acquisition of Fairchild  International,  Inc., 62,745 shares of common stock
   were  issued with a value of  $320,001  as part of the  purchase  price which
   included $350,000 in cash and a promissory note in the amount of $450,000.






        The accompanying notes are an integral part of these statements.

<PAGE>

             Dallas Gold and Silver Exchange, Inc. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2000 and 1999



NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    Nature of Operations
    --------------------

    Dallas Gold and Silver Exchange,  Inc. and its  subsidiaries  (the Company),
    sell  jewelry and bullion  products to both retail and  wholesale  customers
    throughout  the United  States  through its  facility  in Dallas,  Texas and
    through its internet sites.  In addition,  the Company  provides  consulting
    services  related  to  reorganization  of  other  business  enterprises  and
    liquidations of jewelry retailers.

    Principles of Consolidation
    ---------------------------

    The consolidated  financial  statements  include the accounts of the Company
    and its subsidiaries.  All material  intercompany  transactions and balances
    have been eliminated.

    Cash and Cash Equivalents
    -------------------------

    For purposes of the  statements  of cash flows,  the Company  considers  all
    highly liquid debt instruments  purchased with a maturity of three months or
    less to be cash equivalents.

    Investments in Marketable Securities
    ------------------------------------

    Marketable    equity    securities   have   been   categorized   as   either
    available-for-sale  or trading and carried at fair value.  Unrealized  gains
    and losses for available-for-sale  securities are included as a component of
    shareholders'  equity net of tax until realized,  while unrealized gains and
    losses for  trading  securities  are  included in the  statement  of income.
    Realized  gains  and  losses  on the  sale of  securities  are  based on the
    specific identification method.

    Inventory
    ---------

    Jewelry and other inventory is valued at  lower-of-cost-or-market  (specific
    identification).  Bullion  inventory  is valued  at  lower-of-cost-or-market
    (average cost).

    Property and Equipment
    ----------------------

    Property and equipment are stated at cost less accumulated  depreciation and
    amortization.  Depreciation  and  amortization  are  being  provided  on the
    straight-line  method over periods of five to thirty  years.  Machinery  and
    equipment under capital lease are amortized on the straight-line method over
    their useful lives.

    Goodwill
    --------

    Goodwill is being amortized over periods  expected to be benefited using the
    straight-line method with periods ranging from five to ten years.


<PAGE>

             Dallas Gold and Silver Exchange, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 2000 and 1999



NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

    Financial Instruments
    ---------------------

    The carrying amounts reported in the consolidated balance sheet for cash and
    cash equivalents,  accounts receivable,  marketable  securities,  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 reprice  frequently or the interest rates  approximate  current market
    rates.

    Advertising Costs
    -----------------

    Advertising  costs are  expensed as incurred  and  amounted to $439,300  and
    $398,400 for 2000 and 1999.

    Income Taxes
    ------------

    Deferred tax  liabilities  and assets are recognized for the expected future
    tax  consequences  of  events  that  have  been  included  in the  financial
    statements or tax returns.  Under this method,  deferred tax liabilities and
    assets  are  determined  based  on  the  difference  between  the  financial
    statement and tax basis of assets and liabilities.

    Earnings Per Share
    ------------------

    Basic earnings per common share is based upon the weighted average number of
    shares of common stock outstanding. Diluted earnings per share is based upon
    the weighted average number of common stock  outstanding and, when dilutive,
    common  shares   issuable  for  stock  options,   warrants  and  convertible
    securities.

    Stock-based Compensation
    ------------------------

    The Company  accounts for  stock-based  compensation  to employees using the
    intrinsic value method. Accordingly,  compensation cost for stock options to
    employees is measured as the excess,  if any, of the quoted  market price of
    the  Company's  common  stock at the date of the  grant  over the  amount an
    employee must pay to acquire the stock.

    Use of Estimates
    ----------------

    The  preparation  of  financial  statements  in  conformity  with  generally
    accepted  accounting  principles  requires  management to make estimates and
    assumptions  that affect the reported  amounts of assets and liabilities and
    disclosure of contingent assets and liabilities at the date of the financial
    statements  and the reported  amounts of revenues,  and expenses  during the
    reporting period. Actual results could differ from those estimates.

    Reclassifications
    -----------------

    Certain  reclassifications  were  made  to  the  prior  year's  consolidated
    financial statements to conform to the current year presentation.


<PAGE>

             Dallas Gold and Silver Exchange, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 2000 and 1999



NOTE B - INVENTORIES

    A summary of inventories at December 31, 2000 is as follows:

         Jewelry                                        $6,695,405
         Scrap gold                                        188,045
         Bullion                                            42,632
         Other                                             159,183
                                                        ----------

                                                        $7,087,265
                                                        ==========


NOTE C - INVESTMENTS IN MARKETABLE SECURITIES

    Marketable securities have been classified in the consolidated balance sheet
    according to management's intent. The carrying amount of  available-for-sale
    securities and their fair values at December 31, 2000 follows:

                                           Gross        Gross
                                        unrealized   unrealized      Fair
                              Cost         gains       losses        value
                           ----------   ----------   ----------   ----------

       Equity securities   $1,908,288   $  115,200   $1,167,407   $  856,081
                           ==========   ==========   ==========   ==========


NOTE D - PROPERTY AND EQUIPMENT

    A summary of property and equipment at December 31, 2000 is as follows:

         Land                                                    $  551,300
         Buildings and improvements                                 682,253
         Machinery and equipment                                    758,320
         Furniture and fixtures                                     202,742
                                                                 ----------
                                                                  2,194,615

             Less accumulated depreciation and amortization        (802,997)
                                                                 ----------

                                                                 $1,391,618
                                                                 ==========

    Property  and  equipment  under  capital  lease  is  $158,000.   Accumulated
    depreciation for these assets was $113,200 as of December 31, 2000.


<PAGE>
<TABLE>
<CAPTION>

             Dallas Gold and Silver Exchange, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 2000 and 1999



NOTE E - NOTES PAYABLE

    A summary of notes payable at December 31, 2000 follows:
<S>                                                                                         <C>
       Note payable to bank, due in variable weekly installments based on 90% of
          sales price of inventory collateral approximating $815,896  The note
          bears interest at 9.25% and is due June 24, 2001                                  $1,582,117

       Line  of  credit  payable to bank with  interest at prime plus 1%
          collateralized by inventory and accounts receivable and due
          November 1, 2001.  Maximum borrowings  under the line of credit
          are $600,000                                                                         500,000

       Note payable to limited partnership with interest at 10%, collateralized
          by marketable securities and due April 1, 2001, net of discount of
          $26,792                                                                              248,208

       Various demand notes to individuals with interest rates from 8% to 14%                  569,593
                                                                                            ----------

                                                                                            $2,899,918
                                                                                            ==========

    In connection with note payable to limited  partnership,  the Company issued
    warrants for 27,500 shares of common stock  expiring  December 31, 2001. The
    warrants  have an exercise  price of $6.20 and were valued at $66,550 at the
    date of grant.

NOTE F - LONG-TERM DEBT

    A summary of long-term debt at December 31, 2000 follows:

       Mortgage  payable,  due in  monthly  installments  of  $6,452,  including
          interest based on 30 year US Treasury note rate plus 2-1/2% (10.96% at
          December 31, 2000);  balance due in January 2014                                  $  590,764

       Note payable, due March 2, 2005.  Interest is payable quarterly at a rate
          of 8%                                                                                415,850

       Note payable, due December 31, 2001.  Interest is payable quarterly at a
          rate of 8%                                                                           675,000

       Capital lease obligations                                                                98,785
                                                                                            ----------
                                                                                             1,780,399
          Less current maturities                                                             (830,561)
                                                                                            ----------

                                                                                            $  949,838
                                                                                            ==========
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

             Dallas Gold and Silver Exchange, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 2000 and 1999



NOTE F - LONG-TERM DEBT - Continued

    Convertible Note
    ----------------

    In December  1996, the Company  issued a long-term  convertible  note in the
    amount of $875,000. The note bears interest at 8% payable quarterly.  During
    2000,  $100,000 of the note was converted to 100,000 shares of common stock.
    The remaining principal of $675,000 is due December 2001.

    Also during 2000,  approximately $907,000 of debt was converted into 398,333
    shares of common stock.

