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<SEC-DOCUMENT>0001010549-04-000185.txt : 20040326
<SEC-HEADER>0001010549-04-000185.hdr.sgml : 20040326
<ACCEPTANCE-DATETIME>20040326112213
ACCESSION NUMBER:		0001010549-04-000185
CONFORMED SUBMISSION TYPE:	10KSB
PUBLIC DOCUMENT COUNT:		5
CONFORMED PERIOD OF REPORT:	20031231
FILED AS OF DATE:		20040326

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			DGSE COMPANIES INC
		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:		1934 Act
		SEC FILE NUMBER:	001-11048
		FILM NUMBER:		04691713

	BUSINESS ADDRESS:	
		STREET 1:		2817 FOREST LANE
		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:	DALLAS GOLD & SILVER EXCHANGE INC /NV/
		DATE OF NAME CHANGE:	19930114

	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>dgse10ksb123103.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, 2003         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
                       ----------------

                              DGSE Companies, Inc.
                 (formerly Dallas Gold & Silver Exchange, Inc.)
                 ----------------------------------------------
                         (Name of small business issuer)

          NEVADA                                            88-0097334
- ------------------------------                    ------------------------------
State or other jurisdiction of                   (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:
Common Stock,  $ .01 par value
- ------------------------------
(Title of Class)

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, 2003, total revenues were $ 26,209,342.

As of March 3, 2004,  the  aggregate  market  value of the voting  stock held by
non-affiliates of the registrant was $ 9,798,705

As of March 3, 2004, 4,913,290 shares of Common Stock were outstanding.

Documents  incorporated  by reference:  Portions of the proxy  statement for the
annual  shareholders'  meeting to be held June 16,  2004,  are  incorporated  by
reference into Part III.

<PAGE>

                                     PART I

ITEM 1.   DESCRIPTION OF BUSINESS

DGSE  Companies,  Inc  (formerly  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.  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;  USBullionExchange.com;  FairchildWatches.com;and
SilvermanLiquidations.com.

The Company  also  provides  consulting  and  liquidation  services  through its
wholly-owned  subsidiary,  Silverman  Consultants,  Inc.("SCI").  SCI's  primary
business  is  conducting  liquidation,   consolidation,   promotional  or  other
large-scale retail sales for jewelry stores and other types of retailers.

The Company operates four 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.  The  Company  also  offers
customers  current  quotations  for precious  metals prices on its internet site
USBullionExchange.com.   FairchildWatches.com  provides  wholesale  customers  a
virtual  catalog of the  Company's  fine watch  inventory.  Over 7,500 items are
available for sale on the  Company's  internet  sites  including $ 10,000,000 in
diamonds. SilvermanLiquidations.com is an information site for SCI.

The Company's wholly-owned  subsidiary,  National Jewelry Exchange, Inc. ("NJE")
operates  a pawn  shop  in  Carrollton,  Texas.  The  Company  has  focused  the
operations of NJE on sales and pawn loans of jewelry products.


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.

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 25.4% of
total  revenues  for 2003 and 19.2% in 2002  (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 2003 or 2002.


                                       2
<PAGE>

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

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

The Company  makes pawn loans through its  headquarter  facility and through its
National Jewelry Exchange, Inc. subsidiary. 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 are  transferred to inventory.
Revenues  from  the  Company's  pawn  loans  have  grown  at each  location  and
management  believes this activity to be a good source of jewelry  inventory and
provides an excellent return on investment.

The Company'S  primary presence on the Internet is through its website dgse.com.
This web site serves as a Corporate  information  site, a retail store where the
Company  sells its products and an auction site for jewelry and other  products.
The Internet  store  functions  as a  CyberCashTM  authorized  site which allows
customers to purchase  products  automatically  and  securely on line.  Auctions
close a least five times per week.

The    Company's    internet    activities    also    includes   a   web   site,
USBullionExchange.com,  which  allows  customers  unlimited  access  to  current
quotations  for prices on  approximately  200 precious  metals,  coins and other
bullion related products.

Additional  sites  operated  by the  Company  include  Fairchildwatches.com  and
Silvermanconsultants.com.  FairchildWatches.com  provides wholesale  customers a
virtual catalog of the Company's fine watch inventory.  Silvermanconsultants.com
is an information site for SCI.

Liquidation Services
- --------------------

The  Company's  consulting  activities  are  offered  through  its  wholly-owned
subsidiary, SCI.

SCI's  primary  business  is  conducting   liquidation,   promotional  or  other
large-scale  retail sales for jewelry  stores and other types of retailers.  The
business  of SCI has a  history  extending  over 55 years  providing  consulting
services to over 4,500  retailers.  SCI typically  earns either a commission for
its services,  a participation in the sales activities or a combination of these
forms of compensation. In addition, SCI often supplies inventory to retailers in
order to  facilitate  sales.  SCI also  provides  appraisals  for  creditors and
merchant banking  services.  During 2003 SCI conducted  transactions for over 20
retailers and other parties.


                                       3
<PAGE>

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

All Company  activities rely heavily on local television,  radio and print media
advertising.  Marketing  activities  emphasize the  Company's  broad and unusual
array of  products  and  services  and the  attractiveness  of its  pricing  and
service.

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, 2003 or 2002.  Company backlogs for fabricated jewelry
products were also not significant as of December 31, 2003 and 2002.

Consulting  services  provided by SCI are marketed  directly through  referrals,
print advertising and direct marketing efforts.


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

The retail and  wholesale  jewelry  business  and the  consulting  business  are
seasonal. The Company realized 36.4% and 33.2% of its annual sales in the fourth
quarters of 2003 and 2002, 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 all of its  activities  by  offering  high
quality  products and services at prices  below that of its  competitors  and by
maintaining a staff of highly qualified employees.





                                       4
<PAGE>

Employees
- ---------

As of December 31, 2003, the Company employed 43 individuals,  all of which were
full time employees.


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 $ 503,219
as of December 31, 2003.

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  current monthly payments of $ 9,000. In November 1995, the Company
closed this store.  During July 2000 the Company  subleased  this facility for a
term ending on June 30, 2004 and receives  monthly rental payments in the amount
of $ 7,500.

The Company  leases a 2,400  square foot  facility  in  Carrollton,  Texas which
houses  National  Jewelry  Exchange.  The  lease  expires  on July 31,  2007 and
requires monthly lease payments in the amount of $ 1,456.

SCI 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 $ 15,300.

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.


                                     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 bid  quotations  as
reported by NASDAQ 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.


                                       5
<PAGE>

The following  quotations reflect  inter-dealer  prices without retail mark-ups,
mark-downs or commissions and may not reflect actual transactions.  High and low
bid quotations for the last two years were:

                                  2003                      2002

                           High          Low         High          Low
                           ----          ---         ----          ---

     First Quarter         3.040        1.150        3.650        1.800

     Second Quarter        3.040        1.120        2.550        1.500

     Third Quarter         1.400        1.150        1.650         .750

     Fourth Quarter        1.210        1.000        1.300         .910

On March 3, 2004,  the closing sales price for the Company's  common stock was $
3.220 and there were 754 shareholders of record.

Securities authorized for issuance under equity compensation plans.
- -------------------------------------------------------------------

The Company has granted options to certain officers, directors and key employees
to purchase shares of the Company's common stock. Each option vests according to
a schedule  designed by the board of  directors  of the  Company,  not to exceed
three years.  Each option  expires 180 days from the date of  termination of the
employee or director.  The exercise  price of each option is equal to the market
value of the  Company's  common stock on the date of grant.  These option grants
have not been approved by security holders.

The following table summarizes options outstanding as of December 31, 2003:

Plan         Number of            Weighted average    Number of securities
Category     securities to be     exercise price of   remaining available
             issued upon          outstanding         for future issuance
             exercise of options  options, warrants   under equity compensation
             warrants & rights    warrants & rights   plans
- -----------  -------------------  -----------------   -------------------------
Equity
Compensation
Plans Approved
By Security
Holders          None                 None                   None

Equity
Compensation
Plans Not
Approved By
Security
Holders         1,420,634              $ 2.09                None
            -------------------   -----------------   -------------------------
Total           1,420,634              $ 2.09                None
            ===================   =================   =========================





                                       6
<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.

Marketable equity securities have been categorized as available-for-sale and are
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.  Realized  gains and losses on the sale of securities are based on the
specific  identification  method.  During 2003  management  determined  that the
decline in the market value on its investments in marketable  equity  securities
was other than temporary,  and as a result these investment were written-down to
their fair value.  This write-down  resulted in a charge to 2003 earnings in the
amount of $ 1,134,950, net of income taxes, or $ .23 per share.

Controls and Procedures
- -----------------------

Under the supervision and with the  participation  of our management,  including
our  principal  executive  officer  and  principal  financial  officer,  we have
evaluated  the  effectiveness  of the design  and  operation  of our  disclosure
controls  and  procedures  within 90 days of the filing  date of this  quarterly
report,  and, based on their  evaluation,  our principal  executive  officer and
principal  financial  officer have  concluded that these controls and procedures
are  effective.  There are no  significant  changes in our internal  controls or
other factors that could  significantly  affect these controls subsequent to the
date of their  evaluation.  Disclosure  controls and procedures are our controls
and other procedures that are designed to ensure that information required to be
disclosed  by us in the reports that we file or submit under the Exchange Act is
recorded,  processed,  summarized and reported, within the time period specified
in the Securities and Exchange Commission's rules and forms. Disclosure controls
and procedures include, without limitation,  controls and procedures designed to
ensure that  information  required to be  disclosed by us in the reports that we
file under the Exchange Act is accumulated  and  communicated to our management,
including our principal  executive officer and principal  financial officer,  as
appropriate to allow timely decisions regarding required disclosure.


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

2003 vs 2002
- ------------
Sales increased by $ 4,189,538  (19.0%) in 2003. This increase was the result of
a $ 4,186,087 increase in sales from the jewelry segment.  The increase in sales
from the jewelry  segment  was the result of a $ 2,300,065  increase in precious


                                       7
<PAGE>

metals sales and a $ 1,886,022  increase in jewelry sales.  These increases were
the  result  of  a  nation-wide   improvement  in  the  retail  environment  and
significant  price increases in the precious metals products.  Pawn service fees
increase  by $  25,537  (16.3%)  in  2003  due  to an  increase  in  pawn  loans
outstanding  during the year. Cost of goods increased by $ 3,763,448 during 2003
primarily due to the increase in sales  volume.  Gross  margins  decreased  from
23.9% in 2002 to 21.6% in 2003 due to the increase in the precious  metals sales
volume.

Selling,  general and administrative  expenses decreased by $ 85,114 or 1.9% due
to a reduction  in payroll  and  related  cost.  Depreciation  and  amortization
decreased  by $  15,428  during  2003  due  to  certain  assets  becoming  fully
depreciated.  Other income in the amount of $ 401,853 during 2002 was the result
of retirement of debt at a discount.

During 2003  management  determined  that the decline in the market value of its
investments in marketable equity  securities was other than temporary,  and as a
result these investment were  written-down to their fair value.  This write-down
resulted  in a charge to 2003  earnings  in the  amount of $  1,134,950,  net of
income taxes, or $ .23 per share.

Loss  from  discontinued  operations  during  2003  and 2002 in the  amounts  of
$104,350 and $ 86,437 net of income taxes is the combined  results of operations
of two subsidiaries of the Company, DLS Financial Services,  Inc. and eye media,
inc.  These  entities have not solicited or received any new clients  during the
past two years and do not anticipate doing so in the future.

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

The Company's  short-term debt,  including current  maturities of long-term debt
totaled $ 738,861 as of December  31,  2003.  During  November  2002 the Company
re-financed $ 2,700,000 of its  outstanding  bank debt. This new credit facility
in the amount of $ 3,000,000 allowed the Company to retire a portion of its debt
at a discount of $ 401,853, extend the maturity of its bank debt to January 2004
and provided the Company with additional  working  capital.  In January 2004 The
Company renewed its credit facility for an additional one year term.

Management of the Company  expects capital  expenditures to total  approximately
$100,000 during 2004. It is anticipated that these  expenditures  will be funded
from working capital.

The ability of the Company to finance its operations  and working  capital needs
are dependent upon management's ability to negotiate extended terms or refinance
its short-term debt. The Company has historically renewed,  extended or replaced
short-term  debt as it matures and  management  believes that it will be able to
continue to do so in the near future.

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
unforeseen working capital requirements.



                                       8
<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.

Critical Accounting Policies
- ----------------------------

Our  reported  results are  impacted by the  application  of certain  accounting
policies that require us to make subjective  estimates or judgments.  Changes in
estimates and judgments  could  significantly  affect our results of operations,
financial  condition  and cash  flows  in  future  years.  We  believe  that the
following critical accounting policies are affected by significant judgments and
estimates used in the preparation of its consolidated financial statements:

Effective January 1, 2002, the Company adopted Statement of Financial Accounting
Standards  (SFAS) No. 141,  Business  Combinations,  SFAS No. 142,  Goodwill and
Intangible  Assets,  and SFAS No. 144,  Accounting for Impairment or Disposal of
Long-Lived Assets.

SFAS No. 141, SFAS No. 142 and SFAS No. 144

Major provisions of these statements and their effective dates are as follows:

o        intangible  assets acquired in a business  combination must be recorded
separately  from goodwill if they arise from  contractual  or other legal rights
and are  separable  from  the  acquired  entity  and can be  sold,  transferred,
licensed,  rented  or  exchanged,  either  individually  or as part of a related
contract, asset or liability;

o        effective  January 1, 2002,  all  previously  recognized  goodwill  and
intangible   assets  with  indefinite   lives  was  no  longer  be  subject  to
amortization;

o        effective  January  1,  2002,   goodwill  and  intangible  assets  with
indefinite  lives was tested for  impairment  annually or  whenever  there is an
impairment indicator; and

o        all acquired  goodwill must be assigned to reporting units for purposes
of impairment testing and segment reporting

The Company  amortized  goodwill and intangible assets acquired prior to July 1,
2001 until December 31, 2001.  Beginning  January 1, 2002,  quarterly and annual
goodwill  amortization  is no longer  recognized.  The Company  completed a fair
value based  impairment test of goodwill as of December 31, 2003. In the opinion
of management  this test indicated that the goodwill and  intangibles  assets of
the Company are not impaired.


                                       9
<PAGE>

The Company  performs an annual  evaluation  for the  impairment  of  Long-Lived
Assets,  including goodwill, based on expectations of non-discounted future cash
flows compared to the carrying value of the subsidiary.  The Company's cash flow
estimates are based on historical cash flows,  as well as future  projected cash
flows.  Management believes that its procedures for estimating gross future cash
flows are reasonable and consistent with current market conditions.

Goodwill consists of the following:

                               Jewelry           Liquidation
                               Segment            Segment              Total
                           ---------------     --------------     --------------



Goodwill                   $       837,117     $      314,003     $    1,151,120
                           ===============     ==============     ==============


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.

The following table  illustrates the effect on net income and earnings per share
if the  Company  had  applied  the fair  value  recognition  provisions  of FASB
Statement No. 123,  Accounting  for  Stock-Based  Compensation,  to  stock-based
employee compensation.

                                                      Year Ended December 31,
                                                   ----------------------------
                                                       2003             2002
                                                   -----------      -----------

         Net income (loss), as reported            $  (524,140)     $   429,311
         Deduct: Total stock-based employee
         compensation expense determined under
         fair value based method for all awards,
         net of related tax effects                       --           (236,611)
                                                   -----------      -----------
         Pro forma net income (loss)               $  (524,140)     $   192,700
                                                   ===========      ===========
         Earnings per share:
             Basic - as reported                          (.11)             .09
             Basic - pro forma                            (.11)             .04
             Diluted - as reported                        (.11)             .09
             Diluted - pro forma                          (.11)             .04



                                       10
<PAGE>

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 96%,
risk-free  rate of 3.9 to 6.6%,  no dividend  yield and expected  life of 5 to 8
years.