    The following  table  summarizes the aggregate  maturities of long-term debt
    and payments on the capital lease obligations:

                                                                         Obligations
                                                                            under
                                                              Long-term    capital
                                                                 debt      leases       Totals
                                                              ---------   ---------   ---------
<S>                                                           <C>         <C>         <C>
       2001                                                   $ 802,880   $  36,688   $ 839,568
       2002                                                     114,980      34,242     149,222
       2003                                                     124,605      32,504     157,109
       2004                                                     135,089      12,346     147,435
       2005                                                      66,483       1,248      67,731
       Thereafter                                               437,576        --       437,576
                                                              ---------   ---------   ---------

       Total                                                  1,681,614     117,028   1,798,642

       Amounts representing interest (interest rates
           Ranging from 10.8% to 23.3%)                            --       (18,242)    (18,242)
                                                              ---------   ---------   ---------
                                                              1,681,614      98,785   1,780,399
       Less current portion                                    (802,880)    (27,681)   (830,561)
                                                              ---------   ---------   ---------

                                                              $ 878,734   $  71,104   $ 949,838
                                                              =========   =========   =========

</TABLE>


<PAGE>
<TABLE>
<CAPTION>

             Dallas Gold and Silver Exchange, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 2000 and 1999



NOTE G - EARNINGS PER SHARE

     A reconciliation  of the income and shares of the basic earnings per common
     share and diluted  earnings per common  share for the years ended  December
     31, 2000 and 1999 is as follows:

                                                                                2000
                                                                 ---------------------------------
                                                                                         Per-share
                                                                  Income       Shares      amount
                                                                 ---------   ---------   ---------
<S>                                                              <C>         <C>         <C>
        Basic earnings per common share
           Income from operations allocable to
              common stockholders                                $ 251,684   4,682,375         .05
                                                                                         =========

        Effect of dilutive securities
           Stock options and warrants                                 --       204,872
           Convertible debt                                         11,360     155,856
                                                                 ---------   ---------

        Diluted earnings per common share
           Income from operations available to common
              stockholders plus assumed conversions              $ 263,044   5,043,103         .05
                                                                 =========   =========   =========

                                                                                1999
                                                                 ---------------------------------
                                                                                         Per-share
                                                                   Income      Shares      amount
                                                                 ---------   ---------   ---------
        Basic earnings per common share
           Income from operations allocable to
              common stockholders                                $ 285,302   4,256,920   $     .07
                                                                                         =========

        Effect of dilutive securities
           Stock options and warrants                                 --        95,006
           Convertible debt                                         11,629     260,319
                                                                 ---------   ---------

        Diluted earnings per common share
           Income from operations available to common
              stockholders plus assumed conversions              $ 296,931   4,612,245   $     .06
                                                                 =========   =========   =========

</TABLE>

NOTE H - STOCK OPTIONS

    The Company has granted stock options to key employees to purchase shares of
    the Company's common stock.  Each option issued vests according to schedules
    designated  by the  Board of  Directors,  not to  exceed  three  years.  The
    exercise  price  is  based  upon  the  estimated  fair  market  value of the
    Company's  common stock at the date of grant, and is payable when the option
    is exercised.


<PAGE>
<TABLE>
<CAPTION>

             Dallas Gold and Silver Exchange, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 2000 and 1999



NOTE H - STOCK OPTIONS - Continued

    The  Company  has  adopted  only  the  disclosure  provisions  of  Financial
    Accounting Standard No. 123, "Accounting for Stock-Based  Compensation" (FAS
    123).  It applies  APB  Opinion  No.  25,  "Accounting  for Stock  Issued to
    Employees," and related Interpretations in accounting for its plans and does
    not recognize compensation expense for its stock-based compensation.

    The following  table  summarizes  the activity in common  shares  subject to
    options for the two years ended December 31, 2000:

                                                         2000                    1999
                                               -----------------------  -----------------------
                                                           Weighted                 Weighted
                                                            average                  average
                                               Options  exercise price  Options  exercise price
                                               -------  --------------  -------  --------------
<S>                                            <C>      <C>             <C>      <C>
       Outstanding at beginning of year        434,000       2.55       340,000       $2.12
       Granted                                      -         -          94,000        4.13
                                               -------                  -------       -----

       Outstanding at end of year              434,000       2.55       434,000       $2.55
                                               =======       ====       =======       =====

       Exercisable at end of year              408,000       2.49       395,000       $2.45
                                               =======       ====       =======       =====

       Weighted average fair value of
         options granted during the year                      -                       $3.39
                                                             ====                     =====

</TABLE>

    Stock options outstanding at December 31, 2000:

                  Options Outstanding                      Options Exercisable
                -----------------------                  -----------------------
                            Weighted        Weighted                 Weighted
   Range of                 average         average                  average
exercise price  Options   expected life  exercise price  Options  exercise price
- --------------  -------   -------------  --------------  -------  --------------

$1.63 to $2.25  340,000      8 years          $2.12      340,000       $2.12

$3.63 to $4.19   59,000      8 years          $3.69       34,000       $3.83

$4.88            35,000      5 years          $4.88       35,000       $4.88
                -------                                  -------

                434,000                                  408,000
                =======                                  =======



<PAGE>
<TABLE>
<CAPTION>

             Dallas Gold and Silver Exchange, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 2000 and 1999



NOTE H - STOCK OPTIONS - Continued

    Had compensation  costs for stock-based  compensation  plans been determined
    consistent  with the fair  value  method  of SFAS  123,  the  Company's  net
    earnings and net  earnings per common and diluted  share for 1999 would have
    been:

                                                     2000              1999
                                                    --------          --------

       Net earnings
         As reported                                $251,684          $285,302
         Pro forma                                   227,917           155,106
       Basic earnings per common share
         As reported                                     .05              .07
         Pro forma                                       .05              .04
       Diluted earnings per common share
         As reported                                     .05              .06
         Pro forma                                       .05              .03

    The  effects  of  applying  SFAS 123 in this pro  forma  disclosure  are not
    indicative  of future  disclosures  because they do not take into effect pro
    forma  compensation  expense  related to grants made before fiscal 1996. The
    fair value of these  options  was  estimated  at the date of grant using the
    Black-Scholes  option-pricing  model  with the  following  weighted  average
    assumptions used for grants after 1998,  expected  volatility of 70% to 86%,
    risk-free  rate of 6.3 to 6.6%,  no dividend  yield and  expected  life of 8
    years.

NOTE I - COMPREHENSIVE INCOME

Comprehensive income at December 31, 2000 and 1999 is as follows:

                                                           Before-Tax       Tax      Net-of-Tax
                                                             Amount       Benefit      Amount
                                                          -----------    --------    ----------
<S>                                                       <C>            <C>         <C>
    Comprehensive income (loss) at January 1, 1999        $    (7,500)   $  2,550    $   (4,950)

    Unrealized holding losses arising during 1999              (3,000)      1,020        (1,980)
                                                          -----------    --------    ----------

    Comprehensive income (loss) at December 31, 1999          (10,500)      3,570        (6,930)

    Unrealized holding losses arising during 2000          (1,041,707)    357,888      (683,819)
                                                          -----------    --------    ----------

    Comprehensive income (loss) at December 31, 2000      $(1,052,207)   $361,458    $ (690,749)
                                                          ===========    ========    ==========

</TABLE>

<PAGE>
<TABLE>
<CAPTION>

             Dallas Gold and Silver Exchange, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 2000 and 1999



NOTE J - INCOME TAXES

    The income tax  provision  reconciled  to the tax computed at the  statutory
    Federal rate follows:

                                                                               2000         1999
                                                                             ---------    ---------
<S>                                                                          <C>          <C>

   Tax expense at statutory rate                                             $ 169,301    $ 154,115
   Nondeductible goodwill                                                       32,844       11,949
   Basis difference in acquired assets                                          36,687         --
   Other                                                                         7,428         --
                                                                             ---------    ---------

   Tax expense                                                               $ 246,260    $ 167,978
                                                                             =========    =========

   Current                                                                   $ 684,396    $ 135,016
   Deferred                                                                   (438,136)      32,962
                                                                             ---------    ---------

                                                                             $ 246,260    $ 167,978
                                                                             =========    =========

Deferred income taxes are comprised of the following at December 31, 2000:

   Deferred tax assets:
      Unrealized loss on available for sale securities                                    $ 151,489
      Property and equipment                                                                 11,443
      Goodwill                                                                                8,500
                                                                                          ---------

                                                                                          $ 171,432
                                                                                          =========
</TABLE>

NOTE K - OPERATING LEASES

    The Company leases certain of its facilities  under  operating  leases.  The
    minimum rental  commitments  under  noncancellable  operating  leases are as
    follows:

       Year ending             Lease         Sub-lease
       December 31,        obligations      receivables           Total
       ------------        -----------      -----------        ----------

          2001             $   386,943      $   (90,000)       $  296,943
          2002                 386,760          (90,000)          296,760
          2003                 388,764          (90,000)          298,764
          2004                 259,176          (60,000)          199,176
                           -----------      -----------        ----------

                           $ 1,421,643      $  (330,000)       $1,091,643
                           ===========      ===========        ==========

    Rent   expense  for  the  years  ended   December  31,  2000  and  1999  was
    approximately  $386,000 and  $221,000,  respectively,  and was  decreased by
    sublease income of approximately $23,000 and $18,000, respectively.


<PAGE>

             Dallas Gold and Silver Exchange, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 2000 and 1999



NOTE L - ACQUISITIONS

    On  March  2,  2000,  the  Company  acquired  certain  assets  of  Fairchild
    International,  Inc. The purchase price of $1,120,001  consisted of $350,000
    in cash, a promissory note for $450,000,  and 62,745 shares of the Company's
    common stock valued at $320,001. The acquisition has been accounted for as a
    purchase. Accordingly, a portion of the purchase price has been allocated to
    net tangible and intangible  assets  acquired based on their  estimated fair
    values.  The purchase  price has been allocated to furniture and fixtures in
    the amount of $120,000 and goodwill in the amount of $1,000,000. Goodwill is
    being amortized over ten years.