Impairment of  Investment  Securities  results in a charge to operations  when a
market decline below cost is other than temporary.  Management regularly reviews
each  investment  security  for  impairment  based on criteria  that include the
extent to which cost exceeds  market value,  the duration of that market decline
and the financial health of and specific prospects for the issuer. The Company's
investment  securities  amounted to  approximately  $243,446 as of December  31,
2003. Gross unrealized losses were $1,684,845 at December 31, 2003.


Inventory Obsolescence Accruals may be required based on management's estimation
of obsolescence or unmarketable  inventory,  in order to write-down inventory to
its estimated net realizable  value based upon  assumptions  about future demand
and market conditions. If actual market conditions are less favorable than those
projected by management, inventory write-downs may be required.


ITEM 7.  FINANCIAL STATEMENTS

(a)      Financial Statements (see pages 16 - 34 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 the Company'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 the Company'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.





                                       11
<PAGE>

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information  contained in the Company'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.


ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information  contained in the Company'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 AND REPORTS ON FORM 8-K

(a)      Exhibits:

         10.1     Loan and  Security  Agreement  dated  November 22, 2002 by and
                  between First American Bank, SSB and DGSE Companies, Inc.

         21       List of subsidiaries
                    DGSE Corporation
                    DLS Financial Services, Inc.
                    eye media, inc.
                    National Jewelry Exchange, Inc.
                    Silverman Consultants, Inc.
                    Charleston Gold And Diamond Exchange, Inc.

         31.1     Certificate  of L.S.  Smith  pursuant  to Section  3026 of the
                  Sarbanes-Oxley Act of 2002, Chief Executive Officer.

         31.2     Certificate  of John  Benson  pursuant  to Section  302 of the
                  Sarbanes-Oxley Act of 2002, Chief Financial Officer .

         32.1     Certificate  of L.S.  Smith  pursuant  to  Section  906 of the
                  Sarbanes-Oxley Act of 2002, Chief Executive Officer.

         32.2     Certificate  of John  Benson  pursuant  to Section  906 of the
                  Sarbanes-Oxley Act of 2002, Chief Financial Officer.

The  following  exhibits are  incorporated  by reference to the  Company's  Form
10-KSB dated March 21, 2001:

         10.1     EXHIBIT  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:


                                       12
<PAGE>

         10.2     EXHIBIT 10.2 - 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.

         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, 1994:

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



                                       13
<PAGE>

         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


ITEM 14. Controls and Procedures

Under the supervision and with the  participation  of our management,  including
our  principal  executive  officer  and  principal  financial  officer,  we have
evaluated  the  effectiveness  of the design  and  operation  of our  disclosure
controls and procedures within 90 days of the filing date of this annual report,
and, based on their  evaluation,  our principal  executive officer and principal
financial  officer  have  concluded  that  these  controls  and  procedures  are
effective.  There are no significant  changes in our internal  controls or other
factors that could significantly affect these controls subsequent to the date of
their evaluation.  Disclosure controls and procedures are our controls and other
procedures that are designed to ensure that information required to be disclosed
by us in the reports  that we file or submit under the Exchange Act is recorded,
processed,  summarized  and  reported,  within the time period  specified in the
Securities and Exchange  Commission's rules and forms.  Disclosure  controls and
procedures  include,  without  limitation,  controls and procedures  designed to
ensure that  information  required to be  disclosed by us in the reports that we
file under the Exchange Act is accumulated  and  communicated to our management,
including our principal  executive officer and principal  financial officer,  as
appropriate to allow timely decisions regarding required disclosure.



























                                       14
<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.

DGSE Companies, Inc.


By:/s/ L. S. Smith                          Dated: March 24, 2004
   -------------------------
   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 24, 2004
   ------------------------------
   L.S Smith
   Chairman of the Board,
   Chief Executive Officer and
   Secretary


By:/s/ W. H. Oyster                         Dated: March 24, 2004
   ------------------------------
   W. H. Oyster
   Director, President and
   Chief Operating Officer


By:/s/ John Benson                          Dated: March 24, 2004
   ------------------------------
   John Benson
   Director and Chief Financial
   Officer
   (Principal Accounting Officer)

By /s/ William P. Cordeiro                  Dated: March 24, 2004
   ------------------------------
    Director

By:/s/ James Walsh                          Dated: March 24, 2004
   ------------------------------
   Director







                                       15
<PAGE>

               Report of Independent Certified Public Accountants
               --------------------------------------------------


Board of Directors and Shareholders
DGSE Companies, Inc. and Subsidiaries

We have audited the accompanying  consolidated  balance sheet of DGSE Companies,
Inc. and  Subsidiaries  as of December 31,  2003,  and the related  consolidated
statements of  operations,  shareholders'  equity,  and cash flows for the years
ended December 31, 2003 and 2002. These  consolidated  financial  statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated 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 audits to obtain reasonable assurance about whether the consolidated
financial  statements  are free of  material  misstatement.  An  audit  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  consolidated  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 consolidated  financial statements referred to above present
fairly, in all material  respects,  the consolidated  financial position of DGSE
Companies,  Inc. and  Subsidiaries as of December 31, 2003, and the consolidated
results of their  operations  and their cash flows for the years ended  December
31, 2003 and 2002, in conformity with accounting  principles  generally accepted
in the United States of America.




                                CF & Co., L.L.P.
Dallas, Texas
March 22, 2004












                                      F-1
<PAGE>

                      DGSE COMPANIES, INC. AND SUBSIDIARIES
                      -------------------------------------
                           Consolidated Balance Sheet
                                December 31, 2003

                                     ASSETS
                                     ------
Current assets:
Cash and cash equivalents                                          $    735,293
Trade receivables                                                       774,586
Other receivables                                                       204,430
Inventories                                                           6,673,865
Prepaid expenses                                                        149,277
                                                                   ------------
Total current assets                                                  8,537,451

Marketable securities - available for sale                              243,446
Property and equipment, net of accumulated depreciation                 989,966
Goodwill                                                              1,151,120
Other assets                                                            149,546
                                                                   ------------

                                                                   $ 11,071,529
                                                                   ============

                      LIABILITIES AND SHAREHOLDERS' EQUITY
                      ------------------------------------

Current liabilities:
Notes payable                                                      $    541,546
Current maturities of long-term debt                                    197,315
Accounts payable - trade                                                859,269
Accrued expenses                                                        705,756
Customer deposits                                                       150,088
Accrued income taxes                                                    512,991
                                                                   ------------
Total current liabilities                                             2,966,965

Long-term debt, less current maturities                               2,719,482
Deferred income taxes - long-term                                        22,743
                                                                   ------------

Total liabilities                                                     5,709,190
                                                                   ------------

Shareholders' equity:
Common stock, $.01 par value; authorized 10,000,000
shares; issued and outstanding 4,913,290                                 49,133
Additional paid-in capital                                            5,708,760
Retained earnings (accumulated deficit)                                (395,554)
                                                                   ------------
Total shareholders' equity                                            5,362,339
                                                                   ------------

                                                                   $ 11,071,529
                                                                   ============

                                      F-2

<PAGE>

                      DGSE COMPANIES, INC. AND SUBSIDIARIES
                      -------------------------------------
                      Consolidated Statements of Operations
                        For the Years Ended December 31,

                                                       2003            2002
                                                   ------------    ------------
Revenues
Sales revenue                                      $ 26,027,514    $ 21,863,513
Pawn service fees                                       181,828         156,291
                                                   ------------    ------------
                                                     26,209,342      22,019,804
                                                   ------------    ------------

Costs and expenses:
Cost of goods sold                                   20,394,019      16,630,571
Selling, general and administrative expenses          4,512,723       4,597,837
Depreciation and amortization                           160,131         179,419
                                                   ------------    ------------

                                                     25,066,873      21,407,827
                                                   ------------    ------------

Operating income (loss)                               1,142,469         611,977
                                                   ------------    ------------

Other income (expense):
Unrealized loss on investments                       (1,634,845)           --
Other income                                               --           401,849
Interest expense                                       (268,344)       (270,025)
                                                   ------------    ------------

Total other income (expense)                         (1,903,189)        131,824

Income (loss) before income taxes                      (760,720)        743,801
Income tax expense (benefit)                           (340,930)        228,053
                                                   ------------    ------------

Income (loss) from continuing operations               (419,790)        515,748

Loss from discontinued operations, net of
income tax benefit                                     (104,350)        (86,437)
                                                   ------------    ------------
Net income (loss)                                  $   (524,140)   $    429,311
                                                   ============    ============

Earnings (loss) per common share:
Basic and diluted
From continuing operations                         $      (0.09)   $       0.11
From discontinued operations                              (0.02)          (0.02)
                                                   ------------    ------------
                                                   $      (0.11)   $       0.09
                                                   ============    ============

Weighted average number of common shares:
Basic                                                 4,913,290       4,913,628
                                                   ============    ============
Diluted                                               4,913,290       4,916,878
                                                   ============    ============


                                      F-3
<PAGE>
<TABLE>
<CAPTION>

                      DGSE COMPANIES, INC. AND SUBSIDIARIES
                      -------------------------------------
                 Consolidated Statements of Shareholders' Equity
                        For the Years Ended December 31,


                                                                Common Stock               Additional
                                                       ----------------------------         Paid-In
                                                           Shares           Amount          Capital
                                                       -------------    -------------    -------------
<S>                                                    <C>              <C>              <C>
Balances at January 1, 2002                                4,913,290    $      49,133    $   5,708,301

Net income                                                      --               --               --

Other comprehensive income (loss):
Loss on marketable securities arising during the
year, net of tax                                                --               --               --
Reclassification adjustment                                     --               --               --
                                                       -------------    -------------    -------------
Unrealized loss on marketable securities, net of tax            --               --               --
                                                       -------------    -------------    -------------

Purchase and retirement of common shares                        (500)              (5)            (606)

Common stock issued                                              500                5            1,065
                                                       -------------    -------------    -------------

Balances at December 31, 2002                              4,913,290           49,133        5,708,760

Net income (loss)                                               --               --               --

Other comprehensive income (loss):
Gain on marketable securities arising during the
year, net of tax                                                --               --               --
Reclassification adjustment                                     --               --               --
                                                       -------------    -------------    -------------
Unrealized loss on marketable securities, net of tax            --               --               --
                                                       -------------    -------------    -------------

Balances at December 31, 2003                              4,913,290    $      49,133    $   5,708,760
                                                       =============    =============    =============

                                                                          Retained
                                                          Earnings          Other            Total
                                                        (Accumulated    Comprehensive    Shareholders'
                                                          Deficit)      Income (Loss)       Equity
                                                       -------------    -------------    -------------

Balances at January 1, 2002                            $    (300,725)   $    (987,277)   $   4,469,432

Net income                                                   429,311             --            429,311

Other comprehensive income (loss):
Loss on marketable securities arising during the
year, net of tax                                                --           (161,878)        (161,878)
Reclassification adjustment                                     --             14,205           14,205
                                                       -------------    -------------    -------------
Unrealized loss on marketable securities, net of tax            --           (147,673)        (147,673)
                                                       -------------    -------------    -------------

Purchase and retirement of common shares                        --               --               (611)

Common stock issued                                             --               --              1,070
                                                       -------------    -------------    -------------

Balances at December 31, 2002                                128,586       (1,134,950)       4,751,529

Net income (loss)                                           (524,140)            --           (524,140)

Other comprehensive income (loss):
Gain on marketable securities arising during the
year, net of tax                                                --             60,413           60,413
Reclassification adjustment                                     --          1,074,537        1,074,537
                                                       -------------    -------------    -------------
Unrealized loss on marketable securities, net of tax            --          1,134,950        1,134,950
                                                       -------------    -------------    -------------

Balances at December 31, 2003                          $    (395,554)   $        --      $   5,362,339
                                                       =============    =============    =============

</TABLE>

                                      F-4
<PAGE>
<TABLE>
<CAPTION>

                      DGSE COMPANIES, INC. AND SUBSIDIARIES
                      -------------------------------------
                      Consolidated Statements of Cash Flows
                        For the Years Ended December 31,

                                                            2003           2002
                                                        -----------    -----------
<S>                                                     <C>            <C>
Cash flows from operating activities:
Net income (loss)                                       $  (524,140)   $   429,311
Adjustments to reconcile net income (loss) to net
cash provided (used) by operating activities
Depreciation and amortization                               187,558        202,986
Deferred income taxes                                      (451,081)        80,815
Accretion of debt discount                                     --           12,132
Loss on disposal of assets in discontinued operations        31,072           --
Loss on sale of marketable securities                        26,998         14,205
Unrealized loss on marketable securities                  1,634,845           --
Change in operating assets and liabilities
Trade receivables                                            18,004       (148,257)
Other receivables                                          (204,430)          --
Prepaid assets                                                3,577        (27,456)
Inventories                                                (338,123)       (38,423)
Accounts payable and accrued expenses                       355,653       (344,300)
Income taxes payable                                         27,538        164,772
Accrued compensation                                        (15,437)       (14,810)
                                                        -----------    -----------
Net cash provided (used) by operating activities            752,034        330,975
                                                        -----------    -----------

Cash flows from investing activities:
Proceeds from sale of marketable securities                  46,988          4,794
Purchases of property and equipment                         (34,464)       (25,024)
Purchases of investments                                    (48,989)          --
Additions to deposits                                        (6,344)       (15,264)
                                                        -----------    -----------
Net cash provided (used) by investing activities            (42,809)       (35,494)
                                                        -----------    -----------

Cash flows from financing activities:
Issuance of common stock                                       --            1,070
Proceeds from indebtedness                                  737,590      2,460,555
Repayment of indebtedness                                (1,209,930)    (3,321,147)
Purchase and retirement of common stock                        --             (611)
                                                        -----------    -----------
Net cash provided (used) by financing activities           (472,340)      (860,133)
                                                        -----------    -----------

Net increase (decrease) in cash and cash equivalents        236,885       (564,652)
Cash and cash equivalents at beginning of year              498,408      1,063,060
                                                        -----------    -----------

Cash and cash equivalents at end of year                $   735,293    $   498,408
                                                        ===========    ===========


                                      F-5

<PAGE>

                      DGSE COMPANIES, INC. AND SUBSIDIARIES
                      -------------------------------------
                      Consolidated Statements of Cash Flows
                        For the Years Ended December 31,

                                                            2003           2002
                                                        -----------    -----------

Cash paid during the year for:
Interest                                                $   249,088    $   328,732
                                                        ===========    ===========

Income taxes                                            $   246,212    $      --
                                                        ===========    ===========
</TABLE>



























                                      F-6
<PAGE>

                      DGSE COMPANIES, INC. AND SUBSIDIARIES
                      -------------------------------------
                   Notes to Consolidated Financial Statements
                           December 31, 2003 and 2002

Note 1 -Summary of Significant Accounting Policies
        ------------------------------------------

         Nature of Operations

         DGSE Companies, Inc. and its subsidiaries (the "Company"), sell jewelry
         and bullion products to both retail and wholesale customers  throughout
         the  United  States  through  its  facilities  in  Dallas,  Texas,  Mt.
         Pleasant,  South Carolina, 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 have been prepared in accordance
         with accounting  principles  generally accepted in the United States of
         America and 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 Equity Securities

         Marketable    equity    securities    have    been    categorized    as
         available-for-sale  and  carried at fair  value.  Unrealized  gains and
         losses for available-for-sale securities are included as a component of
         shareholders'  equity  net of tax until  realized.  Realized  gains and
         losses  on  the  sale  of   securities   are  based  on  the   specific
         identification  method. The Company continually reviews its investments
         to  determine  whether a decline in fair value  below the cost basis is
         other than temporary. If the decline in the fair values is judged to be
         other than temporary, the cost basis of the security is written down to
         fair  value  and  the  amount  of the  write-down  is  included  in the
         consolidated statements of operations.