    On  August  13,  1999 the  Company  purchased  substantially  all  assets of
    Silverman  Consultants,  Inc.  ("Silverman") located in Mt. Pleasant,  South
    Carolina.   Silverman's   primary   business  is   conducting   liquidation,
    consolidation,  promotional  or other  large-scale  retail sales for jewelry
    stores  and other  types of  retailers.  The  purchase  price of  $3,100,000
    consisted  of  the  issuance  of  200,000  of  the  Company's  newly  issued
    unregistered  common stock and the assumption by the Company of a $2,500,000
    obligation  to a bank.  The  purchase  price has been  allocated as follows:
    inventory  ($2,500,000);  property and  equipment  ($131,000);  and goodwill
    ($469,000).  Goodwill is being  amortized  over five  years.  The results of
    Silverman have been included in the consolidated  financial statements since
    August 13, 1999.

    The following unaudited pro forma information presents a summary of 2000 and
    1999 consolidated  results of operations as if the acquisitions had occurred
    on January 1, 1999:

                                                       2000             1999
                                                   -----------      -----------

         Revenue                                   $25,998,000      $26,645,518
         Net income (loss)                             232,592         (518,566)
         Earnings per share
           Basic                                           .05             (.12)
           Diluted                                         .05             (.12)


<PAGE>
<TABLE>
<CAPTION>

             Dallas Gold and Silver Exchange, Inc. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 2000 and 1999



NOTE M - SEGMENT INFORMATION

    Management identifies reportable segments by product or service offered. The
    Company's operations by segment were as follows:

                                                                          Consulting     Corporate
                                 Software   Liquidations      Jewelry      Services       & other      Consolidated
                                 --------   ------------    -----------   ----------     ---------     ------------
<S>                              <C>        <C>             <C>           <C>            <C>           <C>
      Revenues
         2000                    $205,368   $  4,336,550    $20,535,286   $  722,714     $    --       $ 25,799,918
         1999                     160,000      2,212,060     19,107,084      193,461          --         21,672,605

      Operating income (loss)
         2000                    $ 50,291   $   (347,276)   $   278,941   $  369,080     $ (99,352)    $    251,684
         1999                      86,715        (48,371)       462,582      (45,150)     (170,474)         285,302

      Identifiable assets
         2000                    $134,241   $  3,765,941    $ 8,620,016   $  886,045     $   7,000     $ 13,413,243
         1999                     132,315      3,682,549      4,699,172    3,951,319          --         12,465,355

      Capital expenditures
         2000                    $ 52,915   $     44,702    $   245,010   $    2,017     $    --       $    344,644
         1999                      19,375        131,426        104,764        8,738          --            264,303

      Depreciation and
         amortization
         2000                    $ 12,737   $    142,207    $   216,552   $   16,467     $    --       $    387,963
         1999                       4,045         89,318         99,115       17,627          --            210,105

</TABLE>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>2
<FILENAME>0002.txt
<DESCRIPTION>LEASE AGREEMENT
<TEXT>



STATE OF SOUTH CAROLINA    )                                      EXHIBIT 10.1
                           )            LEASE AGREEMENT
COUNTY OF CHARLESTON       )

         THIS LEASE  AGREEMENT is made and entered into on this __2nd____ day of
JUNE,  2000,  by and between  SMD  PROPERTIES,  (hereinafter  referred to as the
"Landlord") and CHARLESTON GOLD AND DIAMOND EXCHANGE, INC. (hereinafter referred
to as the "Tenant").

                              W I T N E S S E T H:

         1.       Premises.  The Landlord  hereby Leases to the Tenant,  and the
Tenant  hereby  Leases from the Landlord,  the premises of  approximately  9,750
square  feet  identified  as (the  "Premises")  of 975  Pinehollow  Road,  Mount
Pleasant,  SC 29464, (the "Building") and being more  particularly  described in
and shown on the floor plan as "A-1" attached hereto and made a part hereof. The
total  rentable  area of the Premises is  stipulated  to be the number above and
shall be adjusted only by the Landlord as necessary to reflect actual changes in
the Premises or Building.  The building  shall be built per the following  plans
and specifications that are incorporated, herein by reference:

   1)  Earthsource Engineering, SITE, CIVIL, & LANDSCAPE DRAWINGS
       Job Number: 99-153, Final Approval 12-22-99
   2)  McKellar & Associates Architects, Architectural Drawings
       Project Number: 99021.07, Final Approval 11-15-1999, A101 DATED 04-28-00:
   3)  Devita & Associates, Structural, Electrical, Mechanical & Plumbing
       Project Number: 99081, Final Approval 11-3-99

         TO HAVE  AND TO  HOLD  THE  Premises  upon  the  terms  and  conditions
hereinafter set forth.

         2.       Term.  The term  ("Term") of this Lease shall begin  August 1,
2000 or as soon  thereafter as Landlord  delivers  possession of the Premises to
Tenant,  or upon final  completion  and  approval by Town of Mt.  Pleasant  (the
"Commencement  Date") and end at midnight on August 31, 2005  thereafter  unless
sooner  terminated  in  accordance  with the terms  hereof.  The Tenant shall be
granted two (2) five-year  (5) options to renew the lease with rental  increases
of (3%) three percent yearly.

         3.       Possession.  If for  any  reason  Landlord  fails  to  deliver
possession of the Premises on or before the specified  Commencement  Date,  this
Lease  shall  remain in full  force and effect  and the  Landlord  shall have no
liability for delay, but Base Rent and Additional Rent, ("Rent"), and Lease Term
shall not commence until the later of the date Landlord  delivers  possession of
the Premises to the Tenant or date of final  completion and approval of the Town
of Mt. Pleasant.

         4.       Base  Rent.  The  Tenant  shall  pay to the  Landlord  without
deduction,  set off, prior notice or demand, Base Rent ("Base Rent") as follows:
Year One:  $14,421.88 per month; or $173,062.50 per year, with rental  increases
of (3%) three percent each year calculated from the from the previous year.

                  All  Base  Rent  is  payable  in  advance  in  equal   monthly
installments,  on the first day of each and every calendar month during the Term
hereof. All Base Rent payments shall be made to SMD PROPERTIES, 960 BERRY SHOALS
ROAD,  DUNCAN,  S. C. 29334 or at such other place as the Landlord may designate
in writing to Tenant. If the Commencement Date of this Lease is a day other than
the first day of the month,  Base Rent for the first month shall be prorated and
paid with the first regular monthly  installment.  Any Base Rent hereunder which
is not  received  by the fifth,  (5th),  day of each month shall be subject to a
delinquency  charge of the  greater of either one and one half (1 1/2%)  percent
per month on the unpaid balance,  accruing from the first day of every month for
which Base Rent is due or the sum of One Hundred Dollars,  ($100.00), so long as
the  amount  does  not  exceed  the  amount  allowed  by  applicable  law.  Said
delinquency charge shall be in addition to the default provisions herein.

<PAGE>

         5.       Security Deposit. Tenant shall deposit the sum of TWENTY EIGHT
THOUSAND EIGHT HUNDRED FORTY THREE DOLLARS AND  SEVENTY-SIX  CENTS  ($28,843.76)
with Landlord upon execution of this Lease as security for the full  performance
of all of the provisions of this Lease on its part (the "Security Deposit").  If
at any time during the Term of this Lease, Tenant shall be in default, Landlord,
without  limitation of any other right or remedy which may apply because of such
default,  may (i) apply all or part of the  Security  Deposit for the payment of
Rent in default;  and/or (ii) appropriate all or part of the Security Deposit to
cure the default,  including,  but not limited to, the  defraying of any and all
reasonable and necessary expenses incurred by Landlord in recovering  possession
of the Premises upon  termination  of this Lease.  To the extent that all or any
portion of the Security Deposit is thus applied or appropriated by the Landlord,
and if this  Lease is not  terminated  as a result of the  default,  Tenant,  at
Landlord's  request and as a condition to the  continuance of this Lease,  shall
pay to the Landlord,  within ten (10) days of request by the Landlord, an amount
sufficient to place in the Landlord's hands the amount of the original  Security
Deposit,  taking into  account the  portion,  if any, of the  adjusted  original
Security  Deposit  as may not have been  applied  or  expended  by  Landlord  in
accordance herewith.

                  Landlord may retain the Security  Deposit in a general account
with other  funds.  Tenant  shall not be entitled  to  interest on the  Security
Deposit. If Tenant is not in default at the termination of this Lease,  Landlord
shall return the  Security  Deposit (or the portion that has not been applied or
appropriated in accordance herewith) to the Tenant within thirty days (30) after
the termination date of this Lease.

         6.       Use. The Tenant  shall use and occupy the  Premises  solely as
general  office  and retail  space and for no other  purpose  without  the prior
written  consent of Landlord.  Tenant  shall  comply with all laws,  ordinances,
orders,  or regulations of any lawful  authority  having  jurisdiction  over the
Premises  and the use  thereof.  Tenant shall not at any time leave the Premises
vacant, but shall in good faith  continuously  throughout the Term of this Lease
conduct and carry on in the entire  Premises  the type of business for which the
Premises are Leased.