         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).





                                      F-7
<PAGE>

                      DGSE COMPANIES, INC. AND SUBSIDIARIES
                      -------------------------------------
                   Notes to Consolidated Financial Statements
                           December 31, 2003 and 2002

Note 1 - Summary of Significant Accounting Policies, continued
         ------------------------------------------

         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 the  life of the  lease.  Expenditures  for
         repairs and maintenance are charged to expense as incurred.

         Goodwill

         Effective  January 1, 2002, the Company adopted  Statement of Financial
         Accounting  Standards No. 142,  Goodwill and Other  Intangible  Assets.
         Under  that  pronouncement,  goodwill  is not  being  amortized  but is
         subject to periodic  tests to determine  the amount of  impairment,  if
         any, to be reflected during the period.

         Impairment of Long-Lived Assets

         The  Company  assesses  the  recoverability  of its  long-lived  assets
         (including  intangible  assets) based on their current and  anticipated
         future  undiscounted  cash flows.  An  impairment  occurs when the cash
         flows  (excluding  interest) do not exceed the  carrying  amount of the
         asset. The amount of the impairment loss is the difference  between the
         carrying amount of the asset and its estimated fair value.

         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
         consolidated  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 $589,689 and
         $541,079 for 2003 and 2002, respectively.




                                      F-8
<PAGE>

                      DGSE COMPANIES, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                           December 31, 2003 and 2002

Note 1 - Summary of Significant Accounting Policies, continued
         ------------------------------------------

         Accounts Receivable

         The Company records trade  receivables  when revenue is recognized.  No
         product has been  consigned to customers.  The Company's  allowance for
         doubtful  accounts is primarily  determined by review of specific trade
         receivables.  Those  accounts  that  are  doubtful  of  collection  are
         included in the allowance.  These  provisions are reviewed to determine
         the adequacy of the allowance for doubtful accounts.  Trade receivables
         are   charged   off  when  there  is   certainty   as  to  their  being
         uncollectible. Trade receivables are considered delinquent when payment
         has not been made within contract terms.

         Income Taxes

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

         Revenue Recognition

         Sales revenue consists of direct sales to customers for jewelry.  Sales
         are recognized when title and risk of loss have passed to the customer,
         which is at  point-of-sale  for jewelry.  Provisions  for discounts and
         rebates to customers and returns,  bad debts, and other adjustments are
         provided  in the period the  related  sales are  recorded.  Liquidation
         service  revenue  is  also  included  in  sales  and is  recognized  as
         inventory is sold during the respective  liquidation  sale.  Consulting
         service revenue is recognized when the services are performed.

         Pawn loans ("loans") are made with the collateral of tangible  personal
         property for one month with an automatic 60-day extension period.  Pawn
         service  charges are recorded at the time of  redemption at the greater
         of $15 or the  actual  interest  accrued  to  date.  If the loan is not
         repaid,  the  principal  amount  loaned  (or  the  fair  value  of  the
         collateral,  if lower)  becomes  the  carrying  value of the  forfeited
         collateral   ("inventories")   which  is  recovered   through  sale  to
         customers.

         As of December 31, 2003, based on subsequent  collections and operating
         history, management estimated no allowance for discounts,  returns, bad
         debts and other adjustments.





                                      F-9

<PAGE>

                      DGSE COMPANIES, INC. AND SUBSIDIARIES
                      -------------------------------------
                   Notes to Consolidated Financial Statements
                           December 31, 2003 and 2002

Note 1 - Summary of Significant Accounting Policies, continued
         ------------------------------------------

         Shipping and Handling Costs

         Shipping  and  handling  costs are  included  in  selling  general  and
         administrative expenses, and amounted to $84,445, and $100,194 for 2003
         and 2002, respectively.

         Earnings (Loss) 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.  During  2003,  stock  options  were not included in computing
         diluted earnings per share because their effect was antidilutive.

         Comprehensive Income

         The  Company  reports  all  changes  in  comprehensive  income  in  the
         consolidated   statements  of  changes  in  shareholders'   equity,  in
         accordance  with the  provisions  of Statement of Financial  Accounting
         Standards No. 130, Reporting Comprehensive Income.

         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.

         The following  table  illustrates the effect on net income and earnings
         per  share  if the  Company  had  applied  the fair  value  recognition
         provisions  of FASB  Statement  No.  123,  Accounting  for  Stock-Based
         Compensation, to stock-based employee compensation.

                                                       Years Ended December 31,
                                                          2003          2002
                                                       ----------    ----------
         Net income (loss), as reported                $ (524,140)   $  429,311

         Deduct:  Total stock-based  employee
         compensation expense determined under
         fair value  based  method for all  awards,
         net of related  tax effects                         --        (236,611)
                                                       ----------    ----------


         Pro forma net income (loss)                   $ (524,140)   $  192,700
                                                       ==========    ==========




                                      F-10
<PAGE>

                      DGSE COMPANIES, INC. AND SUBSIDIARIES
                      -------------------------------------
                   Notes to Consolidated Financial Statements
                           December 31, 2003 and 2002

Note 1 - Summary of Significant Accounting Policies, continued
         ------------------------------------------

         Stock-based Compensation, continued

                                                        Years Ended December 31,
                                                           2003          2002
                                                        ----------    ----------
         Earnings per share:
             Basic - as reported                              (.11)          .09
             Basic - pro forma                                (.11)          .04
             Diluted - as reported                            (.11)          .09
         Diluted - pro forma                                  (.11)          .04

         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 96%,  risk-free  rate of 3.9 to 6.6%, no dividend
         yield and expected life of 5 to 8 years.

         Use of Estimates

         The  preparation of financial  statements in conformity with accounting
         principles  generally accepted in the United States of America 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.

         New Accounting Pronouncements

         In April 2003, the Financial Accounting Standards Board ("FASB") issued
         Statement  of  Financial  Accounting  Standards  No. 149,  Amendment of
         Statement 133 on Derivative  Instruments and Hedging  Activities.  This
         statement amends and clarifies  financial  accounting and reporting for
         derivative   instruments,   including  certain  derivative  instruments
         embedded in other  contracts  and for hedging  activities.  The Company
         plans to adopt this  statement  as of its  effective  date and does not
         expect  that  the  adoption   will  have  a  material   impact  on  its
         consolidated result of operation or financial position.





                                      F-11
<PAGE>

                      DGSE COMPANIES, INC. AND SUBSIDIARIES
                      -------------------------------------
                   Notes to Consolidated Financial Statements
                           December 31, 2003 and 2002

Note 1 - Summary of Significant Accounting Policies, continued
         ------------------------------------------

         In  May  2003,  the  FASB  issued  Statement  of  Financial  Accounting
         Standards No. 150,  Accounting for Certain  Financial  Instruments with
         Characteristics   of  Both  Liabilities  and  Equity.   This  statement
         establishes standards for how to classify and measure certain financial
         instruments with  characteristics  of both liabilities and equity.  The
         Company plans to adopt this statement as of its effective date and does
         not  expect  that the  adoption  will  have a  material  impact  on its
         consolidated results of operations or financial position.

         In December  2003,  the FASB issued  Statement of Financial  Accounting
         Standards No. 132 (Revised)  Employers'  Disclosures about Pensions and
         Other Postretirement Benefits - an Amendment of FASB Statements No. 87,
         88,  and 106.  This  statement  revises  employers'  disclosures  about
         pension  plans and other  post-retirement  benefit  plans.  The Company
         plans to adopt this  statement  as of its  effective  date and does not
         expect  that  the  adoption   will  have  a  material   impact  on  its
         consolidated results of operations or financial position.