                  Tenant shall not permit any  objectionable or unpleasant odors
to  emanate  from the  Premises;  nor place or  permit  any  radio,  television,
loudspeaker or amplifier,  on the roof or outside the Premises or where the same
can be seen or heard from outside the Premises; nor place any antenna, awning or
other projection on the exterior of the Premises; or take any action which would
constitute a nuisance or would disturb or endanger other Tenants of the Building
or  unreasonably  interfere  with the use of their  respective  Premises;  or do
anything which would tend to injure the reputation of the Building.

                  Tenant expressly acknowledges that it is its responsibility to
obtain  a  business  license  from  the  Town  of  Mount  Pleasant,  SC.  Tenant
represents,  warrants and covenants to Landlord throughout the term of the Lease
as follows:

                  (a)  Tenant is and  agrees to  remain in  compliance  with all
applicable  federal,  state and local laws  relating to protection of the public
health,  welfare,  and the  environment  ("environmental  laws") with respect to
Tenant's use and  occupancy of the  Premises.  Tenant agrees to cause all of its
employees,  agents,  contractors,  sublessees,  assignees, and any other persons
occupying  or  present  on  the  Premises   ("occupants")  to  comply  with  all
environmental laws applicable to their activities in and around the Premises.

                  (b) Tenant shall not bring into the Building or the  Premises,
nor shall it allow any occupant to bring into the Premises, any chemical,  waste
material  or other  substance  that is defined or  otherwise  classified  in any
environmental laws as a "hazardous substance",  "hazardous material", "hazardous
waste", "toxic substance", or "toxic pollutant",  except for small quantities of
any such substances  that are consistent  with ordinary use of the Premises.  If
any quantity of any such  substance is brought into the building or the Premises
by Tenant or occupants for ordinary use, Tenant or occupants shall handle,  use,
and  dispose  of such  substance  in a  reasonable  and  prudent  manner  and in
compliance with all applicable environmental laws.

<PAGE>

                  (c) Landlord or its representative may inspect the Premises at
reasonable  times,  upon prior notice to Tenant,  to insure  compliance with the
requirements  of this  paragraph.  As part of its  inspection,  Landlord  or its
representative  may take such samples as Landlord in its sole  discretion  deems
necessary,  including without  limitation,  samples of substances located on the
Premises,  and neither Landlord nor any representative  shall have any liability
to  Tenant  as a  result  of  such  sampling  activity.  In the  event  Landlord
determines that Tenant  possesses any substances in violation of this paragraph,
Landlord  shall  notify  Tenant  and  Tenant  shall  immediately   remove  those
substances in compliance with all applicable laws, rules, ordinances,  standards
and regulations.  In the event that Tenant fails to comply with the requirements
of this  paragraph,  Landlord or its  representative  may enter the Premises and
provide for the removal and  disposal  of those  substances  as Tenant's  agent.
Tenant agrees to remain responsible for the substances and to indemnify, defend,
hold harmless,  and protect Landlord and any  representative of Landlord against
all costs,  fines,  penalties,  or damages  incurred  by  Landlord or its agent,
representative or property manager due to any activities by Landlord pursuant to
this paragraph, except in the event of Landlord's negligence. Tenant agrees that
no adequate remedy exist at law to enforce this paragraph and that damages would
not make Landlord whole;  accordingly,  Tenant agrees that Landlord may seek and
obtain injunctive relief to enforce this paragraph.

                  Tenant  shall not  place a load on any  floor in the  Premises
exceeding  the floor load such floor was  designed  to carry.  Tenant  shall not
install,  operate or maintain any heavy  equipment  in the Premises  except in a
manner  that  properly  distributes  weight.  Landlord  agrees  that  it is  the
Landlord's  responsibility  to ensure that the floor under the safe meets proper
load standards and acknowledges that the safe will be installed on the Premises.

         7.       Substituted Premises.  Intentionally Deleted.

         8.       Assignment or Sublet. Tenant shall not transfer or assign this
Lease or sublet  the  demised  Premises  without  the prior  written  consent of
Landlord  (not to be  unreasonably  withheld)  and any attempt to do so shall be
void and confer no rights upon any third person.  The consent by Landlord to any
transfer,  assignment or subletting  shall not be deemed a waiver by Landlord of
any prohibition against any future transfer, assignment or subletting.  Further,
in the event that Tenant  request the  Landlord's  consent to an  assignment  or
sublease of fifty percent or more of the Premises,  the Landlord  shall have the
option to release the Tenant of its  obligations  hereunder and  accelerate  the
expiration of the term hereof,  and Landlord may  subsequently  enter into a new
lease  agreement  directly  with any such tenant.  Consent to one  assignment or
sublease  shall  not  constitute  a waiver of this  provision  with  respect  to
subsequent transactions.  Each subtenant or assignee shall be liable to Landlord
for all obligations of the Tenant hereunder, but the Tenant shall not be thereby
relieved of such obligations unless Landlord has exercised its option to release
Tenant and accelerate  expiration of the Term hereof, so that Landlord can enter
into a new lease  agreement  with a new tenant.  In such case,  Tenant  shall be
relieved of any further  obligation under the Lease. The Landlord shall have the
right in its absolute and sole discretion to withhold consent to any sublease or
assignment  if Tenant  shall be in  default  or  breach of this  Lease or if the
proposed  assignee or sublessee or its business will cause Landlord to incur any
cost of whatever kind or nature.

                  Any   transfer   of  this   Lease   from   Tenant  by  merger,
consolidation,  liquidation, or otherwise by operation of law shall be deemed to
constitute  an  assignment  for the  purpose  of this  Lease.  In the event of a
purported subletting of all or any part of said Premises or purported assignment
of this Lease, it is mutually agreed that Tenant will nevertheless  remain fully
and primarily liable under the terms, covenants and conditions of this Lease. At
Landlord's   election,   Landlord  may  consider  any  purported  subletting  or
assignment a default and elect any remedies  provided  herein.  If this Lease is
assigned or if the  Premises  or any part  thereof be  subleased  or occupied by
anybody  other  than  Tenant  in  contravention  of this  Lease,  Landlord  may,
nevertheless,  collect from the assignee, sublessee or occupant any rent payable
by  Tenant  under  this  Lease and apply the  amount  collected  to rent  herein
reserved,  but such  election  will not be deemed an acceptance of the assignee,
sublessee or occupant as Tenant nor a release of Tenant from  performance  under
this Lease.

<PAGE>

                  If Tenant of this Lease is a  corporation,  and if at any time
during the term of this Lease the  person or persons  owning a majority  of such
corporation's  voting shares on the date hereof shall cease to own a majority of
such  shares  whether  due to  sale,  assignment,  operation  of  law  or  other
disposition,  Tenant will so notify  Landlord and Landlord shall have the right,
at its option,  to terminate  this Lease by notice to Tenant given within thirty
days following receipt of such notice. This provision shall not be applicable to
Tenant if all of the outstanding voting stock of such corporation is listed on a
national  securities exchange as defined in the Securities Exchange Act of 1934,
as amended.

         9.       Condition of Premises. Landlord agrees that the Premises shall
be completed and finished according to the specifications described in Paragraph
1 and incorporated herein by reference. Landlord agrees to paint the interior of
Premises  in a color to be chosen by the Tenant and  approved  by the  Landlord.
Landlord  shall install  carpeting and light bulbs within the Premises  prior to
occupancy.  Except as provided in the specifications,  Landlord hereby disclaims
any express or implied warranties as to the Premises including,  but not limited
to any implied warranty of merchantability or fitness for a particular purpose.

         10.      Americans  With   Disabilities   Act.  Landlord  warrants  and
represents that the Premises shall be built to comply with current  standards of
the American with  Disabilities  Act of 1990.  The parties hereby agree that the
Premises  may be  subject  to the terms and  conditions  of the  Americans  With
Disabilities Act of 1990 (hereinafter the "ADA").  The parties further agree and
acknowledge  that it shall be the sole  responsibility  of the  Tenant to comply
with any and all  provisions of the ADA, as such  compliance  may be required to
operate  the  Premises.  The Tenant  further  agrees to  indemnify  and hold the
Landlord  harmless against any claims which may arise out of Tenant's failure to
comply with the ADA, such indemnification  shall include, but not necessarily be
limited to, reasonable attorneys' fees, court costs and judgments as a result of
said  claims,  except for such claims  arising  out of the  Building as built by
Landlord.  Within ten days after  receipt,  Tenant  shall advise the Landlord in
writing and provide the Landlord with copies of any notices alleged in violation
of ADA  relating  to any  portion of the  demised  Premises,  any claims made or
threatened in writing regarding  non-compliance with the ADA and relating to any
portion  of  the  Premises  or  any   governmental  or  regulatory   actions  or
investigations  instituted or threatened  regarding  non-compliance with the ADA
and relating to any portion of the Premises.