Note 2 - Concentration of Credit Risk
         ----------------------------

         The Company maintains cash balances in financial institutions in excess
         of federally insured limits.

Note 3 - Inventories
         -----------

         A summary of inventories at December 31, 2003, is as follows:

         Jewelry                                                      $6,033,044
         Scrap gold                                                      439,083
         Bullion                                                         115,654
         Other                                                            86,084
                                                                      ----------

                                                                      $6,673,865
                                                                      ==========

Note 4 - Investments in Marketable Equity Securities
         -------------------------------------------

         Marketable  equity  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,
         2003 follows:



                                      F-12
<PAGE>

                      DGSE COMPANIES, INC. AND SUBSIDIARIES
                      -------------------------------------
                   Notes to Consolidated Financial Statements
                           December 31, 2003 and 2002

Note 4 - Investments in Marketable Equity Securities, continued
         -------------------------------------------

                                                           Gross
                                                         Unrealized       Fair
                                               Cost        Losses        Value
                                            ----------   ----------   ----------
         Equity securities                  $1,878,291   $1,634,845   $  243,446
                                            ==========   ==========   ==========

         During  2003,  management  determined  that the  decline in fair values
         below cost basis to be other than  temporary  and that such loss should
         be included in the consolidated statements of operations.

         Proforma earnings per share information for 2003 is as follows computed
         in accordance with accounting principles disclosed in Note 1.

         Basic and diluted:
             Net income from operations                                $   0.14
             Loss from write-down of marketable  securities
                 Net of income tax benefits                               (0.23)
                                                                       --------

             Net loss from continuing operations                          (0.09)
             Net loss from discontinued operations                        (0.02)
                                                                       --------
                                                                       $  (0.11)
                                                                       ========

         A director and member of the audit  committee  is also  Chairman of the
         Board  and  Chief  Executive  Officer  of  Hawaiian  Vintage  Chocolate
         Company,  Inc.,  ("HVCC")  which is an investee of the  Company.  As of
         December 31, 2003, the investment had a cost basis of $1,117,945, and a
         market value of $194,815.

Note 5 - Property and Equipment
         ----------------------

         A summary of  property  and  equipment  at  December  31,  2003,  is as
         follows:

         Buildings and improvements                                  $   721,315
         Machinery and equipment                                         716,280
         Furniture and fixtures                                          215,272
                                                                     -----------
                                                                       1,652,867
         Less accumulated depreciation and
         amortization                                                  1,214,201
                                                                     -----------
                                                                         438,666
         Land                                                            551,300

                                                                     $   989,966
                                                                     ===========




                                      F-13
<PAGE>

                      DGSE COMPANIES, INC. AND SUBSIDIARIES
                      -------------------------------------
                   Notes to Consolidated Financial Statements
                           December 31, 2003 and 2002

Note 5 - Property and Equipment, continued
         ----------------------

         Property and equipment  under capital leases is $202,450 as of December
         31, 2003. Accumulated  depreciation for these assets was $148,195 as of
         December 31, 2003.

Note 6 - Goodwill
         --------

         At  December  31,  2003,  goodwill  was  reflected  for  the  following
         reporting units:

         Wholesale watch sales                                       $  837,117
         Consulting and liquidation                                     314,003
                                                                     ----------
                                                                     $1,151,120
                                                                     ==========

         No impairment was reflected during 2003 or 2002.

Note 7 - Notes Payable
         -------------

         At December 31, 2003, the Company was obligated to various  individuals
         under  unsecured,  demand notes bearing annual  interest rates of 8% to
         14% totaling $541,546.

         One  of  the  notes  in  the  amount  of  $135,000  was  payable  to  a
         shareholder. During January 2004, the principal amount of this note was
         paid in full, and the note holder forgave $24,226 of accrued  interest.
         As a result, no interest was paid or expensed on this note during 2003.
         One of the notes in the amount of $16,301  was payable to a relative of
         an officer of the Company.

Note 8 - Long-Term Debt
         --------------

         A summary of long-term debt at December 31, 2003, follows:

         Notes payable to bank, a note of $1,500,000 which bears
         interest at prime plus 1-1/2% (5.75% at December 31,
         2003) and is due March 31, 2005 and a note of $500,000
         which bears interest at prime plus 1-3/4% (5.75% at
         December 31, 2003) is due in equal monthly installments of
         $8,333 through January 2009. These notes are secured by
         all accounts receivable, inventory property and equipment
         and intangible assets. The notes contain certain covenants,
         restricting payment of dividends, and requiring the
         Company to maintain certain financial ratios.              $ 2,000,000












                                      F-14
<PAGE>
<TABLE>
<CAPTION>

                      DGSE COMPANIES, INC. AND SUBSIDIARIES
                      -------------------------------------
                   Notes to Consolidated Financial Statements
                           December 31, 2003 and 2002

Note 8 - Long-Term Debt, continued
         --------------

         Mortgage payable, due in monthly installments of $5,977,
         including interest based on 30 year U.S. Treasury note rate
         plus 2-1/2% (7.41% at December 31, 2003); balance due in
         January 2014                                                   503,219

         Note payable, due March 2, 2005. Interest is payable
         quarterly at a rate of 8%                                       51,649

         Note payable, due January 2, 2005. Interest is payable
         monthly at a rate of 8%                                        310,556

         Capital lease obligations                                       51,372
                                                                    -----------
                                                                      2,916,796
         Less current maturities                                       (197,315)
                                                                    -----------
                                                                    $ 2,719,481

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

                                                                             Obligations
                                                                                Under
                                                               Long-term       Capital
         December 31,                              Debt          Leases        Totals
                                               -----------    -----------    -----------
         <S>                                   <C>            <C>            <C>
            2004                               $   167,853    $    32,270    $   200,123
            2005                                 1,963,631         21,106      1,984,737
            2006                                   135,054          2,852        137,906
            2007                                   135,330           --          135,330
            2008                                   135,606           --          135,606
         Thereafter                                327,950           --          327,950
                                               -----------    -----------    -----------
                                                 2,865,424         56,228      2,921,652
         Amounts representing interest
         interest rates at approximately 9%)          --           (4,856)        (4,856)
                                               -----------    -----------    -----------
                                                 2,865,424         51,372      2,916,796
         Less current portion                     (175,853)       (21,462)      (197,315)
                                               -----------    -----------    -----------

                                               $ 2,689,571    $    29,910    $ 2,719,481
                                               ===========    ===========    ===========
         </TABLE>







                                      F-15
<PAGE>
<TABLE>
<CAPTION>

                      DGSE COMPANIES, INC. AND SUBSIDIARIES
                      -------------------------------------
                   Notes to Consolidated Financial Statements
                           December 31, 2003 and 2002

Note 9 - Earnings Per Common 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, 2003 and 2002 is as follows:

                                                        December 31, 2003
                                               ----------------------------------
                                                                        Per-Share
                                                 Income       Shares      Amount
                                               ---------    ---------   ---------
         <S>                                   <C>          <C>         <C>
         Basic earnings per common share
             Income from operations allocable
               to common shareholders          $(524,140)   4,913,920   $    (.11)
                                                                        =========

         Effect of dilutive securities
             Stock options                          --           --
                                               ---------    ---------

         Diluted earnings per common share
             Income from operations available
               to common shareholders plus
               assumed conversions             $(524,140)   4,913,920   $    (.11)
                                               =========    =========   =========


                                                        December 31, 2002
                                               ----------------------------------
                                                                        Per-Share
                                                 Income       Shares      Amount
                                               ---------    ---------   ---------
         Basic earnings per common share
             Income from operations allocable
               to common shareholders          $ 429,311    4,913,628   $     .09
                                                                        =========

         Effect of dilutive securities
             Stock options                          --          3,250
                                               ---------    ---------

         Diluted earnings per common share
             Income from operations available
               to common shareholders plus
               assumed conversions             $ 429,311    4,916,878   $     .09
                                               =========    =========   =========
</TABLE>

Note 10 - 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.





                                      F -16
<PAGE>

                      DGSE COMPANIES, INC. AND SUBSIDIARIES
                      -------------------------------------
                   Notes to Consolidated Financial Statements
                           December 31, 2003 and 2002

Note 10 - 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  as all options  granted under those plans had an exercise
         price equal to the market value of the  underlying  common stock on the
         date of grant.

         The following table summarizes the activity in common shares subject to
         options for the two years ended December 31, 2003 and 2002:
         <TABLE>
         <CAPTION>


                                             December 31, 2003                  December 31, 2002
                                       -------------------------------   --------------------------------
                                                           Weighted                           Weighted
                                                           Average                            Average
                                           Options      Exercise Price       Options       Exercise Price
                                       --------------   --------------   --------------    --------------
         <S>                           <C>              <C>              <C>               <C>
         Outstanding at beginning
             of year                        1,420,634   $         2.09        1,164,777    $         2.33
         Granted                                 --               --            267,857              1.12
         Forfeited                               --               --            (12,000)             3.63
                                       --------------   --------------   --------------    --------------

         Outstanding at end of year         1,420,634   $         2.09        1,420,634    $         2.09
                                       ==============   ==============   ==============    ==============

         Exercisable at end of year         1,420,634   $         2.09        1,420,634    $         2.09
                                       ==============   ==============   ==============    ==============

         Weighted average fair value
            of options granted
            during year                                 $         --                       $         0.85
                                                        ==============                     ==============
         </TABLE>


         Stock options outstanding at December 31, 2003:
         <TABLE>
         <CAPTION>


                                    Options Outstanding                     Options Exercisable
                          -------------------------------------------   ----------------------------
            Range of                     Weighted        Weighted                       Weighted
            Exercise                      Average        Average                         Average
             Price          Options    Expected Life   Exercise Price     Options     Exercise Price
         --------------   ----------   -------------   --------------   -----------   --------------
         <S>              <C>          <C>             <C>              <C>           <C>
         $1.12               267,857      8 Years           $1.12           267,857       $1.12
         $1.63 to $2.25    1,097,777      8 Years           $2.21         1,097,777       $2.21
         $3.63 to $4.19       20,000      8 Years           $3.81            20,000       $3.83
         $4.88                35,000      5 Years           $4.88            35,000       $4.88
                          ----------                                    -----------
                           1,420,634                                      1,420,634
                          ==========                                    ===========
         </TABLE>





                                      F-17
<PAGE>

                      DGSE COMPANIES, INC. AND SUBSIDIARIES
                      -------------------------------------
                   Notes to Consolidated Financial Statements
                           December 31, 2003 and 2002

Note 11 - Comprehensive Income
          --------------------

         Comprehensive income at December 31, 2003 and 2002 is as follows:
         <TABLE>
         <CAPTION>


                                                 Before-Tax        Tax         Net-of-Tax
                                                   Amount        Benefit         Amount
                                                -----------    -----------    -----------
         <S>                                    <C>         <C>            <C>
         Accumulated comprehensive
           income (loss) at January 1, 2002     $(1,495,874)   $   508,597    $  (987,277)

         Unrealized holding losses
           arising during 2002                     (232,256)        84,583       (147,673)
                                                -----------    -----------    -----------

         Accumulated comprehensive
           income (loss) at December 31, 2002    (1,728,130)       593,180     (1,134,950)

         Unrealized holding gains
           arising during 2003                       93,285        (32,872)        60,413

         Reclassification to statement
           of operations                          1,634,845       (560,308)     1,074,537
                                                -----------    -----------    -----------

         Accumulated comprehensive
           income (loss) at December 31, 2003   $      --      $      --      $      --
                                                ===========    ===========    ===========
         </TABLE>

Note 12 - Income Taxes
          ------------

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

                                                            2003         2002
                                                         ---------    ---------

         Tax (benefit) expense at statutory rate         $(294,124)   $ 223,504
         Other                                              16,484        5,076
         Benefit (expense) of discontinued operations       26,710         (527)
         Reduction in valuation allowance                  (90,000)        --
                                                         ---------    ---------
             Tax expense (benefit)                       $(340,930)   $ 228,053
                                                         =========    =========

         Current                                         $  55,622    $  54,532
         Deferred                                         (396,552)     173,521
                                                         ---------    ---------

                                                         $(340,930)   $ 228,053
                                                         =========    =========




                                      F-18
<PAGE>

                      DGSE COMPANIES, INC. AND SUBSIDIARIES
                      -------------------------------------
                   Notes to Consolidated Financial Statements
                           December 31, 2003 and 2002

Note 12 -Income Taxes, continued

         Deferred  income taxes are  comprised of the  following at December 31,
         2003:

         Deferred tax assets (liabilities)
             Inventory                                               $   25,197
             Unrealized loss on available for sale securities            28,202
             Property and equipment                                       9,804
             Valuation reserve                                          (60,000)
                                                                     ----------

                                                                     $    3,203

             Goodwill                                                $  (25,946)
                                                                     ==========

Note 13 - 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
                                       -----------    -----------    -----------

            2004                       $   294,093    $   (60,000)   $   234,093
            2005                           148,205           --          148,205
            2006                            18,886           --           18,886
            2007                            11,366           --           11,366
                                       -----------    -----------    -----------

                                       $   472,550    $   (60,000)   $   412,550
                                       ===========    ===========    ===========

         Rent  expense  for the  years  ended  December  31,  2003  and 2002 was
         approximately $223,046 and $291,878, respectively, and was decreased by
         sublease income of approximately $104,000 and $90,000, respectively.

Note 14 - Discontinued Operations
          -----------------------

         During  2003,  the  Company  made  the  decision  to  discontinue   the
         operations of its subsidiaries,  DLS Financial  Services,  Inc. and eye
         media, inc. As a result, operating results from these subsidiaries have
         been reclassified to discontinued operations for all periods presented.
         As of December 31, 2003,  there were no operating assets to be disposed
         of or  liabilities  to be paid in completing  the  disposition of these
         operations.




                                      F-19
<PAGE>

                      DGSE COMPANIES, INC. AND SUBSIDIARIES
                      -------------------------------------
                   Notes to Consolidated Financial Statements
                           December 31, 2003 and 2002

Note 15 - Segment Information
          -------------------

         Management   identifies  reportable  segments  by  product  or  service
         offered.  Each  segment  is managed  separately.  The  jewelry  segment
         consists of sales to both wholesale and retail customers.  This segment
         also includes pawn  operations  and bullion  sales.  The consulting and
         liquidation  services segment includes  consulting  services related to
         insolvency advisory services primarily to business enterprises that are
         involved in or have been  involved in  proceedings  under Chapter 11 of
         the U.S.  Bankruptcy  Code.  Liquidations  are  conducted  through  the
         Company's wholly-owned subsidiary,  Silverman Consultants,  Inc. (SCI).
         SCI conducts  liquidation,  consolidation,  promotional  or other large
         scale  retail  sales for  jewelry  stores  and other  types of  stores.
         Corporate  and  other  includes  certain  general  and   administrative
         expenses not allocated to segments. The Company's operations by segment
         were as follows:
         <TABLE>
         <CAPTION>

                                                      Discontinued      Corporate
                         Jewelry        Liquidation    Operations       and Other     Consolidated
                       ------------    ------------   ------------    ------------    ------------
         <S>           <C>             <C>            <C>             <C>             <C>
         Revenues
           2003        $ 25,425,548    $    783,794    $      --      $       --      $ 26,209,342
           2002          21,239,461         780,343           --              --        22,019,804

         Net income
         (loss)
           2003            (366,795)         48,225       (104,350)       (101,220)       (524,140)
           2002             447,873         108,243        (86,437)        (40,368)        429,311

         Identifiable
         assets
           2003          10,783,297            --          273,715          14,517      11,071,529
           2002           9,778,499         431,998        331,892           3,000      10,545,389