         11.      Improvements. All improvements,  alterations, and additions to
the Premises  desired by Tenant shall be made at Tenant's  expense,  in good and
workmanlike  manner and in accordance with plans and  specifications  which have
been  previously   approved  in  writing  by  Landlord.   If  the  improvements,
alterations,  or additions are to be made by a contractor other than Landlord's,
Landlord reserves the right to approve such contractor, which approval shall not
be unreasonably withheld, and to require adequate lien waivers,  bonds, permits,
licenses,  and  insurance.  Tenant shall  indemnify and hold  Landlord  harmless
against any loss,  liability or damage  resulting  from such work by the Tenant.
All  improvements  and  additions  made by the Tenant  attached to the Premises,
including without limitation all partitions,  carpets, lighting fixtures, doors,
hardware,  shelves,  cabinets,  safe, and ceilings, shall remain in the Premises
and shall be surrendered to Landlord at the expiration or earlier termination of
this Lease unless Landlord  requests their removal in which event,  Tenant shall
remove the same and restore the Premises to its  original  condition at Tenant's
expense. Tenant shall specifically have the right to remove modular systems that
may be attached  to walls or floors so long as Tenant  repairs any damage to the
walls or floors caused by installation or removal of any such item. If by reason
of any  alteration,  repair,  labor  performed  or  materials  furnished  to the
Premises  for or on behalf of  Tenant,  any  mechanic's  or other  lien shall be
filed, claimed,  perfected or otherwise established against the Premises, Tenant
shall  discharge or remove the lien by bonding or otherwise  within fifteen (15)
days  after the same is filed.  If Tenant  fails to cause such lien or notice of
lien to be  discharged  within  such  period,  Landlord  may,  but  shall not be
obligated to,  discharge the same either by paying the amount  claimed to be due
or by procuring  the  discharge of such lien by deposit,  bond, or otherwise and
Tenant shall reimburse Landlord for such amounts upon demand.

         12.      Utilities  and  Services.  Landlord  shall,  during  the  Term
hereof,  furnish  Tenant,  without  charge:  reasonable  quantities  of water to
lavatories in or  appurtenant  to the Premises.  Landlord shall contract for and
pay for  installation of heating,  cooling and electric systems for the Premises
including  lighting  and small  business  machine  purposes  only,  such as word
processors,  personal computers,  electric typewriters and calculators, with all
applicable  federal and state regulations.  Janitorial  services for cleaning of
the Premises shall be provided by the Tenant.  Tenant shall furnish,  at its own
expense  and without  damage or threat of damage to the  Premises or any part of
the Building,  any  utilities or services  required for its use of the Premises,
including,  but not  limited to,  telephone  service  and  electrical  power and
connections for electronic  data  processing  equipment and other large business
equipment.

<PAGE>

         13.      Repairs by  Landlord.  Upon  reasonable  notice  from  Tenant,
Landlord shall make necessary repairs to: (1) roof; (2) foundation; (3) exterior
wall;  (4) any load  bearing  interior  walls of the  Premises;  (5) below grade
plumbing  lines;  and (6)  replacement  of the components of the heating and air
conditioning  equipment that services the Premises if  necessitated  by ordinary
wear and tear,  provided  that said repairs  shall not be  occasioned by fire or
other casualties as contemplated in paragraph 20 herein, however, Landlord shall
not be  required to repair  windows,  plate  glass,  doors or any  fixtures  and
appurtenances  composed  of glass or any  damage  caused  by any act,  omission,
misuse or negligence of Tenant,  Tenant's  agents or Tenant's  invitees.  Tenant
shall  keep  the  Premises  in  good,  clean  and  habitable  condition.  At the
expiration of the Lease,  Tenant shall surrender the Premises in good condition,
excepting reasonable wear and tear.

         14.      Rubbish.  Tenant shall take good care of the Premises and keep
the same free from waste at all times.  Tenant shall store all trash and garbage
within the Premises, arranging for the regular pick up of such trash and garbage
at  Landlord's  expense.  Receiving  and delivery of goods and  merchandise  and
removal  of  garbage  and  trash  shall be made  only in the  manner  and  areas
prescribed by Landlord. Tenant shall not operate an incinerator or burn trash or
garbage within the Premises or any Common Area.

         15.      Signs;  Displays.  Tenant shall not, without  Landlord's prior
written  consent,  (a) install any exterior  lighting,  decorations,  paintings,
awnings, canopies, or the like or (b) erect or install any signs, window or door
lettering,  placards, decorations and advertising media of any type which can be
viewed  from the  exterior  of the  Premises.  All signs,  placards,  lettering,
decorations,  and  advertising  media shall  conform in all respects to the sign
criteria  established  by  Landlord  for the  building  from time to time in the
exercise  of its sole  discretion  and shall be  subject  to the  prior  written
approval of Landlord as to  construction,  method of  attachment,  size,  shape,
height, lighting, color, and general appearance. All signs shall be kept in good
condition and in proper operating order at all times.

                  Tenant shall remove any such signs,  lettering,  placards,  or
decorations  at the  expiration or earlier  termination of this Lease and repair
any damage to the Premises and/or building caused by the installation or removal
of same.

         16.      Property  of Tenant.  Tenant  may,  and at the  expiration  or
earlier  termination hereof shall,  remove all furniture,  equipment,  and other
personal  property  which  Tenant  shall have  placed in the  Premises or on the
exterior  thereof;  provided that Tenant shall repair any damage to the Premises
caused by the  installation  or removal of the same.  All such  property  shall,
during the Term hereof,  be at the risk of the Tenant only,  and Landlord  shall
not be liable for any loss thereof or damage  thereto  resulting  from any cause
whatsoever;  and each policy of insurance covering such property shall contain a
standard waiver of subrogation endorsement. Any such property not removed at the
expiration or earlier  termination  of this Lease shall be deemed  abandoned and
may be disposed of by the Landlord in any manner whatsoever. Landlord shall have
the right to deduct any costs and expenses  incurred by Landlord in disposing of
Tenant's  property  from the security  deposit.  In the event that the costs and
expenses incurred by Landlord exceed the balance of the security deposit, Tenant
shall reimburse Landlord for the discrepancy between the balance of the security
deposit and the actual costs and expenses incurred by the Landlord.

         17.      Landlord's  Liability.  Landlord  shall not be  responsible or
liable for and Tenant hereby  expressly  waives all claims against  Landlord for
injury to persons or damage to Tenant's property resulting from:

                  (i)      Water,  snow or ice being upon or coming  through the
                           roof, walls, windows or otherwise;

                  (ii)     Wind, water or flooding;

                  (iii)    Any act,  omission or  negligence  of  co-tenants  or
                           other persons or occupants of the Building;

                  (iv)     The acts of any owners or  occupants  of adjoining or
                           contiguous property; or

                  (v)      Failure of the electrical  system, the heating or air
                           conditioning   systems,  or  the  plumbing  or  sewer
                           systems,

<PAGE>

                  Landlord shall not be liable for any damage  occasioned by its
failure to keep the Premises in repair unless Landlord is obligated to make such
repairs  under the terms  hereof,  notice of the need for such  repairs has been
given  Landlord,  a reasonable  time has elapsed and Landlord has failed to make
such  repairs.  Notwithstanding  the  above,  Tenant  does not waive all  claims
against Landlord for injury to persons or damage to Tenants  property  resulting
from (I) - (v) above,  when such a damage is due to  Landlord's  failure to keep
Premises  under repair or acts,  omission or negligence of Landlord's  agents or
employees.

         18.      Additional Rent, Taxes and Insurance.  In addition to the Base
Rent  provided  for in  Paragraph  Four  (4)  herein,  Tenant  shall  pay to the
Landlord,  as Additional  Rent, its pro-rata share of all increases in insurance
(liability,  fire and extended  coverage  insurance carried by Landlord insuring
the  Building)  and real estate taxes  assessed on the Building  and/or the land
upon which the Building is located. Such payment shall be due and payable thirty
(30) days after a statement  thereof is rendered to Tenant by Landlord.  If said
Additional  Rent is not  received  by Landlord a  delinquency  charge of one and
one-half (1 1/2%)  percent per month shall accrue on the unpaid  amount from the
due date until  paid.  The term "real  estate  taxes"  shall  include any taxes,
assessments,  levies or  charges  assessed  or  imposed  on the land  and/or the
Building  of  which  the  Premises  forms a part.  Tenant  shall  pay  prior  to
delinquency all personal  property taxes and assessments of every kind or nature
imposed or assessed upon or with respect to  furnishings,  fixtures,  equipment,
and other  property  of Tenant  placed on the  Premises.  For  purposes  hereof,
Tenant's  pro-rata  share of the above  items  shall be based upon the number of
square feet  comprising  the Building.  Landlord  shall,  during the entire Term
hereof, maintain in force, casualty insurance on its interest in the Premises in
such amounts and against such hazards and  contingencies  as Landlord shall deem
desirable  for its own  protection;  provided,  however,  Landlord  shall not be
obligated to insure any furniture,  equipment,  or other property  placed in the
Premises by or at the expense of Tenant.  Tenant shall not permit any use of the
Premises that would invalidate or conflict with the known terms of any insurance
policy covering risks insured by Landlord,  and Tenant shall pay the cost of any
premium amounts above standard rates for such insurance occasioned by the nature
of Tenant's use of the Premises.

         19.      Public Liability Insurance. Tenant shall obtain and maintain a
comprehensive  policy of liability insurance with respect to the Premises naming
Landlord  and any  designee  of Landlord as  additional  insured and  protecting
Landlord, Tenant and any designee of Landlord against any liability which arises
from any occurrence on or about the Premises or any  appurtenances  thereof,  or
any of the  claims  against  which  Tenant is  required  to  indemnify  Landlord
pursuant to this Lease.  Such policy shall be written by a company  satisfactory
to  Landlord.  The  coverage  limits  shall be at  least  One  Million  Dollars,
($1,000,000.),  with respect to combined single limits of bodily injury or death
per  occurrence,  One Million  Dollars,  ($1,000,000.),  with  respect to bodily
injury or death of more than one person in any one  occurrence and at least Five
Hundred Thousand Dollars,  ($500,000.) for property damage per occurrence.  Said
policy(ies)  must contain a provision  that they will not be canceled or changed
without  first giving  Landlord  thirty (30) days prior written  notice.  Tenant
shall provide Certificate of Insurance to Landlord prior to taking possession of
the  Premises.  Each policy of insurance  Tenant is required to carry under this
Lease shall contain a waiver of subrogation  against  Landlord and Tenant hereby
waives all  rights of  recovery  or causes of action  against  Landlord  for any
damage or injury  covered  by  Tenant's  insurance  or by the type of  insurance
required of Tenant by this Lease.

         20.      Damage or Destruction by Casualty.  If the Premises are wholly
or partially  destroyed by fire or other  casualty,  Landlord  shall, at its own
expense,  promptly restore the Premises to  substantially  the same condition as
existed  when Tenant took  possession  of the  Premises,  unless said damage was
caused by Tenant, its agents,  licensees,  employees,  invitees, or visitors, in
which case any repair shall be at Tenant's expense; provided,  however, Landlord
may by notice to Tenant  within sixty (60) days after the date of such damage or
destruction  elect,  at its option,  not to restore or repair the  Premises  and
Landlord  or Tenant may  thereafter,  at its option,  cancel this Lease.  If the
Premises  cannot be restored  within ninety (90) days of the date of such damage
or  destruction,  either Landlord or Tenant shall have the option to cancel this
Lease with written notice thereof to the other party within said period.

                  If all or any  portion of the  Premises  is damaged by fire or
other casualty  insurable under a standard fire insurance policy with a standard
extended coverage  endorsement,  not caused by the fault or neglect of Tenant or
Tenant's agents,  and this Lease is not terminated  pursuant to any provision of
this Lease, the following shall apply: from the date of the occurrence until the
Premises, or the portion thereof which is damaged, is rebuilt or repaired,  Base
Rent and  Additional  Rent shall  abate in the  proportion  that the area of the
portion of the Premises  rendered unusable for the permitted use hereunder bears
to the entire area of the Premises.  If the fire or other  casualty is caused by
the fault or neglect of Tenant or Tenant's agents, Base Rent shall not abate.

         21.      Eminent Domain. If the whole of the Premises,  or such portion
thereof as will make the Premises unsuitable for the use contemplated hereby, be
taken or  condemned  by any  public or  quasi-public  authority  (including  any
conveyance  in lieu  thereof),  then the Term hereof  shall cease as of the date
possession thereof is taken by the condemnor,  and Base Rent and Additional Rent
shall be accounted  for as between  Landlord and Tenant as of that date.  If any
lesser  portion  of the  Premises  is thus  taken or  condemned,  Base  Rent and
Additional  Rent shall  abate in  proportion  to the loss of the use  occasioned
thereby.  Tenant shall not have any right or claim to any part of any award made
to or  received  by  Landlord  for such  taking  or any  right or claim  against
Landlord for the value for the unexpired term of this Lease; provided,  however,
nothing  contained  herein shall  preclude  Tenant from making a claim  directly
against the condemning authority for loss of business, cost of moving, etc.

<PAGE>

         22.      Indemnity.  Tenant shall  defend,  indemnify and hold harmless
Landlord,  Landlord's  agents and property  managers and any mortgagee  from and
against all claims for  injuries to persons or  property  or  administrative  or
criminal action by a governmental authority, which arises from:

                  (i)      Tenant's  possession,  use,  occupation,  management,
                           repair, maintenance or control of the Premises or any
                           other portion thereof;

                  (ii)     Any act or  omission  of Tenant or  Tenant's  agents,
                           employees or invitees;

                  (iii)    Any default,  breach, violation or non-performance of
                           this Lease by Tenant; or

                  (iv)     Any  injury  to person  or  property  or loss of life
                           sustained in or about the Premises.

                  Tenant shall defend any claims  against  Landlord,  Landlord's
agents,  property managers,  and any mortgagees with respect to the foregoing or
in any action in which they may be  impleaded.  Tenant  shall pay,  satisfy  and
discharge any judgments,  orders and decrees which may be recovered  against the
Landlord,   property  manager  and/or  any  mortgagee  in  connection  with  the
foregoing.  Tenant needs  indemnification  for losses,  etc. caused by Landlord,
Landlord's agents or property managers.

                  If Landlord, without fault on its part, is made a party to any
litigation  commenced by or against  Tenant,  Tenant  agrees to protect and hold
Landlord  harmless  therefrom  and to pay all  costs,  expenses  and  reasonable
attorneys' fees incurred or paid by Landlord in connection with such litigation.

                  Landlord  shall defend,  indemnify  and hold harmless  Tenant,
Tenant's  agents and property  managers and any  mortgagee  from and against all
claims for injuries to persons or property or  administrative or criminal action
by a governmental authority, which arises from:

                  (i)      Landlord's possession,  use, occupation,  management,
                           repair, maintenance or control of the Premises or any
                           other portion thereof;

                  (ii)     Any act or omission of Landlord or Landlord's agents,
                           employees or invitees;

                  (iii)    Any default,  breach, violation or non-performance of
                           this Lease by Landlord; or

                  (iv)     Any  injury  to person  or  property  or loss of life
                           sustained  in  or  about  the   Premises   caused  by
                           Landlord,  Landlord's agents,  employees, or property
                           managers.

                  Landlord  shall  defend any claims  against  Tenant,  Tenant's
agents,  property managers,  and any mortgagees with respect to the foregoing or
in any action in which they may be impleaded.  Landlord  shall pay,  satisfy and
discharge any judgments,  orders and decrees, which may be recovered against the
Tenant, property manager and/or any mortgagee in connection with the foregoing.

                  If Tenant,  without  fault on its part, is made a party to any
litigation commenced by or against Landlord, Landlord agrees to protect and hold
Tenant  harmless  therefrom  and to  pay  all  costs,  expenses  and  reasonable
attorneys' fees incurred or paid by Tenant in connection with such litigation.

         23.      Landlord's  Entry.  Upon  twenty-four  (24)  hours  notice  to
Tenant,  Landlord  may  enter  the  Premises  during  business  hours,  and in a
reasonable  manner  to  inspect  or  exhibit  same,  to comply  with  Landlord's
obligations hereunder, to exercise Landlord's rights under this Lease agreement,
or to make repairs or renovations  required in connection with adjoining spaces.
Additionally,  Tenant  expressly  authorizes  Landlord  to enter  the  Premises,
without  prior  notice,  in case of an  emergency  to take action  necessary  to
preserve the  Premises.  Tenant will permit  Landlord to place and maintain "For
Rent" or "For Lease" signs on the  Premises  during the last ninety (90) days of
the Lease Term without compensation to Tenant.

<PAGE>

         24.      Default and Remedies.  If Tenant shall fail to pay either Base
Rent or  Additional  Rent when  due,  or any other  sums of money  becoming  due
hereunder within ten (10) days of written notice,  or if Tenant shall default in
the performance of any of the other terms, conditions, or covenants contained in
this Lease within  thirty (30) days after  written  notice  thereof or does not,
within such thirty (30) days, commence such act or acts as shall be necessary to
remedy a default,  which is not curable within said thirty (30) days for reasons
beyond the  control of Tenant,  and shall not  complete  such act or acts within
sixty (60) days after  written  notice,  or if Tenant shall  become  bankrupt or
insolvent, or file any debtor proceedings,  or file in any court pursuant to any
statute,  either of the United  States or any state a petition in  bankruptcy or
insolvency  or for  reorganization,  or file or have filed against it a petition
for the appointment of a receiver or trustee for substantially all of the assets
of Tenant,  or if Tenant makes an assignment  for the benefit of  creditors,  or
petitions for or enters into an  arrangement  with its  creditors,  or if Tenant
shall  abandon  the  Premises  or suffer the Lease to be taken under any writ of
execution and such writ is not vacated or set aside within fifteen (15) days, an
event of default shall have occurred.  Without terminating the Lease, and with a
Court Order,  Landlord  shall have the right to re-enter and take  possession of
the Premises or any part thereof and repossess the same and expel the Tenant and
those  claiming  through or under the  Tenant and remove the  effects of both or
either with force, if necessary, without being deemed guilty in trespass or of a
forcible entry or detainer and without  prejudice to any remedies for arrears of
rent or preceding  breach of  covenants.  In such event,  the Landlord  shall be
entitled  to recover  from the Tenant all damages  incurred  by the  Landlord by
reason  of the  Tenant's  default,  including  but not  limited  to the  cost of
recovering possession of the Premises, expenses of reletting including necessary
repair of any damages to the  Premises,  reasonable  attorneys'  fees,  any real
estate  commission  actually paid, the worth at the time of the unpaid Base Rent
for the balance of the Term.  If Landlord  should  take  possession  pursuant to
legal  proceedings,  it may either  terminate  this Lease or it may from time to
time  without  terminating  this Lease,  relet the Premises for such Term and at
such rentals and upon such other terms and  conditions  as the Landlord may deem
advisable.  If such reletting shall yield rentals  insufficient for any month to
pay the rental due by Tenant hereunder for that month, Tenant shall be liable to
Landlord for the deficiency and same shall be paid monthly.  No such re-entry or
taking  possession of the Premises by Landlord shall be construed as an election
to terminate  this Lease unless written notice of such intention be given by the
Landlord to the Tenant at the time of such re-entry;  but, not  withstanding any
such  re-entry  and  reletting  without  termination,  Landlord  may at any time
thereafter  elect to  terminate  this Lease for such  previous  breach.  If as a
result of Tenant's default hereunder, Landlord shall institute legal proceedings
for the enforcement of Tenant's obligations, Tenant shall pay all costs incurred
by Landlord, including reasonable attorneys' fees.