         Capital
         expenditures
           2003              33,165            --            1,299            --            34,464
           2002              25,074            --             --              --            25,074

         Depreciation and
         amortization
           2003             160,131            --           27,427            --           187,558
           2002             169,427            --           33,559            --           202,986
         </TABLE>




</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>3
<FILENAME>dgse10ksbex311123103.txt
<DESCRIPTION>SECTION 302 CERTIFICATION OF CEO
<TEXT>

                                                                    Exhibit 31.1


I, L.S. Smith, Certify that:

1.       I have reviewed  this annual  report on Form 10-KSB of DGSE  Companies,
         Inc.;
2.       Based on my  knowledge,  this annual report does not contain any untrue
         statement of a material fact or omit to state a material fact necessary
         to make the statements made, in light of the circumstances  under which
         such  statements  were made, not misleading  with respect to the period
         covered by this annual report;
3.       Based on my knowledge,  the financial  statements,  and other financial
         information  included  in this  annual  report,  fairly  present in all
         material  respects the financial  condition,  results of operations and
         cash flows of the Company as of, and for, the periods presented in this
         annual report;
4.       The  Company's  other  certifying  officers and I are  responsible  for
         establishing  and  maintaining  disclosure  controls and procedures (as
         defined in Exchange Act Rules 13a-14 and 15d-14) for the Company and we
         have:
         a)       designed  such  disclosure  controls and  procedures to ensure
                  that material information  relating to the Company,  including
                  its consolidated  subsidiaries,  is made known to us by others
                  within those entities, particularly during the period in which
                  this annual report is being prepared;
         b)       Evaluated  the  effectiveness  of  the  Company's   disclosure
                  controls and  procedures  as of a date within 90 days prior to
                  the filing date of this annual report (the "Evaluation Date");
                  and
         c)       Presented  in this  annual  report our  conclusions  about the
                  effectiveness of the disclosure  controls and procedures based
                  on our evaluation as of the Evaluation Date;
5.       The Company's other certifying officers and I have disclosed,  based on
         our most recent  evaluation,  to the  Company's  auditors and the audit
         committee of the Company's  board of directors  (or persons  performing
         the equivalent functions):
         a)       all  significant  deficiencies  in the design or  operation of
                  internal  controls which could adversely  affect the Company's
                  ability to record,  process,  summarize  and report  financial
                  data  and  have  identified  for the  Company's  auditors  any
                  material weakness in internal controls; and
         b)       any fraud,  whether or not material,  that involves management
                  or  other  employees  who  have  a  significant  role  in  the
                  Company's internal controls; and
6.       The Company's  other  certifying  officers and I have indicated in this
         annual report whether or not there were significant changes in internal
         controls or in other factors that could  significantly  affect internal
         controls  subsequent  to  the  date  of  our  most  recent  evaluation,
         including any corrective action with regard to significant deficiencies
         and material weaknesses.

Date: March 24, 2004

/s/ L.S. Smith
- --------------
Chairman and Chief Executive Officer

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>4
<FILENAME>dgse10ksbex312123103.txt
<DESCRIPTION>SECTION 302 CERTIFICATION OF CFO
<TEXT>

                                                                    Exhibit 31.2


I, John Benson, Certify that:

1.       I have reviewed  this annual  report on Form 10-KSB of DGSE  Companies,
         Inc.;
2.       Based on my  knowledge,  this annual report does not contain any untrue
         statement of a material fact or omit to state a material fact necessary
         to make the statements made, in light of the circumstances  under which
         such  statements  were made, not misleading  with respect to the period
         covered by this annual report;
3.       Based on my knowledge,  the financial  statements,  and other financial
         information  included  in this  annual  report,  fairly  present in all
         material  respects the financial  condition,  results of operations and
         cash flows of the Company as of, and for, the periods presented in this
         annual report;
4.       The  Company's  other  certifying  officers and I are  responsible  for
         establishing  and  maintaining  disclosure  controls and procedures (as
         defined in Exchange Act Rules 13a-14 and 15d-14) for the Company and we
         have:
         a.       designed  such  disclosure  controls and  procedures to ensure
                  that material information  relating to the Company,  including
                  its consolidated  subsidiaries,  is made known to us by others
                  within those entities, particularly during the period in which
                  this annual report is being prepared;
         b.       Evaluated  the  effectiveness  of  the  Company's   disclosure
                  controls and  procedures  as of a date within 90 days prior to
                  the filing date of this annual report (the "Evaluation Date");
                  and
         c.       Presented  in this  annual  report our  conclusions  about the
                  effectiveness of the disclosure  controls and procedures based
                  on our evaluation as of the Evaluation Date;
5.       The Company's other certifying officers and I have disclosed,  based on
         our most recent  evaluation,  to the  Company's  auditors and the audit
         committee of the Company's  board of directors  (or persons  performing
         the equivalent functions):
         a.       all  significant  deficiencies  in the design or  operation of
                  internal  controls which could adversely  affect the Company's
                  ability to record,  process,  summarize  and report  financial
                  data  and  have  identified  for the  Company's  auditors  any
                  material weakness in internal controls; and
         b.       any fraud,  whether or not material,  that involves management
                  or  other  employees  who  have  a  significant  role  in  the
                  Company's internal controls; and
6.       The Company's  other  certifying  officers and I have indicated in this
         annual report whether or not there were significant changes in internal
         controls or in other factors that could  significantly  affect internal
         controls  subsequent  to  the  date  of  our  most  recent  evaluation,
         including any corrective action with regard to significant deficiencies
         and material weaknesses.


 Date: March 24, 2004

 /s/ John Benson
 ---------------
 Chief Financial Officer



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>5
<FILENAME>dgse10ksbex321123103.txt
<DESCRIPTION>SECTION 906 CERTIFICATION OF CEO
<TEXT>

                                                                    Exhibit 32.1



                    Certification of Chief Executive Officer

                            CERTIFICATION PURSUANT TO
                 SECTIONS 906 OF THE SARBANES-OXLEY ACT OF 2002
                                (18 U.S.C. 1350)



         In  connection  with the Annual  Report of DGSE  Companies,  Inc.  (the
"Company")  on Form 10-KSB for the period ended  December 31, 2003 as filed with
the Securities and Exchange  Commission on the date hereof (the  "Report"),  the
undersigned certifies pursuant to 18 U.S.C. 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

         1)       The Report fully  complies  with the  requirements  of Section
                  13(a) or  15(d) of the  Securities  Exchange  Act of 1934,  as
                  amended; and
         2)       The information  contained in the Report fairly  presents,  in
                  all material respects,  the financial condition and results of
                  operations of the Company.



Dated: March 24, 2004                    By /s/ L.S. Smith
                                           -------------------------------------
                                           L.S. Smith, Chairman of the Board,
                                           Chief Executive Officer and Secretary


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.2
<SEQUENCE>6
<FILENAME>dgse10ksbex322123103.txt
<DESCRIPTION>SECTION 906 CERTIFICATION OF CFO
<TEXT>

                                                                    Exhibit 32.2



                    Certification of Chief Financial Officer

                            CERTIFICATION PURSUANT TO
                 SECTIONS 906 OF THE SARBANES-OXLEY ACT OF 2002
                                (18 U.S.C. 1350)



         In  connection  with the Annual  Report of DGSE  Companies,  Inc.  (the
"Company")  on Form 10-KSB for the Period ended  December 31, 2003 as filed with
the Securities and Exchange  Commission on the date hereof (the  "Report"),  the
undersigned certifies pursuant to 18 U.S.C. 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

         1)       The Report fully  complies  with the  requirements  of Section
                  13(a) or  15(d) of the  Securities  Exchange  Act of 1934,  as
                  amended; and
         2)       The information  contained in the Report fairly  presents,  in
                  all material respects,  the financial condition and results of
                  operations of the Company.



Dated: March 24, 2004                     By  /s/ John Benson
                                            ------------------------------------
                                            John Benson, Chief Financial Officer
                                            and Director


</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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