                  Landlord  may relet all or any part of the Premises for all or
any part of the  unexpired  portion  of the Term of this Lease or for any longer
period. Landlord may accept any rental then obtainable, grant any concessions of
rent,  and make any repairs of damage to the  Premises  for any new  Tenant,  as
Landlord may deem advisable

         25.      Right to Close Common Areas.  Landlord shall have the right to
close all or any  portions  of the common  areas to such  extent as may,  in the
opinion of  Landlord's  counsel,  be legally  sufficient to prevent a dedication
thereof or the accrual of any rights to any person or to the public  therein and
to close  temporarily,  if  necessary,  any part of the common areas in order to
discourage non-customer parking, to permit alterations of existing buildings and
other  improvements  or  the  construction  of  additional  buildings  or  other
improvements.

<PAGE>

         26.      Arbitration.  At Landlord's request,  any disagreement between
the parties  hereto with respect to the  interpretation  or  application of this
Lease, or the obligations of the parties hereunder,  or to any matter of dispute
arising  between the parties hereto,  shall be determined by  arbitrators.  Such
arbitration shall be conducted before three (3) arbitrators  (unless the parties
hereto agree to one  arbitrator).  Landlord shall have the right to name one (1)
arbitrator and the Tenant shall name one (1) arbitrator. The two (2) arbitrators
shall then  choose a third  arbitrator.  The  arbitrators  shall  conduct  their
proceedings  and make  their  decisions  in  strict  conformity  with the  South
Carolina Uniform  Arbitration Act;  provided,  however,  such arbitrators  shall
apply  applicable  South Carolina law to any  controversy.  All such arbitration
proceedings  hereunder shall be conducted in Charleston County,  South Carolina.
The  decision of the  arbitrator  or  arbitrators,  as the case may be, shall be
final, conclusive and binding upon the parties hereto.

         27.      Remedies Cumulative Non-Waiver.  No remedy herein or otherwise
conferred  upon or reserved to Landlord or Tenant shall be considered  exclusive
of any other remedy, but the same shall be distinct, separate and cumulative and
shall be in addition to every other remedy given hereunder,  or now or hereafter
existing  at law or in equity;  and every  power and remedy  given by this Lease
Agreement  may be exercised  from time to time as often as occasion may arise or
as may be deemed  expedient.  No delay or omission  of Landlord to exercise  any
right or power  arising  from any default on the part of Tenant shall impair any
such right or power,  or shall be construed to be a waiver of any such  default,
or any future default, or an acquiescence  therein.  The acceptance of Base Rent
by Landlord with knowledge of default by Tenant hereunder shall not constitute a
waiver of such default.

         28.      Limited Recourse.  The liability of Landlord to Tenant for any
default  by  Landlord  under the terms of this  Lease  shall be  limited  to the
proceeds of sale on  execution  of the  interest of Landlord in the Premises and
Landlord shall not be personally liable for any deficiency, except that Landlord
shall remain  personally  liable to account to Tenant for any  Security  Deposit
hereunder.  The clause shall not be deemed to limit or deny any remedies,  which
Tenant  may have in the event of  default by  Landlord  hereunder,  which do not
involve the personal liability of Landlord.  The liability of Tenant to Landlord
for any  default by Tenant  under the terms of this Lease shall be united to the
Base Rent due for the remaining Term of Lease and Tenant shall not be personally
liable for any deficiency.

         29.      Quiet  Enjoyment.  If  Tenant  shall  pay the  Base  Rent  and
Additional  Rent when due and perform and observe all of the other covenants and
conditions  to be performed  and observed by it  hereunder,  Tenant shall at all
times  during the term  hereof have the  peaceable  and quiet  enjoyment  of the
Premises  without  interference  from Landlord or any person  lawfully  claiming
through Landlord, subject, however, to the terms of this Lease Agreement and any
mortgages or deeds of trust provided for in Paragraph 31 hereof.

         30.      Estoppel Agreement. Within ten (10) days after written request
thereof by the Landlord or any  mortgagee or trustee under a mortgage or deed of
trust covering the Premises, Tenant shall deliver in recordable form a statement
to any mortgagee,  trustee or other transferee,  or to Landlord,  certifying any
facts that are then true with respect to this Lease Agreement, including without
limitation (if such may be the case) that this Lease  Agreement is in full force
and effect,  that Tenant is in possession,  that Tenant commenced the payment of
Rent,  and  that  Tenant  claims  no  defense  or  set-off  to the due and  full
performance of its obligations under this Lease Agreement.

         31.      Subordination  and  Attornment;  Transfer.  Tenant agrees that
this Lease shall be subject to and subordinate to any mortgages,  deeds of trust
or any ground Lease now or hereafter placed upon the Premises,  the Building, or
land upon which the Premises is located and to all modifications thereto, and to
all present and future  advances  made with respect to any such mortgage or deed
of trust.  Tenant agrees to attorn to the  mortgagee,  trustee,  or  beneficiary
under such mortgage or deed of trust, and to the purchaser at a sale pursuant to
the foreclosure  thereof, and to the lessor in the event of a termination of any
such ground Lease.

<PAGE>

                  In the event of the transfer and assignment by Landlord of its
interest in this Lease and in the Building  containing  the Premises to a person
expressly  assuming  Landlord's  obligations  under this Lease,  Landlord  shall
thereby be released from any further obligations hereunder, and Tenant agrees to
look solely to such  successor in interest of the Landlord  for  performance  of
such obligations.  Any Security Deposit given by Tenant to secure performance of
Tenant's  obligations  hereunder may be assigned and  transferred by Landlord to
such  successor in interest,  and Landlord  shall  thereby be  discharged of any
further obligation relating thereto.

         32.      Jurisdiction  and Venue.  Tenant  expressly  consents that the
Courts of the State of South Carolina shall have  jurisdiction  over any dispute
arising out of this Lease or the Premises  between  Landlord and Tenant  (unless
Landlord  exercises  its rights to  arbitration),  that the County of Charleston
shall be the proper place of venue for any such proceeding and Tenant  expressly
waives any rights to object to same.

         33.      Notices.  All  notices  provided  for in this Lease  Agreement
shall be in writing and shall be deemed to be given when sent by  registered  or
certified mail,  return receipt  requested,  postage  prepaid,  and addressed as
follows:

                             If to Landlord:
                             SMD PROPERTIES
                             960 BERRY SHOALS ROAD
                             DUNCAN, South Carolina 29334

                             If to Tenant:
                             CHARLESTON GOLD AND DIAMOND EXCHANGE, INC.
                             503 Wando Park Boulevard
                             Mt. Pleasant,  South Carolina 29464

                  Notices  shall  also be sent to the  holder or  holders of any
mortgage or deed of trust  covering  the Premises at such address as such holder
or holders may have given by notice as herein provided.  Either party hereto, or
any such holder, may from time to time, by notice as herein provided, designated
a different address to which notices to it shall be sent.

         34.      Governing  Law.  This Lease  Agreement  shall be governed  by,
construed  and  enforced  in  accordance  with  the  laws of the  State of South
Carolina.

         35.      Nature  and  Extent  of  Agreement.   This  Lease   Agreement,
including the exhibits attached hereto,  contains the complete agreement between
the parties regarding the terms and conditions of the Lease of the Premises, and
there are no oral or written conditions, terms, warranties,  understandings,  or
other agreements  pertaining  thereto which have not been  incorporated  herein.
This Lease Agreement may be modified only by written instrument duly executed by
either parties or their respective successors in interest.

         36.      Holding  Over.  This  Lease  expires  at the  end of the  Term
defined  herein,  but it is expressly  understood  that if Tenant holds over for
another month at the end of said Term for any purpose, and Landlord accepts Rent
for said month,  such  acceptance  shall operate as a renewal of the tenancy for
another month and for each  additional  month for which  Landlord  accepts Rent.
Should Landlord require possession of the Premises,  it shall give Tenant thirty
(30) days to vacate the said Premises during such hold over period.  The monthly
Base Rent during the hold over period shall be at fifty percent  (50%)  increase
above the  monthly  Base  Rent paid for the last  month of the term as set forth
herein.

         37.      Attorney's  Fees. If Tenant defaults in the performance of any
of the  covenants of this Lease and by reason  thereof the Landlord  employs the
service of an attorney to enforce  performance by Tenant, or to evict Tenant, to
collect monies due by Tenant, or to perform any service based upon said default,
then  the  Tenant  shall  pay a  reasonable  attorney's  fee and all  reasonable
expenses and costs incurred by Landlord pertaining thereto.

                  If  Landlord  defaults  in  the  performance  of  any  of  the
covenants of this Lease and by reason  thereof the Tenant employs the service of
an  attorney  to enforce  performance  by  Landlord,  to  collect  monies due by
Landlord,  or to perform any service based upon said default,  then the Landlord
shall pay a  reasonable  attorney's  fee and all  reasonable  expenses and costs
incurred by Tenant pertaining thereto.

<PAGE>

         38. Non-Waiver. The failure of Landlord or Tenant to insist upon strict
performance of any of the terms,  conditions  and covenants  herein shall not be
deemed to be a waiver of any rights or  remedies  that  Landlord  and Tenant may
have,  and shall not be deemed a waiver of any  subsequent  breach or default in
the terms,  conditions and covenants herein contained except as may be expressly
waived in writing.

         39.      Non-Easement. It is understood and agreed that this Lease does
not grant any rights to light and air over property  adjoining the land on which
the Premises is situated.

         40.      No  Representations  by  Landlord.  Tenant  acknowledges  that
neither  Landlord  nor any broker,  agent or  employee of Landlord  has made any
representations  or promises with respect to the Premises or the Building except
as herein expressly set forth in the Lease Agreement, and any attachments hereto
or incorporated by reference, and no rights,  privileges,  easements or licenses
are acquired by Tenant except as herein expressly set forth.

         41.      Time is of the Essence.  It is understood  and agreed  between
the  parties  hereto  that  time  is of the  essence  in all  of the  terms  and
provisions of this Lease.

         42.      Caption and Titles.  The captions and titles  appearing within
this Lease are for  reference  only and shall not be  considered  a part of this
Lease or in any way modify, amend, or affect the provisions thereof.

         43.      Grammatical  Changes.  The proper grammatical changes shall be
understood  and apply where  necessary to designate  the plural  rather than the
singular and the masculine or feminine gender.

         44.      Recordation and Documentary  Stamp Taxes. This Lease shall not
be recorded,  but a short form referring to this Lease,  describing the Premises
setting  forth the term  thereof may be recorded  by either  party.  The cost of
recording shall be paid by the recording party.

         45.      No Partnership or Joint Venture. Landlord does not, in any way
or for any purpose,  become a partner of Tenant in the conduct of its  business,
or otherwise, or a joint venturer or a member of a joint enterprise with Tenant.

         46.      Binding  Agreement.  The conditions,  covenants and agreements
contained  in this Lease  shall be binding  upon and inure to the benefit of the
parties hereto and their respective successors, heirs, executors, administrators
and assigns except as otherwise provided in this Agreement.  No rights, however,
shall inure to the benefit of any assignee of Tenant  unless the  assignment  to
such  assignee has been approved in accordance  with the  provisions  set out in
this Lease.

         47.      Brokerage:  Tenant  represents  and warrants to Landlord  that
they have not dealt with any broker or finder in connection with the transaction
contemplated by this Lease other than ReMax Realty, who represents the Landlord.
Landlord  agrees  to pay to  Broker  the  commission  earned  by  reason of this
transaction  as agreed upon between  Landlord and Broker.  Tenant shall  defend,
indemnify and hold harmless  Landlord and  Landlord's  Agent against any and all
expense,  cost, damage or liability  (including without limitation,  court costs
and reasonable  attorney's fees, at trial and appeal)  resulting from the claims
of any other brokers, or those claiming to have performed services in the nature
of brokerage or finding services.

         48.      Authority. If Tenant is a corporation,  general partnership or
limited partnership, each person executing this Lease on behalf of Tenant hereby
covenants  and warrants  that Tenant is a duly  organized  corporation,  general
partnership or limited  partnership (as the case my be) qualified to do business
in the State of South  Carolina,  that it has full  authority to enter into this
Lease  and that  each  person  executing  this  Lease on  behalf  of  Tenant  is
authorized to do so.

<PAGE>

         49.      Interpretation Presumption.  The Landlord and Tenant expressly
agree  that in the  event of a dispute  concerning  the  interpretation  of this
Agreement,  each party hereby  waives the doctrine  that an ambiguity  should be
interpreted against the party who drafted the document.

         50.      No Limitation of Rights and Remedies.  All rights and remedies
of Landlord and Tenant herein  enumerated  shall be cumulative  and shall not be
construed to exclude any other remedies allowed at law or in equity.

         51.      Accord  and  Satisfaction.  No payment by Tenant or receipt by
Landlord of a lessor amount than the Base Rent herein  stipulated will be deemed
to be other  than on  account  of the  earliest  stipulated  rent nor  shall any
endorsement  or statement on any check or any letter  accompanying  any check or
payment of rent be deemed an accord and  satisfaction,  and  Landlord may accept
such check or payment  without  prejudice  to  Landlord's  right to recover  the
balance of such rent or pursue any other  remedy  provided  for in this Lease or
available at law or in equity.

         52.      Force Majeure.  In the event that either party hereto shall be
delayed or hindered in or  prevented  from the  performance  of any act required
hereunder  by  reason  of  strikes,  lockouts,  inability  to  procure  labor or
materials,  failure  of power,  restrictive  governmental  laws or  regulations,
riots,  war,  fire, or other casualty or other reason of a similar or dissimilar
nature beyond the reasonable control of the party delayed in performing work, or
doing acts required under the terms of this Lease, then performance of such acts
shall be excused for the period of delay and the period for the  performance  of
any such acts shall be extended  for a period  equivalent  to the period of such
delay.  After the commencement  date, the provisions of this paragraph shall not
operate to excuse  Tenant  from the prompt  payment of rent as  required by this
Lease and shall not extend the term of this Lease. Delays or failures to perform
resulting  from lack of funds shall not be deemed delays  beyond the  reasonable
control of a party.

         53.      Third Party Rights.  The rights and obligations  arising under
this  Lease are  personal  between  Landlord  and  Tenant  and such  rights  and
obligations  shall not be  enforceable by any third party.  Furthermore,  Tenant
recognizes  that it has no  third  party  rights  arising  out of any  agreement
between  Landlord  and any party other than Tenant  regardless  of any  benefits
accruing to Tenant by virtue of such agreement.

         54.      Option/Offer.  The Tenant  shall have an option to purchase as
per the terms and  conditions  specified  in the  AGREEMENT  TO BUY AND SELL and
attached  hereto as "A-2" Dated May 3rd, 2000 between SMD  Properties and Dallas
Gold and Silver  Exchange.  This option to purchase shall terminate ONE (1) YEAR
from the date of delivery of the Premises. If the above said option is exercised
all monies  received,  as security deposit shall apply towards the earnest money
deposit on the AGREEMENT TO BUY AND SELL.

         IN  WITNESS  WHEREOF,  the  parties  hereto  have  hereunto  set  their
respective hands and seals on the day and year first above written.

WITNESSES:                          Landlord:


________________________            By: ___________________________
As to Landlord
                                    Its: __________________________

                                    Dated: ________________________


                                    Tenant:

________________________            By: ___________________________
As to Tenant
                                    Its: __________________________

                                    Dated: ________________________


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<ARTICLE>                       5
<LEGEND>
</LEGEND>
<CIK>                           0000701719
<NAME>                          Dallas Gold & Silver Exchange, Inc.
<MULTIPLIER>                                                    1,000
<CURRENCY>                                                 US DOLLARS

<S>                             <C>
<PERIOD-TYPE>                   12-MOS
<FISCAL-YEAR-END>                                         DEC-31-2000
<PERIOD-START>                                            JAN-01-2000
<PERIOD-END>                                              DEC-30-2000
<EXCHANGE-RATE>                                                     1
<CASH>                                                          1,362
<SECURITIES>                                                        0
<RECEIVABLES>                                                     935
<ALLOWANCES>                                                        0
<INVENTORY>                                                     7,087
<CURRENT-ASSETS>                                                9,527
<PP&E>                                                          2,195
<DEPRECIATION>                                                    803
<TOTAL-ASSETS>                                                 13,413
<CURRENT-LIABILITIES>                                           7,472
<BONDS>                                                           950
<COMMON>                                                           49
<PREFERRED-MANDATORY>                                               0
<PREFERRED>                                                         0
<OTHER-SE>                                                      4,943
<TOTAL-LIABILITY-AND-EQUITY>                                   13,413
<SALES>                                                        24,998
<TOTAL-REVENUES>                                               25,800
<CGS>                                                          18,835
<TOTAL-COSTS>                                                  24,805
<OTHER-EXPENSES>                                                    0
<LOSS-PROVISION>                                                    0
<INTEREST-EXPENSE>                                                497
<INCOME-PRETAX>                                                   498
<INCOME-TAX>                                                      246
<INCOME-CONTINUING>                                               252
<DISCONTINUED>                                                      0
<EXTRAORDINARY>                                                     0
<CHANGES>                                                           0
<NET-INCOME>                                                      252
<EPS-BASIC>                                                       .05
<EPS-DILUTED>                                                     .05



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